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Q1 League Table: Energy, Healthcare Fuel Out-of-Court Restructuring

By Kirk O'Neil | Published on April 30, 2020

Companies in the oil and gas, healthcare and manufacturing sectors were busy avoiding Chapter 11 in the first quarter by launching out-of-court restructuring transactions.

Energy, healthcare and manufacturing companies were busy in the first quarter refinancing outstanding debt and restructuring their businesses out of court before the catastrophic effects of the novel coronavirus triggered a meltdown of the U.S. economy in March.

The price of West Texas Intermediate oil began plummeting in the first quarter after its most recent peak of $63.05 per barrel on Dec. 30 to $21.31 on March 30 at closing, mostly as a result of effects from Covid-19 and the oil price war between Saudi Arabia and Russia.

As prices began to tumble in January, oil producer Premier Oil plc began its efforts to refinance about $816 million in outstanding debt, while its biggest creditors opposed a restructuring. Also in January, however, onshore oil well services company Key Energy Services Inc. reached a restructuring agreement with its term loan lenders.

By March 8, the Saudi Arabia-Russia price war had begun and the Covid-19 pandemic was accelerating in the U.S., which prompted several more energy-related companies to seek an out-of-court restructuring to avoid Chapter 11.

Seadrill Ltd., which filed Chapter 11 in September 2017, in March hired Houlihan Lokey Inc. to work on a restructuring effort. Other energy companies hiring restructuring advisers in March included Gulfport Energy Corp. and Chesapeake Energy Corp.

Oil and gas producer Tapstone Energy LLC arranged an out-of-court exchange offer, while Yuma Energy Inc. needs to either modify credit agreements or sell assets after violating terms of its credit agreements.

Natural gas producer Perpetual Energy Inc. will need to refinance maturing debt by selling or monetizing assets, extending its maturity dates or finding alternate funding.

A variety of healthcare-related companies sought out-of-court restructurings mostly before Covid-19 went out of control. In January, AAC Holdings Inc., a substance abuse treatment center operator, needed to renegotiate a financing agreement after violating a forbearance agreement. Healthcare defense contractor Constellis Holdings LLC said it needed to negotiate a debt refinancing.

Robotic surgery technology provider Titan Medical Inc. in February said it was seeking financing and strategic options, since it needed to raise $72 million in funding by the end of 2020. Biotech firm Novan Inc. also in February said it was exploring financial and strategic options.

In March, biotech company Protalix Biotherapeutics Inc. said it was considering an out-of-court restructuring or refinancing of outstanding debt. Pharmaceutical company Obalon Therapeutics Inc. said it was seeking strategic options, including a sale, debt financing or other options.

Several manufacturers were seeking out-of-court restructurings in the first quarter as well. Tobacco company Turning Point Brands Inc. in January was seeking strategic alternatives for its vaping product. In February, specialty metals maker A.M. Castle & Co. launched an out-of-court exchange offer.

In March, Honeywell International Inc. was seeking to raise a $5 billion term loan for liquidity and considering a possible sale of its protective equipment unit. Glass tableware maker Libbey Inc. needed to refinance outstanding debt.

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