Swift Energy Co received U.S. bankruptcy court approval on Jan. 5 to borrow up to $15 million, giving the oil-and-gas exploration company time to negotiate a refinancing deal that is key to its turnaround.
Swift filed for Chapter 11 on Dec. 31, joining about 40 other energy companies that entered bankruptcy in 2015 as oil prices plunged to less than $37 a barrel from more than $100 a barrel in June 2014.
At Swift's first court hearing in Wilmington, Delaware on Jan. 5, lawyers stressed the importance of moving the Houston-based company's reorganization quickly. Swift faces a looming deadline for refinancing a $330 million loan, the main obstacle to its plan to emerge from bankruptcy in about four months and shed nearly $1 billion in debt.
"We need to try to minimize Chapter 11 time and expense as much as possible," said Gregory Gordon, a Jones Day attorney who represents Swift, which explores for oil and gas in South Texas.
Energy companies such as Samson Resources Corp that filed for bankruptcy in the past year have struggled to exit Chapter 11 due to slumping commodity prices.
Swift became the 19th publicly traded company with at least $1 billion in assets to file for bankruptcy in 2015, the most since 2010, according to bankruptcydata.com. The increase has been driven by commodity producers such as Sabine Oil & Gas Corp, Patriot Coal Corp and Allied Nevada Gold Corp.
Swift entered bankruptcy with an agreement with more than 60 percent of the holders of its unsecured bonds, which have a face value of $875 million. The company intends to exchange those bonds for 96 percent of its stock when it exits bankruptcy. Swift shareholders will receive 4 percent of its stock.
Credit rating agency Fitch noted that the current average bid of 7 cents on the dollar for Swift bonds shows that traders see little value in the deal with bondholders.
Fitch said Swift's bankruptcy is representative of the continued problems in the energy sector. The credit rating agency said it expects defaults in the industry to rise to 11 percent in 2016 from 7.2 percent in 2015.
According to Fitch, the energy sector accounts for 17 percent of outstanding U.S. high yield debt, an asset class that became an investor favorite during years historically low interest rates.
The case is Swift Energy Co, U.S. Bankruptcy Court, District of Delaware, No. 15-12670.
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