HOUSTON, Dec. 15, 2016 /PRNewswire/ -- Key Energy
Services, Inc. ("Key" or the "Company") (NYSE: KEG).
As previously announced, on October 24,
2016, the Company and certain of its domestic subsidiaries
(collectively, the "Filing Subsidiaries" and, together with the
Company, the "Debtors") filed voluntary petitions for
reorganization under chapter 11 of the United States Bankruptcy
Code in the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"), pursuant to
the terms of a plan support agreement, dated August 24, 2016, by and among the Debtors and
certain of their lenders and noteholders, that contemplated the
reorganization of the Debtors pursuant to a prepackaged plan of
reorganization (the "Plan"). The Debtors obtained joint
administration of their chapter 11 cases under the
caption In re: Key Energy Services, Inc, et al., Case
No. 16-12306. The Filing Subsidiaries in these chapter 11 cases
were Misr Key Energy Investments, LLC, Key Energy Services, LLC,
and Misr Key Energy Services, LLC.
On December 15, 2016 the Company
emerged from bankruptcy, having satisfied all unwaived conditions
to effectiveness set forth in the Plan. The reorganized
Company received approval to list its new common stock on the New
York Stock Exchange in conjunction with its emergence, and trading
in its common stock is expected to commence on December 16, 2016, under the ticker symbol
"KEG".
Platinum Equity, a Los
Angeles-based global investment firm with a unique focus on
operations and extensive experience helping businesses in
transition, previously held a majority of Key's senior notes and is
now the Company's largest shareholder.
Approximately $694 million of the
Company's long-term debt has been eliminated in the reorganization
along with more than $45.6 million of
annual interest expense going forward. The table below summarizes
Key's capital structure as of September 30,
2016 on a historical basis and on a pro forma basis after
giving effect to the reorganization.
|
As of September 30,
2016
|
Face Value
|
|
|
Recognition
|
|
|
Capitalization
($MM)
|
Actual
|
|
Adjustments
|
|
Pro Forma
|
|
|
|
|
|
|
Cash & Cash
Equivalents
|
$
57
|
|
$
32
|
|
$
89
|
Restricted
Cash
|
19
|
|
-
|
|
19
|
Segregated
Cash*
|
-
|
|
10
|
|
10
|
Total
Cash
|
$
76
|
|
$
42
|
|
$
118
|
|
|
|
|
|
|
Term Loan Facility
due 2020
|
289
|
|
(39)
|
|
250
|
6.75% Senior Notes
due 2021
|
675
|
|
(675)
|
|
-
|
Debt issuance costs
and unamortized premium (discount) on debt, net
|
(20)
|
|
20
|
|
-
|
Total
Debt
|
$
944
|
|
$
(694)
|
|
$
250
|
|
|
|
|
|
|
Primary Rights
Offering
|
-
|
|
85
|
|
85
|
Rights Offering
Liquidity Shares
|
-
|
|
24
|
|
24
|
Stockholders' Equity
(from conversion in bankruptcy)
|
(163)
|
|
313
|
|
150
|
Total
Stockholders' Equity
|
$
(163)
|
|
$
422
|
|
$
259
|
|
|
|
|
|
|
Borrowing
Base
|
$
60
|
|
$
-
|
|
$
60
|
Less:
Borrowings
|
-
|
|
-
|
|
-
|
Less: Letters of
Credit
|
39
|
|
-
|
|
39
|
Plus: Cash
|
57
|
|
32
|
|
89
|
Total
Liquidity
|
$
78
|
|
$
32
|
|
$
110
|
|
|
|
|
|
|
*Segregated cash is
to pay restructuring professionals.
|
|
|
|
|
|
|
|
|
|
|
|
As previously disclosed, holders of Key common stock are
entitled to receive 5.0% of the new common stock of the reorganized
Company and the remaining 95.0% of the new common stock of the
reorganized Company is being allocated to the Company's
noteholders, each calculated prior to issuance of common stock in
the Rights Offering and subject to dilution by new common shares
reserved for issuance pursuant to the management incentive program
(the "MIP"), and warrants issued to certain existing equity holders
pursuant to the Plan (the "New Warrants"). In addition, certain
qualified pre-petition holders of Key common stock received rights
to participate in up to 5% of the Rights Offering, and certain
pre-petition debt holders in the Company received rights to
participate in up to 95% of the Rights Offering. On emergence, the
Company expects to have approximately 20.1 million new common
shares outstanding before dilution from the MIP and the New
Warrants. The table below summarizes the new ownership structure of
Key.
Pro Forma
Ownership Summary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
Excluding
|
%
|
|
Including
MIP,
|
%
|
Holder
|
|
MIP &
Warrants
|
Ownership
|
|
Excluding
Warrants
|
Ownership
|
New Shares Issued to
Senior Note Holders
|
|
|
18,746,635
|
93.3%
|
|
18,746,635
|
83.1%
|
New Shares Issued to
Equity Holders(1)
|
|
|
1,338,266
|
6.7%
|
|
1,338,266
|
5.9%
|
New Shares Reserved
under MIP(2)
|
|
|
|
–
|
–
|
|
2,482,403
|
11.0%
|
New Warrants Issued
to Existing Equity Holders(3)
|
|
–
|
–
|
|
–
|
–
|
Total
|
|
|
|
|
|
20,084,901
|
100.0%
|
|
22,567,304
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
Note: Final share
allocations may vary slightly from the amounts seen above due to
rounding.
|
|
(1) Includes Primary
Rights Offering and Incremental Liquidity Shares
|
(2) Shares underlying
the MIP consist of RSUs and stock options (to be awarded based on
time and/or performance and vesting
ratably over 4 years) and restricted stock (to be awarded to
directors and vesting one year after the date of
grant).
|
(3) The 4-Year
Warrants are exercisable for 919,090 shares in the aggregate at a
strike price of $43.52 per share and the 5-Year Warrants are exercisable for 919,090 shares in
the aggregate at a strike price of $54.40 per
share.
|
|
|
Robert Drummond, Key's President
and Chief Executive Officer, commented, "We could not be more
pleased to be emerging from our bankruptcy process in such an
expeditious fashion and to concurrently re-list Key's new common
shares on the New York Stock Exchange. I am greatly appreciative of
our supporting creditors and our dedicated employees who have
showed tremendous commitment during this period. Platinum
Equity has also been a strong partner in driving the restructuring
process, and the firm's M&A and operations capabilities will be
instrumental in executing our long-term strategic plan. We worked
closely with our customers throughout the process and actually
managed to improve our service quality while delivering the best
safety performance in our history. I want to especially thank
all of our customers for their loyalty and let them know that we
are already adding skilled employees to meet their growing
demand."
Platinum Equity partner and newly-appointed Key board member
Jacob Kotzubei said he is excited
about Key's position today and its prospects for growth.
"Key Energy is a market leader in North American production
services and stands today as a stable, well-capitalized business
with a great future," said Mr. Kotzubei. "The Company is an ideal
platform to grow organically and through prospective add-on
acquisitions. We look forward to working with Robert and the
management team to capitalize on the opportunities ahead."
Details of the restructuring and debt agreements can be found in
the Current Report on Form 8-K filed with the Securities and
Exchange Commission on December 15,
2016.
Key was represented in its restructuring by Sidley Austin LLP.
Sullivan & Cromwell LLP represented Platinum Equity as well as
certain other holders of Key's pre-petition senior notes, who
were also represented by Cleary Gottlieb
Steen & Hamilton LLP.
Cautionary Note regarding Forward-Looking
Statements
This press release contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. Statements that are not historical in nature or that
relate to future events and conditions are, or may be deemed to be,
forward-looking statements. These statements are only predictions
and are subject to substantial risks and uncertainties and are not
guarantees of performance. Future actions, events and conditions
and future results of operations may differ materially from those
expressed in these statements.
Important factors that may affect Key's expectations, estimates
or projections include, but are not limited to, the following:
conditions in the oil and natural gas industry, especially oil and
natural gas prices and capital expenditures by oil and natural gas
companies; volatility in oil and natural gas prices; Key's ability
to implement price increases or maintain pricing on its core
services; industry capacity; increased labor costs or
unavailability of skilled workers; asset impairments or other
charges; the periodic low demand for Key's services and resulting
operating losses and negative cash flows; Key's highly competitive
industry as well as operating risks, which are primarily
self-insured, and the possibility that its insurance may not be
adequate to cover all of its losses or liabilities; the economic,
political and social instability and risks of doing business in
certain foreign countries; significant costs and potential
liabilities resulting from compliance with applicable laws; Key's
historically high employee turnover rate and its ability to replace
or add workers, including executive officers; Key's ability to
incur debt or long- term lease obligations; Key's ability to
implement technological developments and enhancements; significant
costs and liabilities resulting from environmental, health and
safety laws and regulations, including those relating to hydraulic
fracturing; severe weather impacts on Key's business; Key's ability
to successfully identify, make and integrate acquisitions and its
ability to finance future growth of its operations or future
acquisitions; the loss of one or more of Key's larger customers;
the impact of compliance with climate change legislation or
initiatives; Key's ability to generate sufficient cash flow to meet
debt service obligations; the amount of Key's debt and the
limitations imposed by the covenants in the agreements governing
its debt, including its ability to comply with covenants under its
current debt agreements; an increase in Key's debt service
obligations due to variable rate indebtedness; Key's inability to
achieve its financial, capital expenditure and operational
projections, including quarterly and annual projections of revenue
and/or operating income and its inaccurate assessment of future
activity levels, customer demand, and pricing stability which may
not materialize (whether for Key as a whole or for geographic
regions and/or business segments individually); Key's ability to
achieve the benefits expected from acquisition and disposition
transactions; Key's ability to respond to changing or declining
market conditions, including Key's ability to reduce the costs of
labor, fuel, equipment and supplies employed and used in its
businesses; Key's ability to maintain sufficient liquidity; adverse
impact of litigation; and other factors affecting Key's business
described in "Item 1A. Risk Factors" in its Annual Report
on Form 10-K for the year ended December 31, 2015
and its other filings with the SEC and in Article XI of the
Disclosure Statement.
About Key Energy Services
Key Energy Services is the largest onshore, rig-based well
servicing contractor based on the number of rigs owned. Key
provides a complete range of well intervention services and has
operations in all major onshore oil and gas producing regions of
the continental United States and internationally
in Russia.
Contact:
West Gotcher, Investor Relations
713-757-5539
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SOURCE Key Energy Services, Inc.