Item
1.03 – Bankruptcy or Receivership
As
previously disclosed, on November 13, 2020, Gulfport Energy Corporation (“Gulfport”) and certain of its subsidiaries (together
with Gulfport, the “Company” or the “Debtors”) filed voluntary petitions for relief under chapter 11 of title
11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas,
Houston Division (the “Bankruptcy Court”). The Company’s chapter 11 cases (the “Chapter 11 Cases”) are
jointly administered under the caption In
re Gulfport Energy Corporation, et al., Case No. 20-35562 (DRJ).
On
April 28, 2021, the Bankruptcy Court entered an order (the “Confirmation Order”) confirming the Amended Joint Chapter
11 Plan of Reorganization of Gulfport Energy Corporation and Its Debtor Subsidiaries (the “Plan”). The Company expects
that the effective date of the Plan will occur once all conditions precedent to the Plan have been satisfied (the “Effective Date”).
Capitalized terms used under this heading titled “Item
1.03 – Bankruptcy or Receivership” but not otherwise defined herein shall have the meanings given to such terms in the Plan.
Summary
of the Plan
The
following is a summary of the material terms of the Plan as approved and confirmed by the Bankruptcy Court. This summary highlights only
certain substantive provisions of the Plan and is not intended to be a complete description of the Plan. This summary is qualified in
its entirety by reference to the full text of the Confirmation Order, which is attached hereto as Exhibit 2.1 and incorporated herein
by reference, and the Plan, which is attached hereto as Exhibit 2.2 incorporated herein by reference. Among other things, the Plan provides
for (in each case, as more fully described in the Plan):
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the
RBL Lenders and DIP Lenders, each with The Bank of Nova Scotia as administrative agent, have
agreed that the RBL Credit Facility and DIP Facility, respectively, will convert into the
$580 million Exit Facility upon the Effective Date, subject to the terms and conditions
set forth in the Exit Facility Documentation;
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certain
members of the Ad Hoc Noteholder Group have agreed to backstop the Rights Offering of at
least $50 million in exchange for New Preferred Stock;
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Holders
of Allowed General Unsecured Claims against Gulfport Parent will receive their Pro Rata share
of: (a) $10 million in Cash, subject to adjustment by the Unsecured Claims Distribution Trustee;
(b) 100% of the Mammoth Shares; and (c) 4% of the New Common Stock of the Reorganized Debtors,
subject to dilution and certain adjustments;
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Holders
of Allowed Notes Claims against Gulfport Parent will waive their entitlement to a Cash recovery
or any of the Mammoth Shares, and will cap their recovery at 96% of the New Common Stock
of the Reorganized Debtors, which will be drawn first from the Gulfport Subsidiaries Equity
Pool and then from the Gulfport Parent Equity Pool to the extent required due to dilution
as a result of distributions made to General Unsecured Claims against Gulfport Subsidiaries
(excluding distributions to Unsecured Surety Claims);
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Holders
of Allowed Notes Claims against Gulfport Subsidiaries and Allowed General Unsecured Claims
against Gulfport Subsidiaries will receive their Pro Rata share of: (a) the Gulfport Subsidiaries
Equity Pool; (b) the New Unsecured Notes; and (c) the Rights Offering Subscription Rights;
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a
Class of Convenience Claims consisting of (a) Allowed General Unsecured Claims of $300,000
or less or (b) Allowed General Unsecured Claims over $300,000 that the applicable Holder
has irrevocably elected to have reduced to $300,000 and treated as Convenience Claims, will
share in a $3,000,000 Cash distribution pool, which the Unsecured Claims Distribution Trustee
may increase by an additional $2,000,000 by reducing the Gulfport Parent Cash Pool;
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an
Unsecured Claims Distribution Trustee will administer a trust to make distributions to Allowed
General Unsecured Claims and Allowed Convenience Claims and to exercise certain consent rights
with respect to the settlement and Allowance of disputed General Unsecured Claims and Convenience
Claims;
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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;
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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
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the
Existing Interests in Gulfport Parent will be cancelled, released, and extinguished, and
will be of no further force or effect, without any distribution.
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Capital
Structure
There
were 160,762,186 shares of the Company’s common stock outstanding as of February 22, 2021. On the Effective Date, the Company’s
common stock will be cancelled and Holders thereof will not receive a distribution on account of their equity interests. Under the Plan,
the Reorganized Debtors’ New Organizational Documents will be adopted on the Effective Date. The Reorganized Debtors’ New
Organizational Documents will authorize the applicable Reorganized Debtors to issue the New Common Stock and New Preferred Stock.
The
New Common Stock and New Preferred Stock of the applicable Reorganized Debtors issued pursuant to the Plan will be issued without registration
under the Securities Act of 1933, as amended (the “Securities Act”), or any similar federal, state, or local law in reliance
upon section 1145 of the Bankruptcy Code and Section 4(a)(2) of the Securities Act and Regulation D thereunder.
Certain
Information Regarding Assets and Liabilities of the Company
In
the Company’s most recent monthly operating report filed with the Bankruptcy Court on March 26, 2021, the Company reported total
assets of approximately $2,647,529,000 and total liabilities of approximately $2,903,585,000 as of February 28, 2021. This financial
information has not been audited or reviewed by the Company’s independent registered public accounting firm and may be subject
to future reconciliation or adjustments. This information should not be viewed as indicative of future results.
Cautionary
Note Regarding the Company’s Securities
The
Company cautions that trading in the Company’s securities during the pendency of the Chapter 11 Cases is highly speculative and
poses substantial risks. Trading prices for the Company’s securities may bear little or no relationship to the actual recovery,
if any, by holders of the Company’s securities in the Chapter 11 Cases.