APPROACH RESOURCES, INC. Item 1.03 Bankruptcy or Receivership.
On
On the Petition Date, the Debtors filed a number of motions with the Court generally designed to stabilize their operations and facilitate the Debtors' transition into Chapter 11. Certain of these motions seek authority from the Court for the Debtors to make payments upon, or otherwise honor, certain obligations that arose prior to the Petition Date, including obligations related to employee wages, salaries and benefits, taxes, and certain holders of royalty, working and other mineral interests as required by the Debtors' various leases and related agreements essential to the Debtors' businesses.
In addition, the Debtors filed a motion (the "NOL Motion") seeking entry of an interim and final order establishing certain procedures (the "Procedures") with respect to direct and indirect trading and transfers of stock of the Company, and seeking related relief, in order to protect the potential value of the Company's net operating loss carryforwards ("NOL") and certain other of the Company's tax attributes for use in connection with the reorganization.
If approved, in certain circumstances, the Procedures would, among other things, restrict transactions involving, and require notices of the holdings of and proposed transactions by, any person or group of persons that is or, as a result of such a transaction, would become, a Substantial Stockholder of the common stock issued by Approach (the "Common Stock"). For purposes of the Procedures, a "Substantial Stockholder" is any person or, in certain cases, group of persons that beneficially own, directly or indirectly (and/or owns options to acquire) at least 4.45 million shares of Common Stock (representing approximately 4.75% of all issued and outstanding shares of Common Stock). If the Procedures are approved, any prohibited transfer of stock of the Company would be null and void ab initio and may lead to contempt, compensatory damages, punitive damages, or sanctions being imposed by the Court.
In addition, the Debtors have requested approval of additional procedures as part of the final order that set forth (i) certain future circumstances under which any person, group of persons, or entity holding, or which as a result of a proposed transaction may hold, a substantial amount of certain claims against the Debtors may be required to file notice of its holdings of such claims and of proposed transactions, which transactions may be restricted, and (ii) certain limited circumstances thereafter under which such person(s) may be required to sell, by a specified date following the confirmation of a Chapter 11 plan of the Debtors, all or a portion of any such claims acquired during the Chapter 11 Cases.
The NOL Motion and Procedures are available on the docket of the Chapter 11
Cases, which can be accessed via PACER at https://www.pacer.gov. The Debtors
also requested authority to employ
Additionally, the Debtors are considering sales of all or substantially all of their assets pursuant to Section 363 of the Bankruptcy Code.
2
--------------------------------------------------------------------------------
Debtor-In-Possession Financing
In connection with the Bankruptcy Petitions, the Debtors filed a motion (the
"DIP Motion") seeking, among other things, final approval of
The DIP Facility, if approved by the Court as proposed, would contain the following terms:
• a senior secured super priority debtor-in-possession credit facility
in an aggregate principal amount of up to $41.25 million consisting
of (i) a new money revolving credit facility in the principal amount
of $16.5 million (the "New Money DIP Loans") and (ii) a refinancing
"roll-up" term loan in the principal amount of $24.75 million (the
"Roll-Up Loans" and, together with the New Money DIP Loans, the "DIP
Loans");
• following approval by the Court, proceeds of the DIP Facility may be
used by the Debtors to (i) pay certain costs, fees and expenses
related to the Chapter 11 Cases; (ii) make payments provided for in
the DIP Motion, including in respect of certain "adequate
protection" obligations and (iii) fund working capital needs,
capital improvements and other general corporate purposes of the
Debtors, in all cases subject to the terms of the DIP Facility and
applicable orders of the Court;
• the maturity date of the DIP Facility is expected to be the earliest
to occur of (i) seven months after the Petition Date; (ii) the entry
of an order approving a sale pursuant to Section 363 of the
Bankruptcy Code; (iii) the effective date of any Acceptable Plan (as
defined in the DIP Facility) or any other Chapter 11 plan; (iv) the
. . .
Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement.
The filing of the Bankruptcy Petitions constituted an event of default that accelerated the Company's obligations under or in respect of a number of instruments and agreements relating to direct financial obligations of the Debtors (the "Accelerated Direct Financial Obligations"). The material Accelerated Direct Financial Obligations include:
• the Amended and Restated Credit Agreement, dated as of May 7, 2014 ,
among the Company, the issuing banks and lenders party thereto, and
JPMorgan Chase Bank, N.A ., as administrative agent (as amended, the
"Credit Agreement");
• the Senior Indenture, dated as of June 11, 2013 , among the Company,
the Filing Subsidiaries as guarantors and Wells Fargo Bank, National
Association as trustee;
• the First Supplemental Indenture, dated as of June 11, 2013 , among
the Company, the Filing Subsidiaries as guarantors and Wells Fargo
Bank, National Association as trustee; and
• the Second Supplemental Indenture, dated as of December 20, 2016 ,
among the Company, the Filing Subsidiaries as guarantors and
Wilmington Trust, National Association as successor trustee.
Pursuant to Section 362 of the Bankruptcy Code, the filing of the Bankruptcy Petitions automatically stayed most actions against the Debtors, including actions to collect indebtedness incurred prior to the Petition Date or to exercise control over the Debtors' property. Subject to certain exceptions under the Bankruptcy Code, the filing of the Debtors' Chapter 11 Cases also automatically stayed the continuation of most legal proceedings or the filing of other actions against or on behalf of the Debtors or their property to recover on, collect or secure a claim arising prior to the Petition Date or to exercise control over property of the Debtors' bankruptcy estates, unless and until the Court modifies or lifts the automatic stay as to any such claim. Notwithstanding the general application of the automatic stay described above, governmental authorities may determine to continue actions brought under their police and regulatory powers.
Item 7.01 Regulation FD Disclosure.
On
Beginning today, the Company also expects to make available information regarding the Chapter 11 Cases through its website under the Restructuring Information tab throughout the course of the Chapter 11 Cases, which will contain a link to the claims agent's website, https://dm.epiq11.com/approachresources.
In accordance with General Instruction B.2 of Form 8-K, the information in Item 7.01, including the attached, referenced exhibit, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any registration statement or other filing under the Securities Act of 1933, as amended, except as otherwise expressly stated in such filing.
4
--------------------------------------------------------------------------------
Cautionary Note Regarding Forward-Looking Statements
This Report on Form 8-K, including Item 7.01, contains "forward-looking statements" within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this report, the words "will," "believe," "intend," "expect," "may," "should," "anticipate," "could," "estimate," "plan," "predict," "project," "potential" or their negatives, or other similar expressions or the statements that include those words, are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words.
These forward-looking statements are largely based on the Company's expectations, which reflect estimates and assumptions made by the Company's management. These estimates and assumptions reflect the Company's best judgment based on currently known market conditions and other factors. Although the Company believes such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond the Company's control. In addition, management's assumptions about future events may prove to be inaccurate. The Company cautions all readers that the forward-looking statements contained in this report are not guarantees of future performance, and the Company cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur.
These statements are subject to significant risks, uncertainties, and assumptions that are difficult to predict and could cause actual results to differ materially and adversely from those expressed or implied in the forward-looking statements, including risks and uncertainties regarding:
• the Company's ability to continue as a going concern;
• the Company's ability to successfully complete a marketing and sales
process under Chapter 11;
• potential adverse effects of the Chapter 11 Cases on the Company's
liquidity and results of operations;
• the Company's ability to obtain timely approval by the Court with
respect to the motions filed in the Chapter 11 Cases;
• objections to the Company's sale process, DIP Financing, or other
pleadings filed that could protract the Chapter 11 Cases;
• employee attrition and the Company's ability to retain senior
management and other key personnel due to the distractions and
uncertainties, including the Company's ability to provide adequate
compensation and benefits during the Chapter 11 Cases;
• the Company's ability to comply with the restrictions imposed by the
DIP Financing and other financing arrangements;
• the Company's ability to maintain relationships with suppliers,
customers, employees and other third parties and regulatory
authorities as a result of the Chapter 11 filing;
• the effects of the Bankruptcy Petitions on the Company and on the
interests of various constituents, including holders of the
Company's Common Stock;
• the Court's rulings in the Chapter 11 Cases, including the approval
of the DIP Financing, and the outcome of the Chapter 11 Cases
generally;
• the length of time that the Company will operate under Chapter 11
protection and the continued availability of operating capital
during the pendency of the proceedings;
• risks associated with third party motions in the Chapter 11 Cases,
which may interfere with the Company's ability to consummate a sale;
and
• increased administrative and legal costs related to the Chapter 11
Cases and other litigation and inherent risks involved in a
bankruptcy process.
Forward-looking statements are also subject to the risk factors and cautionary
language described from time to time in the reports and registration statements
the Company files with the
5
--------------------------------------------------------------------------------
makes forward-looking statements based on currently available information, and the Company assumes no obligation to, and expressly disclaims any obligation to, update or revise publicly any forward-looking statements made in this Report, whether as a result of new information, future events or otherwise, except as required by law.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits. Exhibit No. Description 99.1 Press Release datedNovember 18, 2019 . 6
--------------------------------------------------------------------------------
© Edgar Online, source
