Exco Resources emerges from bankruptcy

September 2019 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

September 2019 Issue

In July, independent energy producer Exco Resources announced that it had successfully completed its financial restructuring and emerged from Chapter 11 bankruptcy, having reduced its debt by more than $1.1bn.

The company filed for bankruptcy protection in the US Bankruptcy Court for the Southern District of Texas in January 2018, in one of the largest bankruptcies of the year, having been negatively impacted by the sustained downturn in commodity prices and ongoing uncertainty in the global energy market. The company estimated the creditors list for it and its 14 affiliates as being between 10,000 and 25,000. The company’s assets were between $500m and $1bn with liabilities between $1bn and $10bn.

Going forward, the company intends to focus on shale oil and gas in Texas, Louisiana and the Appalachia region. Exco has secured $325m in committed exit financing from a new credit facility, which will provide significant financial flexibility to support ongoing operations and investment in the business. The company’s restructuring plan was agreed by the court in late June.

“This is an exciting day for Exco and marks the beginning of the next chapter as an even stronger, more competitive company,” said Hal Hickey, president and chief executive of Exco. “Through the restructuring process, we have significantly improved our capital structure and reduced our debt, and our operations have progressed uninterrupted. Exco is now better positioned to capitalise on our strong asset base and operational expertise as we continue enhancing our business and serving our customers, partners and other stakeholders.

“Our successful emergence from this process is a testament to our former board and talented employees, whose continued focus on our operational initiatives enabled us to execute on our drilling and completion activities while maintaining an exemplary safety record throughout this process,” he added. “I also want to thank our customers, business partners and lenders for their ongoing support. I am honoured to be part of this team and confident our new board will be an asset to EXCO as we enter our next stage of business development.”

As a result of the company’s restructuring, Exco is now privately-owned and its shares are no longer available for trading on a public exchange. Its new board includes representatives from the holders of the company’s newly issued common stock. The new board includes Rick Doman, David Dunn, Peter Furlan, Bill Transier and C. John Wilder.

Kirkland & Ellis LLP served as Exco’s legal adviser during the Chapter 11 process. Alvarez & Marsal North America, LLC served as restructuring adviser, with PJT Partners LP serving as financial adviser.

The company’s financial difficulties have been ongoing for some time. In 2015, Exco went into default, but it completed a distressed debt exchange. The company was one of a number of exploration and production (E&P) companies to go into default in the wake of persistently low commodity prices. At the time, the company also shut down its drilling programme in the Eagle Ford Shale to focus on the Haynesville and Bossier shales in East Texas. The company also renegotiated a number of gathering and transportation contracts at this time.

In 2018, Exco sold its assets in the Eagle Ford to an affiliate of Kohlberg Kravis Roberts & Co. LP for $300m. Prior to its Chapter 11 filing, Exco began trading on the OTC Pink Marketplace after the New York Stock Exchange (NYSE) began proceedings to delist its common shares. Exco had failed to maintain an average global market capitalisation of at least $15m over 30 consecutive trading days and thus was suspended from NYSE trading.

Richard Summerfield