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A Must-Know: Stone Energy’s Debt Restructuring Plans

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Stone Energy’s debt

On September 30, 2016, Stone Energy’s (SGY) total debt stood at ~$1.4 billion. With only ~$182 million in cash and cash equivalents, SGY’s net debt was ~$1.3 billion at the end of 3Q16. The details of Stone Energy’s total debt are outlined below.

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Stone Energy’s debt restructuring support agreement

On October 20, 2016, Stone Energy announced a comprehensive restructuring support agreement with holders of its 1.75% Senior Convertible Notes due 2017 (with an outstanding amount of ~$292 million) and holders of the 7.5% Senior Notes due 2022 (with an outstanding amount of ~$770 million).

The restructuring support agreement contemplates that Stone Energy will file for voluntary relief under Chapter 11 of the United States Bankruptcy Code in a US Bankruptcy Court on or before December 9, 2016, to implement the restructuring plan.

Stone Energy’s debt restructuring

Under the restructuring plan, note holders will be given a higher share in the reorganized Stone Energy. The note holders will receive their pro rata share of:

  • $150 million of the net cash proceeds from the sale of Stone Energy’s ~ 86,000 net acres in the Appalachia regions of Pennsylvania and West Virginia, plus 85% of the net cash proceeds from the sale of the properties in excess of $350 million, if any
  • 95% of the common stock in reorganized Stone Energy
  • $225 million of new 7.5% second lien notes due 2022
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Stone Energy’s common stock holders

Under the restructuring plan, existing common stock holders will be given a lower share in the reorganized Stone Energy. Existing common stockholders of SGY will receive their pro rata share of 5% of the common stock in the reorganized Stone Energy. They will also receive warrants for up to 15% of the post-petition equity.

Stone Energy’s debt restructuring benefit

Assuming the implementation of the restructuring plan, Stone Energy expects that it will eliminate ~$850 million in principal of outstanding debt and reduce its annual interest payment burden by ~$46 million.

Other oil and gas producers

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

In order 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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