Item 1.03.
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Bankruptcy or Receivership.
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On December 14, 2016, Stone Energy Corporation
(
Stone
or the
Company
) and its subsidiaries Stone Energy Holding, L.L.C. and Stone Energy Offshore, L.L.C. (together with the Company, the
Debtors
) filed voluntary
petitions for relief (collectively, the
Petitions
and, the cases commenced thereby, the
Bankruptcy Cases
) under chapter 11 of title 11 of the United States Code (the
Bankruptcy
Code
) in the United States Bankruptcy Court for the Southern District of Texas (the
Bankruptcy Court
). The Debtors have filed a motion with the Bankruptcy Court seeking to jointly administer the Bankruptcy
Cases under the caption In re Stone Energy Corporation, et al. The Bankruptcy Cases were filed in order to effect the Debtors
pre-packaged
plan of reorganization (as amended from time to
time, the
Plan
). As previously disclosed, on November 17, 2016, the Debtors commenced a solicitation to seek acceptance by a majority of those voting in each voting class of claims of the Companys creditors under
the Plan, including (a) the lenders (the
Banks
) under the Fourth Amended and Restated Credit Agreement, dated as of June 24, 2014, as amended, modified, or otherwise supplemented from time to time (the
Credit Agreement
) among Stone Energy Corporation as borrower, Bank of America, N.A. as administrative agent and issuing bank, and the financial institutions named therein, and (b) the holders of the Companys 1
3
/
4
% Senior Convertible Notes due 2017 (the
Convertible
Notes
) and the Companys 7 1/2% Senior Notes due 2022 (the
2022 Notes
and, together with the Convertible Notes, the
Notes
and the holders thereof, the
Noteholders
). The Company expects the solicitation period to end on December 16, 2016. Copies of the Plan, then in effect, and the disclosure statement related to the solicitation (the
Disclosure
Statement
) were furnished as Exhibit 99.1 to the Companys Current Report on Form
8-K
filed on November 18, 2016.
As previously announced, on October 20, 2016, the Debtors and Noteholders holding approximately 85.4% of the aggregate principal amount
of Notes executed a restructuring support agreement (the
Original RSA
). On December 14, 2016, the Debtors, the Noteholders holding approximately 79.7% of the aggregate principal amount of Notes and the Banks holding 100% of
the aggregate principal amount owing under the Credit Agreement entered into an Amended and Restated Restructuring Support Agreement (the
A&R RSA
) that amends, supersedes and restates in its entirety the Original RSA.
In connection with entry into the A&R RSA and the commencement of the Bankruptcy Cases, the Debtors amended the Plan.
Pursuant to the
terms of the Plan as revised to be consistent with the terms of the A&R RSA and the term sheet annexed to the A&R RSA (the
Term Sheet
), Noteholders, Banks and other interest holders will receive treatment under the
Plan, summarized as follows:
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Noteholders will receive their pro rata share of (a) $100 million of cash, (b) 96% of the common stock in reorganized Stone and (c) $225 million of new 7.5% second lien notes due 2022.
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Existing common stockholders of Stone will receive their pro rata share of 4% of the common stock in reorganized Stone and warrants for up to 10% of the post-petition equity exercisable upon the Company reaching certain
benchmarks pursuant to the terms of the proposed new warrants.
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Banks signatory to the A&R RSA will receive their respective pro rata share of commitments and obligations under an amended Credit Agreement on the terms set forth in Exhibit 1 to the Term Sheet, as well as their
respective share of the Companys unrestricted cash, as of the effective date of the Plan, in excess of $25 million, net of certain fees, payments, escrows or distributions pursuant to the Plan and the PSA, defined below.
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Banks not signatory to the A&R RSA will have the option to receive either (a) the same treatment as the Banks signatory to the A&R RSA, or (b) their respective pro rata
share of new senior
secured term loans plus collateral for their respective pro rata share of issued but undrawn letters of credit.
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All claims of creditors with unsecured claims other than claims by the Noteholders, including vendors, shall be unaltered and will be paid in full in the ordinary course of business to the extent such claims are
undisputed. Stone estimates that such unsecured claims are in the range of approximately $17 million to $27 million in the aggregate.
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Each of the foregoing common equity percentages in reorganized Stone is subject to dilution from the exercise of the new warrants described
above and a management incentive plan.
The A&R RSA contains certain covenants on the part of the Debtors and the Noteholders and
Banks who are signatories to the A&R RSA, including that such Noteholders and Banks will vote in favor of the Plan, support the sale of approximately 86,000 net acres in the Appalachia regions of Pennsylvania and West Virginia (the
Properties
) to an affiliate of Tug Hill, Inc., pursuant to the terms of that certain Purchase and Sale Agreement, dated October 20, 2016, as amended on December 9, 2016 (the
PSA
), and
otherwise facilitate the restructuring transaction, in each case subject to certain terms and conditions in the A&R RSA. The consummation of the Plan will be subject to customary conditions and other requirements, as well as the sale by Stone of
the Properties for a cash purchase price of at least $350 million and approval of the Bankruptcy Court. The A&R RSA also provides for termination by each party, or by any party, upon the occurrence of certain events, including without
limitation, termination by the Noteholders or the Banks upon the failure of the Company to achieve certain milestones set forth in Schedule 1 to the A&R RSA.
The foregoing description of the A&R RSA does not purport to be complete and is qualified by reference to the complete text of the A&R
RSA, a copy of which is filed herewith as Exhibit 10.1 and is incorporated herein by reference.
Assuming implementation of the Plan, the
Company expects to eliminate approximately $1.2 billion in principal amount of outstanding debt.
No trustee has been appointed, and
the Company and its subsidiaries will continue to operate as debtors in possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy
Court. To assure ordinary course operations, the Company is seeking approval from the Bankruptcy Court for a variety of first day motions, including authority to maintain bank accounts and other customary relief.
Subject to the approval of the Bankruptcy Court, the Plan is expected to be consummated in approximately 90 days. The Company believes it has
adequate liquidity to maintain its operations in the ordinary course and does not intend to seek any
debtor-in-possession
financing during the pendency of the Bankruptcy
Cases. The Company plans, subject to approval by the Bankruptcy Court, to continue to pay vendors, royalty owners and other parties in the ordinary course throughout the bankruptcy process.
The Company has been in contact with the New York Stock Exchange (the
NYSE
) and anticipates the continued listing of its common stock on the NYSE throughout the bankruptcy process so long as the Company continues to meet the minimum continued listing standards set forth by the NYSE.
The Debtors filed their voluntary chapter 11 petitions and the Plan in the U.S. Bankruptcy Court for the Southern District of Texas in
Houston. Information about the Bankruptcy Cases can be found at http://dm.epiq11.com/StoneEnergy or by calling
+1-888-243-5081
(toll-free in North America) or
+1-503-520-4474
(outside of North America).