Item 1.02 Termination of a Material Definitive Agreement.
As previously disclosed, on October 3, 2019, EP Energy Corporation (together
with EP Energy LLC, the "Company"), and certain of its direct and indirect
subsidiaries (collectively with the Company, the "Debtors") filed voluntary
petitions (the "Chapter 11 Cases") in the United States Bankruptcy Court for the
Southern District of Texas (the "Bankruptcy Court") seeking relief under chapter
11 of title 11 of the United States Code. The Chapter 11 Cases are being jointly
administered under the caption "In re: EP Energy Corporation, et al., Ch. 11
Case No. 19-35654." Court filings and other information related to the Chapter
11 Cases are available at the website administered by the claims agent, Prime
Clerk, at https://cases.primeclerk.com/EPEnergy. Capitalized terms used but not
otherwise defined in this Current Report on Form 8-K have the meanings ascribed
to them in the Fourth Amended Joint Chapter 11 Plan of EP Energy Corporation and
its Affiliated Debtors (ECF No. 685) (as amended, modified or supplemented from
time to time, the "Plan").
On October 18, 2019, the Debtors entered into a Plan Support Agreement (the
"PSA") with holders of approximately 52.0% of the 8.000% Senior Secured Notes
due 2024 (the "1.25L Notes") and approximately 79.3% of the 9.375% Senior
Secured Notes due 2024 and 8.000% Senior Secured Notes due 2025 issued, in each
case, by EP Energy LLC and Everest Acquisition Finance Inc., including
affiliates of, or funds managed by, Elliott Management Corporation ("Elliott"),
Apollo Global Management, Inc. ("Apollo" together with Elliott, the "Initial
Supporting Noteholders"), Access Industries, Inc. ("Access"), and Avenue Capital
Group (collectively, with the Initial Supporting Noteholders and Access, the
"Supporting Noteholders"), to support a restructuring on the terms of a chapter
11 plan described therein. On October 18, 2019, the Debtors also entered into a
backstop commitment agreement (the "BCA") with the Supporting Noteholders,
pursuant to which the Supporting Noteholders agreed to backstop $463 million (to
consist of $325 million in cash and $138 million in exchanged reinstated 1.25L
Notes) of the Rights Offering. On March 6, 2020, after a hearing to confirm the
Plan, the Bankruptcy Court stated that it would confirm the Plan. On March 12,
2020, pursuant to its ruling on March 6, 2020, the Bankruptcy Court entered an
order confirming the Plan (ECF No. 1049).
On March 18, 2020, the Debtors and the Supporting Noteholders under the PSA and
in their capacities as the Commitment Parties under the BCA (the "Commitment
Parties"), mutually agreed to amend and terminate the PSA and the BCA pursuant
the terms of a Stipulation of Settlement Regarding Backstop Agreement and Plan
Support Agreement (the "Stipulation"). Among other things, the Stipulation
provides that (i) the PSA and BCA are terminated consensually by the parties
pursuant to Section 9.1 of the BCA and Section 7(f) of the PSA, (ii) the
Termination Fee (as defined in the BCA) shall not be payable to the Commitment
Parties, (iii) the Debtors will reimburse all fees, costs and expenses of the
Supporting Noteholders, and the Commitment Parties through the date on which the
Bankruptcy Court approves the Stipulation, and (iv) through November 25, 2020
the Supporting Noteholders and Commitment Parties will not interfere, directly
or indirectly, with any further restructuring of the Debtors, that treats their
applicable claims no less favorably than other similarly situated claims. The
Debtors and the Supporting Noteholders and Commitment Parties also agreed to
mutual waivers and releases of certain claims relating to, or arising from, the
Chapter 11 Cases, the BCA, the PSA, and the termination of the BCA and the PSA,
against the other as described in the Stipulation.
The Stipulation is subject to Bankruptcy Court approval. The Debtors are working
with their constituents to explore various alternatives.
The foregoing description of the Stipulation is qualified by reference to the
Stipulation, a copy of which is filed herewith as Exhibit 99.1 and is
incorporated herein by reference.
Forward-Looking Statements
This Current Report on Form 8-K includes certain forward-looking statements
within the meaning of Section 27A of the Securities Act, and Section 21E of the
Exchange Act. Such statements are subject to risks and uncertainties that could
cause results to differ materially from the Company's expectations, including
the following: risks and uncertainties relating to the Chapter 11 Cases,
including but not limited to, the Company's ability to obtain Bankruptcy Court
approval with respect to motions in the Chapter 11 Cases, the effects of the
Chapter 11 Cases on the Company and on the interests of various constituents,
Bankruptcy Court rulings in the Chapter 11 Cases and the outcome of the Chapter
11 Cases in general, the length of time the Company will operate under the
Chapter 11 Cases, risks associated with third-party motions in the Chapter 11
Cases, the potential adverse effects of the Chapter 11 Cases on the Company's
liquidity or results of operations; the ability of the Company to comply with
the terms of that certain Senior Secured Superpriority Debtor-In-Possession
Credit Agreement, dated as of November 25, 2019, by and among EP Energy LLC,
JPMorgan Chase Bank, N.A. and the lenders under EP Energy LLC's prepetition
reserve based credit facility party thereto as lenders (as may be amended from
time to time); the ability of the Company to successfully negotiate a plan of
reorganization; the ability of the Company to obtain requisite support for a
plan of reorganization from various stakeholders; the ability of the Company to
confirm and consummate such plan of reorganization; the uncertainty as to when
or whether the effective date of such plan of reorganization will occur; the
effects of disruption from the Chapter 11 Cases making it more difficult to
maintain business and operational relationships, to retain key executives and to
maintain various licenses and approvals necessary for the Company to conduct its
business; the consequences of the acceleration of the Company's debt
obligations; risks related to the trading of the Company's securities on the OTC
Pink Market; as well as the risk factors described in the Company's Annual
Report on Form 10-K for the year ended December 31, 2018, as updated in the
Company's subsequently filed Quarterly Reports on Form 10-Q. While the Company
makes these statements in good faith, neither the Company nor its management can
guarantee that anticipated future results will be achieved. The Company assumes
no obligation to publicly update or revise any forward-looking statements made
herein or any other forward-looking statements made by the Company, whether as a
result of new information, future events, or otherwise. All forward-looking
statements attributable to the Company or persons acting on the Company's behalf
are expressly qualified in their entirety by the foregoing cautionary
statements. All such statements speak only as of the date made, and, except as
required by law, the Company undertakes no obligation to update or revise
publicly any forward-looking statements, whether as a result of new information,
future events or otherwise.
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