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FTS International Files Chapter 11 Bankruptcy

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   |    Monday,August 24,2020

FTS International Inc. has filed for bankruptcy.

Numerous companies have made similar moves in recent months (such as BJ Energy Services, who filed Chapter 11 in July 2020) as a result of the steep drop in commodity prices caused by the oil price war as well as COVID-19.

Low pricing has led to a steep decline in frac activity since the start of the year, putting many service providers under pressure.

Per Schlumberger's Q2 report, they have seen a near 80% drop in frac activity since last year. However, Schlumberger also said that they expect the frac market to improve in 2H20.

FTS will clear approximately $437.3 million worth of debt from its balance sheet upon its exit. The Company’s cash balance was $192.7 million as of August 20, 2020.

Michael Doss, Chief Executive Officer, commented, “In recent months, we have worked diligently to cut costs and preserve liquidity under circumstances few people could have predicted. I am extremely pleased to announce this consensual deal with our Secured Noteholders which guarantees that we will remain a strong partner to our customers and suppliers going forward.” Mr. Doss continued, “We could not have reached this agreement without the support of our lenders, employees, customers, and suppliers and I thank you for that.”

Chapter 11 Details

The company has entered into a restructuring support agreement (RSA) with ~75% of the holders of the Company’s 6.250% senior secured notes due 2022 and ~64% of the Company’s secured debt claims.

To implement the restructuring, the Company and its subsidiaries, including FTS International Services, LLC, and FTS International Manufacturing, LLC, will commence voluntary cases under chapter 11.

The Agreement provides that holders of the Secured Notes and lenders under the Term Loan will exchange their debt claims for $30.6 million in cash consideration and 90.1% of the equity of a reorganized FTSI. Existing holders of FTSI equity will receive the remaining 9.9% of the equity.

Additionally, the consenting creditor parties to the Agreement have agreed to allow the Company to use existing cash to fund the chapter 11 cases and continue operations in the ordinary course, thereby preserving critical value for all stakeholders. Consenting creditors will also receive a cash payment equal to 3% of the principal amount of secured debt claims held.

Upon completion of the transaction, the Company intends to enter into a new revolving exit facility on terms acceptable to the consenting creditors to provide working capital to support operations.

Advisors

Kirkland & Ellis LLP and Winston & Strawn LLP are acting as legal counsel, Lazard is acting as financial advisor, and Alvarez & Marsal LLP is acting as restructuring advisor to the Company in connection with the restructuring. Davis Polk & Wardwell LLP is acting as legal counsel and Ducera Partners LLC and Silver Foundry, LP are acting as financial advisors to an ad hoc group of Secured Noteholders and consenting creditors.


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