LAFAYETTE, La., Oct. 20, 2016 /PRNewswire/ -- Stone Energy
Corporation (NYSE: SGY) today announced entry into a comprehensive
restructuring support agreement and a purchase and sale agreement
for its properties in the Appalachia basin.
Restructuring Support Agreement
As previously disclosed, Stone Energy Corporation
("Stone") has been involved in discussions with
certain of its stakeholders in respect of a possible restructuring
of the indebtedness and capitalization of Stone and certain of its
subsidiaries (collectively, the "Company"). On
October 20, 2016, the Company entered
into a restructuring support agreement (the "RSA")
with certain (i) holders of the Company's 1¾% Senior Convertible
Notes due 2017 (the "Convertible Notes") and (ii) holders of the
Company's 7½% Senior Notes due 2022 (together with the Convertible
Notes, the "Notes" and the holders thereof, the
"Noteholders"), to support a restructuring on the
terms of a pre-packaged plan of reorganization as described therein
(the "Plan"). The RSA contemplates that the Company
will file for voluntary relief under chapter 11 of the United
States Bankruptcy Code (the "Bankruptcy Code") in a
United States Bankruptcy Court (the "Bankruptcy
Court") on or before December 9,
2016 to implement the Plan in accordance with the term sheet
annexed to the RSA (the "Term Sheet"). The following
description of the RSA and annexed Term Sheet is qualified by
reference to the full text of such agreement, a copy of which is
included as Exhibit 10.1 to the Current Report on Form 8-K filed
today.
"The execution of the RSA is the culmination of months of hard
work to right-size our balance sheet in response to a sustained
period of low oil and natural gas commodity prices," said
David Welch, Chairman, President and
Chief Executive Officer. "The agreement with our Noteholders will
provide value to all of our stakeholders, improves our liquidity
and better positions us to be profitable during a historically
difficult time in our industry. Importantly, this agreement
will allow all stakeholders to share in potential valuation growth
if commodity prices improve."
The RSA will become effective upon (i) execution by the Company
and Noteholders holding, in the aggregate, at least 66-2/3% of the
outstanding aggregate principal amount of the Notes, and (ii) Stone
having entered into a PSA for the sale of Properties, defined
below, for a cash purchase price of at least $350 million. Both conditions have been
satisfied, with Noteholders holding approximately 85.4% of the
aggregate principal amount of the Notes executing the RSA and Stone
signing the PSA, as indicated below. Pursuant to the terms of the
RSA and the Term Sheet, Noteholders and other interest holders will
receive treatment under the Plan summarized as follows:
- The Noteholders will receive their pro rata share of (a)
$150 million of the net cash proceeds
from the sale of Stone's approximately 86,000 net acres in the
Appalachia regions of Pennsylvania
and West Virginia (the
"Properties") plus 85% of the net cash proceeds from
the sale of the Properties in excess of $350
million, if any, (b) 95% of the common stock in reorganized
Stone and (c) $225 million of new 7.5% second lien notes due
2022.
- Existing common stockholders of Stone will receive their pro
rata share of 5% of the common stock in reorganized Stone and
warrants for up to 15% of the post-petition equity exercisable upon
the Company reaching certain benchmarks pursuant to the terms of
the proposed new warrants.
- All claims of creditors with unsecured claims other than claims
by the Noteholders, including vendors, shall be unaltered and will
be paid in full in the ordinary course of business to the extent
such claims are undisputed. Stone estimates that such
unsecured claims are in the range of approximately $17 million to $27 million in the aggregate.
- Holders of claims arising on account of Stone's existing
revolving credit facility will receive (a)(i) if such holders vote,
as a class, to accept the Plan, commitments on terms set forth on
Exhibit 1(a) to the Term Sheet, on a pro rata basis, under an
amended revolving credit facility, or (ii) if such holders, as a
class, do not vote to accept the Plan (or are deemed to reject the
Plan), a term loan on terms set forth on Exhibit 1(b) to the Term
Sheet, or (b) such other treatment as is acceptable to the Company
and the Noteholders and consistent with the Bankruptcy Code,
including, but not limited to, section 1129(b) of the Bankruptcy
Code.
Each of the foregoing common equity percentages in reorganized
Stone is subject to dilution from the exercise of the new warrants
described above and a management incentive plan.
The Company has been engaged in discussions and has exchanged
proposals with the lenders under its revolving credit facility with
respect to the treatment of the revolving credit facility in a
chapter 11 proceeding and a related amendment to the revolving
credit facility; however, no agreement has been reached.
While the Company expects to continue discussions and related
negotiations with its lenders, there can be no assurance that an
agreement will be reached.
The RSA contains certain covenants on the part of the Company
and the Noteholders who are signatories to the RSA, including that
such Noteholders will vote in favor of the Plan, support the sale
of the Properties and otherwise facilitate the restructuring
transaction, in each case subject to certain terms and conditions
in the RSA. The consummation of the Plan will be subject to
customary conditions and other requirements, as well as the sale by
Stone of the Properties for a cash purchase price of at least
$350 million and approval of the
Bankruptcy Court. The RSA also provides for termination by each
party, or by either party, upon the occurrence of certain events,
including without limitation, termination by the Noteholders upon
the failure of the Company to achieve certain milestones set forth
in Schedule 1 to the RSA.
Assuming implementation of the Plan, Stone expects that it will
have eliminated approximately $850
million in principal of outstanding debt and reduced its
annual interest payment burden by approximately $46 million.
Although the Company intends to pursue the restructuring in
accordance with the terms set forth in the RSA, there can be no
assurance that the Company will be successful in completing a
restructuring or any other similar transaction on the terms set
forth in the RSA, on different terms or at all.
The information contained in the RSA, including the Term Sheet,
and this press release are for informational purposes only and do
not constitute an offer to buy, nor a solicitation of an offer to
sell, any securities of the Company, nor do they constitute a
solicitation of consent from any persons with respect to the
transactions contemplated hereby and thereby. While we expect the
restructuring will take place in accordance with the Plan, there
can be no assurance that the Company will be successful in
completing a restructuring. Securityholders are urged to read the
disclosure materials, including the disclosure statement, if and
when they become available because they will contain important
information regarding the restructuring.
Purchase and Sale Agreement
On October 20, 2016 (the
"Execution Date"), Stone entered into a purchase and
sale agreement (the "PSA") with TH Exploration III,
LLC, an affiliate of Tug Hill, Inc. ("Tug Hill").
Pursuant to the terms of the PSA, Stone agreed to sell the
Properties to Tug Hill (the "Disposition") for
$360 million in cash, subject to
customary purchase price adjustments (the "Purchase
Price"). The following description of the PSA is
qualified by reference to the text of such agreement, a copy of
which is included as Exhibit 10.2 to the Current Report on Form 8-K
filed today.
"The sale of the Appalachia properties, an important component
of the restructuring support agreement, will further streamline our
operations and allow us to advance our efforts to grow value in the
Gulf of Mexico, which is central
to our long-term business plan," said David
Welch.
The Disposition has an effective date of June 1, 2016. In connection with the
execution of the PSA, Tug Hill deposited $5.0 million in escrow, which amount may be
supplemented by an additional $31
million at a later date on certain conditions being
met. Upon a closing, the deposit will be credited against the
Purchase Price. From the Execution Date through December 19, 2016 (the "Diligence
Period"), Tug Hill intends to conduct customary due
diligence to assess the aggregate dollar value of any title and
environmental defects associated with the Properties. The
parties expect to close the Disposition by February 27, 2017, subject to customary closing
conditions and approval by the Bankruptcy Court.
The PSA contains customary representations, warranties and
covenants. From and after the closing of the Disposition,
Stone and Tug Hill, respectively, have agreed to indemnify each
other and their respective affiliates against certain losses
resulting from any breach of their representations, warranties or
covenants contained in the PSA, subject to certain customary
limitations and survival periods. Additionally, from and
after closing of the Disposition, Stone has agreed to indemnify Tug
Hill for certain identified retained liabilities related to the
Properties, subject to certain survival periods, and Tug Hill has
agreed to indemnify Stone for certain assumed obligations related
to the Properties.
The PSA may be terminated, subject to certain exceptions, (i)
upon mutual written consent, (ii) if the closing has not occurred
by March 1, 2017, (iii) for certain
material breaches of representations and warranties or covenants
that remain uncured, (iv) if, on or prior to the end of the
Diligence Period, title and environmental defect amounts (after
application of customary thresholds and deductibles), casualty
losses and the value of any assets excluded from the Properties due
to the exercise of preferential purchase rights or consents equal
or exceed $10 million in the
aggregate, (v) if Stone fails to file for bankruptcy on or before
December 9, 2016, (vi) if the
Bankruptcy Court does not enter an order approving Stone's
assumption of the PSA and certain other matters within 30 days of
Stone filing for bankruptcy, (vii) if the Bankruptcy Court does not
enter a sale order for the Disposition by February 10, 2017, and (viii) upon the occurrence
of certain other events specified in the PSA.
Additional Information
Additional details of the restructuring and the asset sale can
be found in the RSA and PSA, respectively, as filed with the
Securities Exchange Commission on a Current Report on Form 8-K
today.
Stone is an independent oil and natural gas exploration and
production company headquartered in Lafayette,
Louisiana with additional offices in New
Orleans, Houston and Morgantown, West Virginia. Stone is engaged in the
acquisition, exploration, development and production of properties
in the Gulf of Mexico and
Appalachian basins.
Forward-Looking Statements
Certain statements in this press release are forward-looking and
are based upon the Company's current belief as to the outcome and
timing of future events. All statements, other than statements of
historical facts, that address activities that the Company plans,
expects, believes, projects, estimates or anticipates will, should
or may occur in the future are forward-looking statements.
Important factors that could cause actual results to differ
materially from those in the forward-looking statements herein
include, but are not limited to, the ability to consummate the sale
of the Properties as contemplated by the PSA; the ability to
confirm and consummate a plan of reorganization in accordance with
the terms of the RSA; risks attendant to the bankruptcy process,
including the effects thereof on the Company's business and on the
interests of various constituents, the length of time that the
Company might be required to operate in bankruptcy and the
continued availability of operating capital during the pendency of
such proceedings; risks associated with third party motions in any
bankruptcy case, which may interfere with the ability to confirm
and consummate a plan of reorganization; potential adverse effects
on the Company's liquidity or results of operations; increased
costs to execute the reorganization; effects on the market price of
the Company's common stock and on the Company's ability to access
the capital markets; and the risk factors and known trends and
uncertainties as described in the Company's Annual Report on Form
10-K, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K as filed with the SEC. For a more detailed discussion of risk
factors, please see Part I, Item 1A, "Risk Factors" of the
Company's most recent Annual Report on Form 10-K and Part II, Item
1A of the Company's Quarterly Reports on Form 10-Q for the periods
ended March 31, 2016 and June 30, 2016, respectively. Should one or
more of these risks or uncertainties occur, or should underlying
assumptions prove incorrect, the Company's actual results and plans
could differ materially from those expressed in the forward-looking
statements. The Company assumes no obligation and expressly
disclaims any duty to update the information contained herein
except as required by law.
Contact:
Jennifer E. Mercer
Epiq Strategic Communications for Stone Energy
310-712-6215
jmercer@epiqsystems.com
Logo -
http://photos.prnewswire.com/prnh/20130429/MM04099LOGO
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/stone-energy-corporation-announces-entry-into-comprehensive-restructuring-support-agreement-with-senior-noteholders-agrees-to-sell-appalachia-assets-to-an-affiliate-of-tug-hill-inc-300348996.html
SOURCE Stone Energy Corporation