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Magnum Hunter Files Chapter 11 Petition; Utica, Marcellus Assets

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   |    Tuesday,December 15,2015

Magnum Hunter Resources Corporation and certain of its wholly-owned subsidiaries announced that they have filed voluntary petitions for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware to facilitate the restructuring of their consolidated balance sheet through a prearranged restructuring plan.

The Company also announced its entry into a restructuring support agreement with lenders that hold, in the aggregate, approximately 75% in principal amount of the Company's funded debt claims. Specifically, the parties to the restructuring support agreement hold substantially all of the Company's first lien debt, approximately 66.5% in principal amount of the Company's second lien debt, and approximately 79% in principal amount of the Company's senior unsecured notes.

The restructuring support agreement contemplates the debt-to-equity conversion of (i) substantially all of the Company's prepetition funded indebtedness and (ii) 100% of the Company's contemplated postpetition debtor-in-possession financing (described below), resulting in a significantly deleveraged balance sheet upon the Company's anticipated emergence from the chapter 11 bankruptcy process in April 2016. In addition, the restructuring support agreement contemplates a significant cash recovery to vendors and trade claimants.

Notably, the restructuring support agreement provides for debtor-in-possession financing in the form of a $200 million senior secured multi-draw term loan that will be backstopped by lenders who are parties to the restructuring support agreement -- further evidencing the lenders' overwhelming support for the Company's chapter 11 process.

The Company anticipates that the DIP financing will provide sufficient liquidity to stabilize the Company's operations and satisfy key vendor, employee, and other key stakeholder commitments for the duration of the restructuring process, and, as noted, the DIP financing is expected to be converted to equity on the Company's exit from the chapter 11 process.

The restructuring support agreement represents a significant achievement for the Company in the face of historic commodity price declines in both oil and natural gas and an increasingly depressed operating environment.

Gary C. Evans, Chairman and Chief Executive Officer of Magnum Hunter, said: "With the unified support of our various lenders, we anticipate this restructuring will be a success and unprecedented in our industry. I believe this restructuring will position Magnum Hunter as a market leader in the upstream sector with an ideal capital structure to capitalize on the large number of opportunities anticipated in our industry due to the precipitous commodity cycle downturn affecting the industry as a whole.

"At a very challenging time for the entire energy industry, when many of our competitors have been forced to either file for bankruptcy without a plan to emerge in place or continue to attempt to restructure with creditors without an 'end game,' our global restructuring accomplishment is definitely an outlier. We expect the entire process to be efficient, cost effective, and quick. We also anticipate emerging from bankruptcy financially stronger than ever before."

PJT Partners LP is serving as financial advisor to Magnum Hunter, Kirkland & Ellis LLP is serving as legal counsel, and Alvarez & Marsal North America, LLC is serving as restructuring advisor. Weil, Gotshal & Manges LLP and Houlihan Lokey are serving as legal counsel and financial advisors, respectively, to an ad hoc group of holders of the Company's first lien debt and second lien debt, in their capacity as prepetition lenders and postpetition DIP lenders. Akin Gump Strauss Hauer & Feld LLP and Centerview Partners are serving as legal counsel and financial advisors, respectively, to an ad hoc group of holders of the Company's first lien debt and senior unsecured notes, in their capacity as prepetition lenders and postpetition DIP lenders.


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