Pacific Exploration & Production on Track to Emerge From Bankruptcy

By Tom Corrigan

Pacific Exploration & Production Corp.'s plan to wipe some $5 billion in debt from its books cleared a final hurdle Wednesday, putting the company on track to emerge from bankruptcy within two weeks.

Following a hearing in Manhattan, U.S. Bankruptcy Court Judge James Garrity Jr. said he would sign off on a global restructuring plan, which has already won approval in courts in both Canada and Colombia.

Pacific, an oil and natural gas producer, is based in Canada but operates primarily in Colombia, where it is the largest independent oil and natural gas company, court papers showed. Much of the company's mountain of debt, however, is held in the U.S.

Judge Garrity, who is overseeing Pacific's U.S. bankruptcy proceeding, had already agreed to formally recognize the Canadian court as Pacific's primary restructuring venue, but he had asked lawyers for the company to return to his courtroom Wednesday to present the final version of the plan before he would agree to discharge any debt.

The restructuring plan, which the company says is one of the largest and most complicated restructurings ever attempted in Latin America, wipes out $5.3 billion, court papers showed. Pacific, which is continuing normal operations during the bankruptcy, said the strategy not only aims to cut debt but will also save it $253 million in annual interest expenses.

In an earlier court hearing, Judge Garrity called the plan "a very, very good result." When put to a vote last month, 98.4% of creditors agreed.

Pacific racked up its multibillion-dollar debt load through an acquisition spree, but ran into trouble when crude oil prices fell.

In April, the oil producer said it had reached an agreement with a group of bank lenders, unsecured bondholders as well as with Canadian investment firm Catalyst Capital Group Inc. on a restructuring blueprint.

Soon after, Pacific sought protection under Canada's Companies' Creditors Arrangement Act, or CCAA, and days later filed for chapter 15 bankruptcy protection in Manhattan. Pacific also launched an insolvency proceeding in Colombia in May.

The company has now won approval for its plan in all three courts.

Catalyst and unsecured bondholders together offered $500 million in bankruptcy financing to help fund Pacific's operations while it restructured. In return, the plan calls for Catalyst to receive 29.3% of Pacific's new shares and the bondholders will receive 12.5% of the new common shares as well as new five-year secured notes, according to court papers.

Creditors including lenders behind $1.2 billion in loans, the holders of $4.1 billion in senior unsecured bonds and other unsecured creditors will share the remaining 58.2% of new shares. Current shareholders, including significant shareholder O'Hara Administration Co., will just receive no more than 0.006% ownership in the reorganized company, court papers showed.

Write to Tom Corrigan at tom.corrigan@wsj.com

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September 29, 2016 16:28 ET (20:28 GMT)

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