Basic Energy Services, Inc (NYSE:BAS) and some of its subsidiaries have voluntarily filed for chapter 11, in order to pursue a pre-packaged plan of restructuring. The announcement comes only days after the company signed a restructuring and support agreement, with its creditors, to effectuate a comprehensive balance sheet restructuring.
As per the RSA, Basic Energy would work to meaningfully improve its balance sheet, by equalizing its unsecured bond obligations, worth over $800 million. In addition to this, the company would also hold a rights offering, for its mandatorily convertible debt, so as to improve its liquidity position. It is expected that the offering would result in proceeds of approximately $125 million. The offering would be backstopped by certain unsecured note holders of the company.
Basic Energy also revealed that subject to court approval, a $90 million worth debtor-in-possession credit facility would also be provided, by certain lenders and unsecured bond holders of BAS. The credit facility is expected to be sufficient to cover the costs of restructuring. The RSA is being supported by 100% of Basic Energy’s secured term lenders and 80% of its note holders, whose notes are due in 2019 and 2022. The reorganization of the company is expected to last until the end of this year.
The management also voiced its belief that they would continue to operate, as per norm, during the chapter 11 processes and meet the requirements of its customers. However, the company would now be under the jurisdiction of the bankruptcy court of Delaware. A petition has already been filed with the court, to allow BAS to continue paying employee salaries and incentives and normal operations, during the restructuring process. The CEO of Basic Energy, Roe Patterson, claimed that chapter 11 had become a necessity to create financial stability within the company. He expressed confidence in emerging as a formidable competitor in the industry, once prices improve.
Basic Energy Services, Inc (NYSE:BAS) experienced a trade volume of 13.51 million and gained 75.66% in terms of its share value, during the October 25 trading session, to close at a share price of $0.608.