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Understanding Halcón Resources’ Balance Sheet Restructuring Plans

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Halcón Resources’ restructuring plan

Under the restructuring plan, all Halcón Resources’ (HK) debt junior in seniority to its existing 8.625% second lien notes due 2020 and its 12% second lien notes due 2022 will be eliminated, as will all of the preferred equity. The restructuring plan projects that the affected stakeholders will be compensated via new shares in the reorganized Halcón Resources, warrants, and cash.

Understanding Halcón Resources' Balance Sheet Restructuring Plans

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Secured debt restructuring

Under the restructuring plan, secured debt holders will be given higher shares in the reorganized Halcón Resources. The details of the secured debt restructuring are as follows:

  • Senior secured revolver: Halcón Resources expects a new or amended reserve-based facility to be provided by existing lenders.
  • Second lien notes (2L Notes): These will be unaffected and reinstated in the reorganized Halcón Resources.
  • Third lien notes (3L Notes): These will be fully equitized into 76.5% of the pro forma equity of reorganized Halcón Resources. These stakeholders will also receive $50 million in cash, plus accrued and unpaid interest through March 31, 2016.

Unsecured debt restructuring

Under the Restructuring Plan, unsecured debt holders will be given a lower share in the reorganized Halcón Resources. The details of the unsecured debt restructuring are as follows:

  • Unsecured notes: These will receive 15.5% of the pro forma equity of reorganized Halcón Resources. These stakeholders will receive warrants for 4% of the pro forma equity (four-year term, ~$1.3 billion equity strike). Plus, unsecured notes stakeholders will also receive $37.6 million in cash, plus accrued and unpaid interest through May 15, 2016.
  • Convertible notes: These will receive 4% of the pro forma equity of reorganized Halcón Resources. These stakeholders will also receive $15 million in cash and warrants for 1% of the pro forma equity (four-year term, ~$1.3 billion equity strike)

Preferred and common equity restructuring

Under the restructuring plan, preferred and common equity holders will be given the lowest priority. The preferred equity holders will receive $11.1 million in cash, whereas the common equity holders will receive 4% of the pro forma equity of the reorganized Halcón Resources.

In order to deal with lower energy prices and raise cash, other upstream players from the S&P 500 (SPY) and S&P Midcap 400 (MDY), including Murphy Oil (MUR), Chesapeake Energy (CHK), Anadarko Petroleum (APC), and CONSOL Energy (CNX), have also recently completed divestitures.

Notably, to preserve cash, Southwestern Energy (SWN) has elected to pay its dividend on preferred stocks in shares of common stock of the company.

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