After spending massive amounts of money in the shale land grab through 2014, debt and low commodity prices caught up with the Linn Energy family of companies in bankruptcy court.
Linn Energy LLC (NASDAQ: LINE), LinnCo LLC (NASDAQ: LNCO) and Berry Petroleum Company LLC entered a restructuring agreement May 11 with its noteholders and filed for Chapter 11 bankruptcy in the Southern District of Texas.
The companies expect operations across their asset base to continue while in bankruptcy.
From 2012 to 2014, Linn was an active acquirer, purchasing $10.5 billion worth of assets. Among its largest deals was the purchase of Berry Petroleum Co. in 2013 for $4.3 billion in shares and acquired debt. In August 2014, the company also purchased acreage from Devon Energy Corp. (NYSE: DVN) in the Rockies, Gulf Coast and Midcontinent for $2.3 billion.
Under the agreement with its creditors, Linn will be supported with:
- $2.2 billion reserve-based and term loan credit facility;
- Consensual use of Linn and Berry's cash collateral to fund the Chapter 11 cases; and
- Broad terms of a comprehensive restructuring of the company's indebtedness.
On exit from bankruptcy, Linn’s credit facility will consist of a term loan of $800 million and a revolving loan of $1.4 billion.
Mark E. Ellis, chairman, president and CEO, said the restructuring agreement is a sign of confidence from its first-lien lenders in the company’s assets and represents an important step forward for the company.
“After our review of the available options, with the assistance of our financial and legal advisers, we determined that this court supervised financial restructuring process is the best course of action for the company and our stakeholders,” Ellis said. “Like many others in our industry, Linn has been impacted by continued low commodity prices.”
The company anticipates that the cash available to it during its Chapter 11 cases will likely provide sufficient liquidity to support the business during financial restructuring. The company does not currently intend to seek debtor-in-possession (DIP) financing.
Kirkland & Ellis LLP is serving as legal adviser to Linn. Lazard is serving as its financial adviser and AlixPartners is its restructuring adviser.
Darren Barbee can be reached at dbarbee@hartenergy.com.
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