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Chapter 11 Revolving Door: Goodrich Going In, Swift Coming Out

Goodrich Petroleum Corp. and Swift Energy Co. have reached separate agreements with their respective creditors on reorganization, with the former planning to enter Chapter 11 bankruptcy on April 15 and the latter planning to emerge from it on the same day.

Meanwhile, Devon Energy Corp. said approximately 60 employees will be affected by its decision to close an office in suburban Houston, while the Danish company Maersk Oil said it will eliminate 60 positions and shutter its office in Houston.

Goodrich, Swift in Chapter 11

According to an Amendment No. 8 to Schedule TO filed Friday with the U.S. Securities and Exchange Commission, Houston-based Goodrich entered into a restructuring support agreement (RSA) with some of its second-lien holders on March 28. The parties “agreed to use reasonable best efforts to proceed with further actions under Chapter 11” no later than April 15.

Under the RSA, the company will enter bankruptcy and reorganize, giving second-lien lenders an equity stake in the new company.

The agreement reportedly comes after a debt-for-equity exchange offer fell short of a required participation level, although the company said on Thursday that it was extending the expiration date of tender offers until April 8.

A spokeswoman for Goodrich could not be reached on Friday.

In a statement Thursday, Goodrich said its exchange agent, American Stock and Transfer & Trust Co. LLC, had advised that as of Thursday, about 61% of its existing unsecured notes eligible for exchange had been tendered, including all convertible notes converted to common stock since Dec. 31, 2015. The exchange agent added that as of Thursday, approximately 42% of shares of existing preferred stock eligible for exchange have also been tendered, including all convertible preferred stock converted to common stock since Dec. 31, 2015.

Last month, Fitch Ratings warned that Goodrich was among several exploration and production (E&P) companies headed toward default (see Shale DailyMarch 17).

Meanwhile, Swift, also based in Houston, said Thursday that the U.S. Bankruptcy Court for the District of Delaware has confirmed its reorganization plan, paving the way for the company to emerge from Chapter 11 on April 15. Swift voluntarily filed for bankruptcy protection on New Year's Eve (see Shale DailyJan. 4).

Swift filed for Chapter 11 after entering into an RSA with an ad hoc group of its senior noteholders. The RSA required the company's senior unsecured notes be converted to equity, that most of the company's secured and unsecured creditors be paid or satisfied in full, and that equity and warrants in a reorganized company by distributed to its existing shareholders.

At the time the plan was filed, Swift said agreements had not been reached over its $75 million debtor-in-possession (DIP) loan held by certain unsecured noteholders, and over the company's reserve-based loan.

But in a statement Thursday, Swift said agreements have since been reached on both loans, with the DIP lenders agreeing to convert the entirety of their loan to equity, and the company's bank group agreeing "to provide a $320 million reserve-based exit loan that will refinance the existing loan and be used, among other things, to fund obligations under the plan and the company's operations following its emergence from bankruptcy."

According to Swift, upon implementation of the plan, the pre-petition senior note holders, contract rejection claim holders and DIP participants will hold 96% of common stock in the new Swift. Meanwhile, existing shareholders will hold 4% of the new Swift common stock and receive warrants for an additional 30% of the new Swift common stock.

"As a result of the exchange of senior notes for equity, the company will have reduced its unsecured debt by approximately $905 million," Swift said. "Pursuant to the terms of the plan and orders entered during the bankruptcy case, all pre-petition amounts owing to royalty and working interest holders, vendors and suppliers will also have been repaid."

Swift said it hopes to emerge from bankruptcy on April 15.

"Swift Energy has worked diligently to improve its business and meet the required milestones under the RSA with the goal of achieving the best possible outcome for all of our constituents," said Swift CEO Terry Swift. "We are grateful for the efforts of our employees and our strong relationships with royalty owners, vendors, suppliers and capital providers, equity holders and other stakeholders, all of whom have supported us during this restructuring."

Layoffs at Devon, Maersk

On Friday, Devon spokesman Tim Hartley told NGI's Shale Daily that the company "plans to close its office in Spring, TX, by mid-year 2016 as part of the personnel reductions announced in February. About 60 employees are affected.

"A small number of Spring employees will move to corporate headquarters in Oklahoma City. Additionally, the company plans to maintain its Cuero, TX, field office to manage its Eagle Ford Shale operations."

Last January, executives with Devon, one of the biggest U.S. onshore operators, announced plans to lay off employees but offered no details other than that the majority of the layoffs would occur by the end of 1Q2016 (see Shale DailyJan. 21).

On Thursday, Maersk said 60 employees and contractors would be affected by its decision to close its office in Houston, part of a strategy to reduce capital expenditures. The international producer said it was looking to improve returns and restructure its un-sanctioned Chissonga deepwater project in Angola. Another 40 jobs were being eliminated in Luanda, the capital of Angola.

"Chissonga, like many deepwater projects in our industry, remains economically challenged in the current market environment," Maersk COO Gretchen Watkins said. She added that the project's restructuring "does not diminish our keenness to pursue the Chissonga project sanction in due course, provided we can achieve an attractive return on our investment.

"We recognize that this is an unsettling time for our people, to whom we offer full support throughout this process. During this difficult time, the safety and welfare of our teams and our focus on safe and incident-free operations remain our top priority."

Maersk said its non-operated activities in the Gulf of Mexico, currently run from Houston, will be transferred to its headquarters in Copenhagen in the next few months.

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