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Item 1.01
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Entry into Material Definitive Agreement.
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As previously disclosed, on July 12, 2020, Hi-Crush Inc. (the “Company”) and each of its direct and indirect wholly-owned domestic subsidiaries (collectively with the Company, the “Debtors”) commenced voluntary cases (the “Chapter 11 Cases”) 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 (the “Bankruptcy Court”). The Chapter 11 cases are being jointly administered under the caption “In re: Hi-Crush Inc., et al.,” Case No. 20-33495. The Debtors will continue to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.
Backstop Purchase Agreement
On August 17, 2020, the Debtors and the backstop parties thereto (the “Backstop Parties”) entered into a Backstop Purchase Agreement (the “Backstop Agreement”).
Pursuant to the terms of the Debtors’ prearranged plan of reorganization (the “Plan”) in the Chapter 11 Cases, and subject to approval by the Bankruptcy Court in connection with confirmation of the Plan, the Company intends to offer (the “Rights Offering”) to eligible holders of its outstanding 9.50% senior unsecured notes due 2026 (“Senior Notes” and the allowed claims arising under the Senior Notes, the “Senior Notes Claims”), including the Backstop Parties, and certain other eligible holders of unsecured claims, subscription rights to purchase new senior secured convertible notes (the “New Senior Convertible Notes”) issued by the Company, with a 51⁄2-year maturity in an aggregate principal amount of $48.1 million (inclusive of the Put Option Notes (as defined below)), upon the Company’s emergence from bankruptcy.
Subject to the terms and conditions contained in the Backstop Agreement, the Backstop Parties committed to purchase, severally and not jointly, the New Senior Convertible Notes that are not duly subscribed for pursuant to the Rights Offering at a price equal to $1,000 per $1,000 in principal amount of the New Senior Convertible Notes purchased by such Backstop Party (the “Backstop Commitment”). As consideration for the commitment by the Backstop Parties, the Company has agreed to issue additional New Senior Convertible Notes in an aggregate principal amount of $4,800,000 (the “Put Option Notes”) to the Backstop Parties pro rata based on the respective amounts of Senior Notes Claims held by each Backstop Party.
The transactions contemplated by the Backstop Agreement are conditioned upon the satisfaction or waiver of customary conditions for transactions of this nature, including, without limitation, that (i) the Bankruptcy Court shall have approved the Rights Offering, (ii) the Bankruptcy Court shall have confirmed the Plan and (iii) the Rights Offering shall have been conducted and consummated in accordance with the Plan.
The Backstop Agreement contains customary representations, warranties and covenants by each of the Debtors and the Backstop Parties, including covenants by the Debtors regarding the conduct of the businesses of the Debtors prior to the consummation of the Rights Offering. The Backstop Agreement also contains customary termination rights exercisable by the Debtors and/or certain of the Backstop Parties upon the occurrence of certain events specified therein, including, without limitation, (i) the consummation of an Alternative Transaction (as defined in the Backstop Agreement) by the Debtors, (ii) a material breach of any representation, warranty or covenant in the Backstop Agreement by the Debtors or the Backstop Parties, as applicable, subject to certain cure provisions, or (iii) the failure to consummate the transactions contemplated by the Backstop Agreement by October 10, 2020. Subject to the terms and conditions of the Backstop Agreement, if any Debtor consummates, or announces its intention to enter into, an Alternative Transaction or files any pleading or document with the Bankruptcy Court in support thereof, the Debtors may be required to pay the Backstop Parties an aggregate amount of $4,800,000 to non-defaulting Backstop Parties as liquidated damages.
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