Financial Restructuring Expected to Eliminate More than $1.3 Billion of Debt
Operations to Continue as Normal Across Asset Base
HOUSTON, Dec. 23, 2016 (GLOBE NEWSWIRE) — Memorial Production Partners LP (NASDAQ:MEMP) (“MEMP” or “the Partnership”) today announced that it has entered into a Plan Support Agreement (“PSA”) with holders of 50.2% of the Partnership’s 7.625% senior notes due 2021 and the Partnership’s 6.875% senior notes due 2022 (collectively, the “Notes”), and has reached an agreement-in-principle with the agent under its revolving credit facility (subject to documentation and approval by the lenders under the revolving credit facility) on the terms of a financial restructuring plan that is expected to eliminate more than $1.3 billion of debt from the Partnership’s balance sheet. The Partnership is working closely with the lenders under its revolving credit facility to reach a definitive agreement.
Under the terms of the PSA, the financial restructuring will, among other things:
- Cancel more than $1.1 billion of principal in outstanding Notes. In the restructuring, the noteholders will receive 98% of the common equity interests of the restructured company as of the effective date of the restructuring plan (the “Effective Date”). The noteholders, at their election, will be entitled to receive an additional cash payment of up to approximately $24.6 million.
- Provide the Partnership’s limited partners with a recovery in the form of (i) 2% of reorganized MEMP’s equity on the Effective Date and (ii) 5-year warrants to acquire an additional 8% of the total outstanding equity in reorganized MEMP at an exercise price based upon the outstanding principal amount plus interest accrued on the Notes.
- Be structured in a manner intended to minimize, to the extent possible, the negative tax impact of cancellation of debt income to the Partnership’s existing limited partners. The Partnership expects to emerge from a financial restructuring plan as a corporation for U.S. federal income tax purposes.
- Ensure that ordinary course trade obligations will be paid in full.
In anticipation of the financial restructuring and to reduce exposure under the revolving credit facility, the Partnership has monetized certain of its hedge positions and used the net cash proceeds to repay outstanding borrowings under its revolving credit facility by approximately $190 million. This has resulted in an equivalent reduction in the borrowing base under the revolving credit facility.
William J. Scarff, President and Chief Executive Officer of the general partner of MEMP, said, “Today’s announcement highlights the next step in our efforts to reduce debt and position the Partnership for the long-term. After thoroughly considering all options with the assistance of our legal and financial advisors, and in light of the challenging commodity pricing environment and the recent reduction of our borrowing base, we believe that this course of action is in the best interests of MEMP. With the support of our lenders and noteholders, we expect to complete the financial restructuring on an expedited basis and emerge as a stronger company.”
Mr. Scarff continued, “Moving forward, we are focused on maintaining production across our high-quality asset base and executing on our strategic priorities. Our employees are the backbone of our success and it is because of their hard work and commitment to working safely that we continue to achieve solid operational results. We thank them for their continued dedication.”
To implement the terms of the PSA and agreement-in-principle and complete the proposed deleveraging transaction, MEMP expects to voluntarily file for reorganization under Chapter 11 of the United States Bankruptcy Code in the coming weeks.
MEMP’s operations and production are expected to continue as normal throughout the court-supervised financial restructuring process. The Partnership intends to continue meeting its employee, customer and vendor obligations in the normal course and will continue to adhere to all applicable regulatory and environmental standards.
MEMP expects to file a Current Report on Form 8-K with the Securities and Exchange Commission that will include the full terms of the PSA.
Perella Weinberg Partners L.P. is serving as financial advisor to MEMP and Weil, Gotshal & Manges LLP is serving as its legal counsel.
Miller Buckfire & Co., LLC is serving as financial advisor and Davis Polk & Wardwell LLP is serving as legal counsel to the ad hoc group of holders of Notes that entered into the PSA.
About Memorial Production Partners LP
Memorial Production Partners LP is a publicly traded partnership engaged in the acquisition, production and development of oil and natural gas properties in the United States. MEMP’s properties consist of mature, legacy oil and natural gas fields. MEMP is headquartered in Houston, Texas. For more information, visit www.memorialpp.com.