Pacific Exploration & Production on Track to Emerge From Bankruptcy
September 29 2016 - 5:00PM
Dow Jones News
Pacific Exploration & Production Corp.'s plan to wipe some
$5 billion in debt from its books cleared a final hurdle Wednesday,
putting the company on track to emerge from bankruptcy within two
weeks.
Following a hearing in Manhattan, U.S. Bankruptcy Court Judge
James Garrity Jr. said he would sign off on a global restructuring
plan, which has already won approval in courts in both Canada and
Colombia.
Pacific, an oil and natural gas producer, is based in Canada but
operates primarily in Colombia, where it is the largest independent
oil and natural gas company, court papers showed. Much of the
company's mountain of debt, however, is held in the U.S.
Judge Garrity, who is overseeing Pacific's U.S. bankruptcy
proceeding, had already agreed to formally recognize the Canadian
court as Pacific's primary restructuring venue, but he had asked
lawyers for the company to return to his courtroom Wednesday to
present the final version of the plan before he would agree to
discharge any debt.
The restructuring plan, which the company says is one of the
largest and most complicated restructurings ever attempted in Latin
America, wipes out $5.3 billion, court papers showed. Pacific,
which is continuing normal operations during the bankruptcy, said
the strategy not only aims to cut debt but will also save it $253
million in annual interest expenses.
In an earlier court hearing, Judge Garrity called the plan "a
very, very good result." When put to a vote last month, 98.4% of
creditors agreed.
Pacific racked up its multibillion-dollar debt load through an
acquisition spree, but ran into trouble when crude oil prices
fell.
In April, the oil producer said it had reached an agreement with
a group of bank lenders, unsecured bondholders as well as with
Canadian investment firm Catalyst Capital Group Inc. on a
restructuring blueprint.
Soon after, Pacific sought protection under Canada's Companies'
Creditors Arrangement Act, or CCAA, and days later filed for
chapter 15 bankruptcy protection in Manhattan. Pacific also
launched an insolvency proceeding in Colombia in May.
The company has now won approval for its plan in all three
courts.
Catalyst and unsecured bondholders together offered $500 million
in bankruptcy financing to help fund Pacific's operations while it
restructured. In return, the plan calls for Catalyst to receive
29.3% of Pacific's new shares and the bondholders will receive
12.5% of the new common shares as well as new five-year secured
notes, according to court papers.
Creditors including lenders behind $1.2 billion in loans, the
holders of $4.1 billion in senior unsecured bonds and other
unsecured creditors will share the remaining 58.2% of new shares.
Current shareholders, including significant shareholder O'Hara
Administration Co., will just receive no more than 0.006% ownership
in the reorganized company, court papers showed.
Write to Tom Corrigan at tom.corrigan@wsj.com
(END) Dow Jones Newswires
September 29, 2016 16:45 ET (20:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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