Item 1.01 – Entry into a Material Definitive Agreement
Restructuring Support Agreement
On November 13, 2020,
Gulfport Energy Corporation (the “Company”) and its wholly owned subsidiaries (collectively, “Gulfport”)
entered into a Restructuring Support Agreement (the “RSA”) with (i) over 95% of the lenders (the “Consenting
RBL Lenders”) party to that certain Amended and Restated Credit Agreement, dated as of December 27, 2013 (as amended,
restated, or otherwise modified from time to time, the “RBL Credit Agreement”), by and among the Company, as borrower,
each of the lenders party thereto, the Bank of Nova Scotia, as administrative agent and issuing bank, the joint lead arrangers
and joint bookrunners, the co-syndication agents, and the co-documentation agents and (ii) certain holders (the “Consenting
Noteholders,” and, together with the Consenting RBL Lenders, the “Consenting Stakeholders”) holding over
two-thirds of the Company’s (a) 6.625% senior notes due 2023, issued under that certain Indenture, dated as of April 21,
2015, (b) 6.000% senior notes due 2024, issued under that certain Indenture, dated as of October 14, 2016, (c) 6.375% senior notes
due 2025, issued under that certain Indenture, dated as of December 21, 2016, and (d) 6.375% senior notes due 2026, issued under
that certain Indenture, dated as of October 11, 2017 (collectively, the “Unsecured Notes”), each by and among the Company,
the subsidiary guarantors party thereto, and UMB Bank, N.A. as successor trustee. Capitalized terms used under this heading titled
“Restructuring Support Agreement” but not otherwise defined herein shall have the meaning given to such terms in the
RSA.
The RSA provides for
certain milestones requiring, among other things, that Gulfport: (i) commences the Chapter 11 Cases (as defined herein) no later
than 11:59 p.m. (prevailing Eastern time) on November 13, 2020 (the date of such commencement, the “Petition Date”);
(ii) obtains entry of an order by the United States Bankruptcy Court for the Southern District of Texas, Houston Division, presiding
over the Chapter 11 Cases (the “Bankruptcy Court”) approving the DIP Facility (as defined herein) on an interim basis
no later than three (3) Business Days after the Petition Date; (iii) files with the Bankruptcy Court the Backstop Approval Motion,
the Plan, and the corresponding disclosure statement (the “Disclosure Statement”) no later than thirty (30) calendar
days after the Petition Date; (iv) obtains entry of an order by the Bankruptcy Court approving the DIP Facility on a final
basis no later than thirty-five (35) calendar days after the Petition Date; (v) obtains entry of an order by the Bankruptcy Court
approving the Disclosure Statement no later than one hundred (100) calendar days after the Petition Date; (vi) files with the Bankruptcy
Court the Plan Supplement no later than one hundred and forty (140) calendar days after the Petition Date; (vii) obtains entry
of an order by the Bankruptcy Court confirming the Plan (the “Confirmation Order”) no later than one hundred and sixty-five
(165) calendar days after the Petition Date; (viii) causes the Plan to become effective no later than one hundred and eighty (180)
calendar days after the Petition Date; and (ix) obtains entry of an order by the Bankruptcy Court no later than one hundred and
eighty (180) calendar days after the Petition Date that permanently reduces the future demand reservation fees owed by Gulfport
over the life of all of Gulfport’s firm transportation agreements, taken as a whole, by at least 50% of the amount of all
such fees owed on October 31, 2020, as calculated on a PV-10 basis, and reduces the future firm transportation demand reservation
volumes over the life of all of Gulfport’s firm transportation agreements, taken as a whole, by at least 35%.
The RSA contains certain
covenants on the part of each of Gulfport and the Consenting Stakeholders, including commitments by the Consenting Stakeholders
to vote in favor of the Plan and commitments of Gulfport and the Consenting Stakeholders to negotiate in good faith to finalize
the documents and agreements governing the Restructuring Transactions. The RSA also places certain conditions on the obligations
of the parties and provides that the RSA may be terminated upon the occurrence of certain events, including, without limitation,
the failure to achieve certain milestones and certain breaches by the parties under the RSA.
Although Gulfport intends
to pursue the restructuring in accordance with the terms set forth in the RSA, there can be no assurance that Gulfport 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.
A copy of the RSA (and
the Exhibits attached thereto) are attached hereto as Exhibit 10.1 to this Current Report on Form 8-K and are incorporated by reference
herein. The foregoing description of the RSA is only a summary, does not purport to be complete, and is qualified in its entirety
by reference to the RSA.
Joint Prearranged Chapter 11 Plan
of Reorganization
The RSA contemplates
a restructuring (the “Restructuring”) of Gulfport pursuant to a prearranged joint plan of reorganization (the “Plan”).
Capitalized terms used under this heading titled “Joint Prearranged Chapter 11 Plan of Reorganization” but not otherwise
defined herein shall have the meaning given to such terms in the Plan.
Below is a summary
of the treatment that the stakeholders of the Company would receive under the Plan:
|
●
|
each
Holder of an Allowed Other Secured Claim shall receive, at the option of the applicable Debtor and with the consent of the Required
Consenting Stakeholders (such consent not to be unreasonably withheld): (a) payment in full in Cash of its Allowed Other Secured
Claim; (b) the collateral securing its Allowed Other Secured Claim; (c) Reinstatement of its Allowed Other Secured Claim; or (d)
such other treatment rendering its Allowed Other Secured Claim unimpaired in accordance with section 1124 of the Bankruptcy Code;
|
|
●
|
each
Holder of an Allowed Other Priority Claim shall receive treatment in a manner consistent with section 1129(a)(9) of the Bankruptcy
Code;
|
|
●
|
each
Holder of an Allowed RBL Claim shall receive, at the option of each such Holder, either (a) its Pro Rata share of the Exit
RBL/Term Loan A Facility, if such Holder elects to participate in the Exit RBL/Term Loan A Facility or (b) its Pro Rata share
of the Exit Term Loan B Facility, if such Holder does not elect to participate in the Exit RBL/Term Loan A Facility (including
by not making any election with respect to the Exit Facility on the ballot);
|
|
●
|
each
Holder of an Allowed General Unsecured Claim against Gulfport Parent shall receive in full and final satisfaction of such Claim,
its Pro Rata share of the Gulfport Parent Equity Pool; provided, however, that once the Holders of Notes Claims
receive distributions of 94% of the New Common Stock (prior to and not including any dilution by the Management Incentive Plan
or any conversion of New Preferred Stock into New Common Stock) in the aggregate on account of their Notes Claims against all
Debtors, the Holders of Notes Claims shall waive any excess recovery on account of their Pro Rata share of the Gulfport Parent
Equity Pool until Holders of Allowed General Unsecured Claims against Gulfport Parent have received New Common Stock with a value
sufficient to satisfy their Allowed General Unsecured Claims against Gulfport Parent in full (based on Plan Value);
|
|
●
|
each
Holder of an Allowed General Unsecured Claim against Gulfport Subsidiaries shall receive in full and final satisfaction of such
Claim, its Pro Rata share of: (a) the Gulfport Subsidiaries Equity Pool; (b) the Rights Offering Subscription Rights; and (c)
the New Unsecured Notes;
|
|
●
|
each
Intercompany Claim shall be cancelled in exchange for the distributions contemplated by the Plan to Holders of Claims against
and Interests in the respective Debtor entities and shall be considered settled pursuant to Bankruptcy Rule 9019;
|
|
●
|
each
Holder of an Intercompany Interest shall receive no recovery or distribution and shall be Reinstated solely to the extent necessary
to maintain the Debtors’ prepetition corporate structure for the ultimate benefit of the Holders of New Common Stock and
New Preferred Stock; and
|
|
●
|
all
Existing Interests in Gulfport Parent and all Allowed Section 510(b) Claims, if any, shall be cancelled, released, extinguished,
and of no further force or effect.
|
Backstop Agreement
On November 13, 2020,
the Company entered into the Backstop Commitment Agreement (as defined in the RSA) with the Backstop Commitment Parties (as defined
in the RSA). Pursuant to the Backstop Commitment Agreement, each of the Backstop Commitment Parties will purchase any shares of
convertible preferred stock (the “New Convertible Preferred Stock”), par value $0.0001 per share, of the Company
(as reorganized pursuant to and under the Plan, the “Reorganized Company”), and receive its proportionate share of
New Convertible Preferred Stock (based on its Backstop Obligation, as defined in the Backstop Commitment Agreement) offered but
not purchased in the rights offering contemplated in the Backstop Commitment Agreement (the “Rights Offering”), pursuant
to which the Company will offer and sell at least $50.0 million of New Convertible Preferred Stock to certain holders of the Unsecured
Notes. In exchange for providing the Backstop Obligation, the Company has agreed to pay the Backstop Commitment Parties, subject
to approval by the Bankruptcy Court, a premium (the “Backstop Commitment Premium”) in an aggregate amount equal to
(a) in the event of the purchase of New Convertible Preferred Stock by any Backstop Commitment Party, 10% of such Backstop Commitment
Party’s Backstop Commitment, payable in the form of New Convertible Preferred Stock issued at the price at which one share
of the New Convertible Preferred Stock is sold to holders of Notes in the Rights Offering (the “Per Share Price”) and
(b) in the event the Backstop Agreement is terminated by 66.67% of the aggregate issued and outstanding principal amount of the
Unsecured Notes held by all Backstop Commitment Parties (the “Required Backstop Commitment Parties”) as a result of
a material breach of the Backstop Agreement by the Company or the debtor subsidiaries of the Company listed on Schedule 1 of the
Backstop Agreement, a commitment fee equal to 10% of the respective Backstop Commitment Party’s Backstop Commitment, as set
forth in Schedule 2 to the Backstop Commitment Agreement.
The Backstop Commitment
Agreement will be terminable by the Company and/or the Required Backstop Commitment Parties upon certain customary events specified
therein, including, among others, (i) the termination of the RSA, (ii) the mutual written consent of the Company and the Required
Backstop Commitment Parties by written notice to the other such Party(ies), or (iii) by either the Company or the Required Backstop
Commitment Parties if the other party materially breaches the Backstop Commitment Agreement and such breach has not been waived
by the Company or cured in all material respects within ten business days after written notice from the Company or the Backstop
Commitment Parties, respectively.
The foregoing description
of the Backstop Commitment Agreement is only a summary of the material terms, does not purport to be complete, and is qualified
in its entirety by reference to the Backstop Commitment Agreement, which is filed herewith as Exhibit 10.2 and incorporated by
reference herein.
DIP Facility
Pursuant to the RSA,
the Consenting RBL Lenders have agreed to provide the Company with a senior secured superpriority debtor-in-possession revolving
credit facility in an aggregate principal amount of $262.5 million (the “DIP Facility”) consisting of (a)
$105 million of new money and (b) subject to entry of the final order approving the DIP Facility, $157.5 million to roll up a portion
of the existing outstanding obligations under the RBL Credit Agreement. The terms and conditions of the DIP Facility are set forth
in that certain form of credit agreement governing the DIP Facility (the “DIP Credit Agreement”), attached hereto as
Exhibit 10.3, to be entered into by and among the Company and certain of the Consenting RBL Lenders and/or their affiliates. The
proceeds of the DIP Facility may only be used in accordance with the 13-week cash flow budget (subject to certain permitted variances
from the budget), which will be required to be updated at certain intervals pursuant to the DIP Credit Agreement.
The foregoing description
of the DIP Facility does not purport to be complete and is qualified in its entirety by reference to the DIP Credit Agreement.
Exit Financing Term Sheet
In addition, as
part of the RSA, the Consenting RBL Lenders and/or their affiliates have agreed to provide, on a committed basis, the Company
with the Exit Facilities (as defined herein) on the terms set forth in the exit term sheet attached to the RSA (the
“Exit Facility Term Sheet”). The Exit Facility Term Sheet provides for, among other things, post-emergence
financing in the form of (i) a new money senior secured revolving credit facility in an aggregate maximum principal amount of
up to $400.0 million (the “Exit Revolving Facility”), (ii) a new money senior secured term loan in an aggregate
maximum principal amount of up to $180.0 million (the “First-Out Term Loan Facility”), and (iii) if
necessary, a last-out senior secured term loan facility (the “Second-Out Term Loan Facility” and, together
with the Exit Revolving Facility and First-Out Term Loan Facility, the “Exit Facilities”), collectively with an
initial reserve-based borrowing base and elected commitments amount of up to $580.0 million, subject to periodic borrowing
base redeterminations. The Exit Revolving Facility and First-Out Term Loan Facility are
scheduled to mature three years from the closing date of the Exit Facilities (the “Closing Date”), and the
Second-Out Term Loan Facility is scheduled to mature 42 months from the Closing Date. Loans drawn under the Exit Revolving
Facility and the Second-Out Term Loan Facility will not be subject to amortization, while loans drawn under the First-Out
Term Loan Facility will amortize with quarterly installments in an amount equal to $15.0 million, commencing on the Closing
Date and occurring every three months after the Closing Date.
The effectiveness of
the Exit Facilities will be subject to customary closing conditions, including consummation of the Plan. The foregoing description
of the Exit Facility Term Sheet does not purport to be complete and is qualified in its entirety by reference to the final, executed
documents memorializing the Exit Facilities, to be included in a supplement to the Plan to be filed with the Bankruptcy Court.