Swift Energy Company files for Chapter 11 protection

March 2016 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

Independent US-based oil and natural gas producer Swift Energy Company has announced that it has agreed to convert all senior notes to equity pursuant to the terms of a restructuring support programme – an agreement that will be actioned through a Chapter 11 reorganisation plan.

Under the terms of the agreement, existing equity holders are to retain 4 percent of the company’s equity on a fully diluted basis, subject only to dilution as a result of a proposed new management incentive programme. In addition to the retained equity, existing equity holders are also to receive warrants for up to 30 percent of the post-petition equity exercisable upon Swift Energy achieving certain benchmarks pursuant to the terms of proposed new warrants.

To begin the process of obtaining bankruptcy court approval of the agreement, Swift Energy (and eight of its subsidiaries) filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the US Bankruptcy Court for the District of Delaware.

“We had to take action in response to the significant reduction in oil and gas prices that the entire industry has been facing,” said Terry E. Swift, president and chief executive of Swift Energy Company. “I am pleased we were able to reach this comprehensive reorganisation plan with senior noteholders holding a majority of those notes.”

Founded in 1979 and headquartered in Houston, Swift Energy Company engages in developing, exploring, acquiring and operating oil and gas properties, with a focus on the Eagle Ford trend of South Texas and the onshore and inland waters of Louisiana.

Swift Energy has also arranged up to $75m of debtor-in-possession (DIP) financing from a group of senior noteholders to provide additional liquidity to fund the business through the Chapter 11 process. Furthermore, the company expects to restructure, amend or refinance its pre-petition $330m secured revolving credit facility as part of its reorganisation plan.

Additionally, the agreement with the senior noteholders provides for the executive management team to retain their positions upon completion of the Chapter 11 process. Terry Swift will retain a director position. A new non-officer chairman of the board will be appointed by the new majority equity group, along with new board members that will comprise a majority of the new board of directors. Pursuant to the restructuring support agreement, Dean Swick, managing director at Alvarez and Marsal, will act as chief restructuring officer (CRO) during the reorganisation process.

The agreement further provides for unsecured creditors with lien rights to be paid in full pursuant to court orders and the plan of reorganisation and includes an agreed timeline for the Chapter 11 process which, if met, would result in Swift Energy emerging from bankruptcy within 110 days.

In the meantime, Swift Energy expects to continue operations as normal during the pendency of the bankruptcy case, and anticipates making royalty payments and payments to working interest owners as and when they are required. Employees have also been advised that they should expect no change in their daily responsibilities and that they will be paid in the ordinary course.

“We would like to thank our business partners, capital providers, vendors, suppliers and employees for their continued support as we move forward with this process quickly and successfully,” said Mr Swift. “We expect to exit bankruptcy with a greatly improved balance sheet and additional liquidity to realise the full potential of our assets for all stakeholders, while having sufficient funding to maintain, if not improve our asset base during the Chapter 11 process.”

Fraser Tennant