LEGACY RESERVES INC. Item 1.03 Bankruptcy or Receivership
As previously disclosed, on
Confirmation of the Plan
On
The Debtors expect that the effective date of the Plan will occur as soon as all conditions precedent to the Plan have been satisfied (the "Effective Date"). Although the Debtors are expecting occurrence of the Effective Date as soon as reasonably practicable, the Debtors can make no assurance as to when, or ultimately if, the Plan will become effective. It is also possible that amendments could be made to the Plan prior to the Effective Date.
The following is a summary of the material terms of the Plan. This summary highlights only certain substantive provisions of the Plan and is not intended to be a complete description of the Plan. This summary is qualified in its entirety by reference to the full text of the Confirmation Order and the Plan, which are attached hereto as Exhibit 2.1, and incorporated by reference herein.
Treatment of Claims and Interests under the Plan
The Plan contemplates the following treatment of claims against and interests in the Debtors:
• all holders of claims arising under the Senior Secured Superpriority
Debtor-In-Possession Credit Agreement dated as ofJune 21, 2019 amongLegacy Reserves LP , as debtor, debtor-in-possession and borrower, the other loan parties party thereto, as debtors, debtors-in-possession and guarantors,Wells Fargo Bank, National Association , as administrative agent, and the lenders party thereto (the "RBL Lenders"), will receive, in full satisfaction of their respective claims (i) on account of claims under the new money revolving loan facility in an aggregate amount of up to$100.0 million , payment in full in cash, (ii) on account of claims under the refinancing term loan in the amount of$250.0 million , distribution of cash and commitments under the Exit Facility (as defined below) and/or (iii) if the Exit Facility is not consummated, payment in full in cash;
• all holders of claims arising under the Third Amended and Restated Credit
Agreement dated as ofApril 1, 2014 (as amended, the "Prepetition RBL Credit Agreement") amongLegacy Reserves LP , as borrower, the guarantors party thereto,Wells Fargo Bank, National Association , as administrative agent, and the lenders party thereto (the "Term Lenders"), will receive, in full satisfaction of their respective claims, (i) distribution of their pro rata share of commitments under the Exit Facility in exchange for the claims arising under the Prepetition RBL Credit Agreement or (ii) if the Exit Facility is not consummated, payment in full in cash;
• all holders of claims arising under the Term Loan Credit Agreement dated as of
October 25, 2016 amongLegacy Reserves LP , as borrower, the guarantors party thereto,Cortland Capital Market Services LLC , as administrative agent and the lenders party thereto, will receive their pro rata share of approximately 52.25% of the new common stock (the "New Common Stock") to be issued by Legacy, as reorganized pursuant to and under the Plan ("Reorganized Legacy"), subject to dilution;
• holders of claims arising under the indenture governing the 8% Senior Notes due
2020, the indenture governing the 6.625% Senior Notes due 2021 and the
indenture governing the 8% Convertible Senior Notes due 2023 (the
"Noteholders") will receive their respective pro rata share of (i)
approximately 2.46% of the New Common Stock, subject to dilution, and (ii)
subscription rights to purchase approximately 10.82% of the New Common Stock
pursuant to the Rights Offering (as defined below) to the extent that such
Noteholders are "accredited investors" as defined under Regulation D
promulgated under the Securities Act of 1933, as amended ("Securities Act");
• all existing equity interests in Legacy will receive no recovery under the Plan
and will be extinguished.
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Capital Structure
As of the Effective Date, under the Plan, Reorganized Legacy will issue New
Common Stock to certain holders of claims against and interests in the Debtors,
and Legacy's shares of existing common stock outstanding immediately prior to
the Effective Date will be cancelled. As of
Exit Financing
The Plan is expected to be funded by the following exit financings, subject to certain customary conditions:
• up to
first lien reserved-based revolving credit facility funded by certain of the RBL Lenders (the "Exit Facility"), or an alternative senior secured revolving asset-based credit facility approved by the Debtors and the Term Lenders, if the Exit Facility is not consummated;
•
Common Stock, subject to dilution, backstopped pursuant to the Sponsor Backstop Commitment Agreement datedJune 13, 2019 , amongLegacy andGSO Capital Partners LP and certain of its affiliates (the "Plan Sponsor"); and
•
backstopped pursuant the Noteholder Backstop Commitment Agreement datedJune 13, 2019 , among Legacy and certain Noteholders (the "Noteholder Backstop Agreement").
Post Emergence Governance and Management
Effective as of the Effective Date, the term of any current members of the board
of directors of Legacy will expire. The board of directors of Reorganized Legacy
(the "New Board") will initially consist of seven directors. The members of the
New Board are expected to be
Management Incentive Plan
As part of the Plan, the
Releases and Exculpations
The Plan provides releases and exculpations for the benefit of the Debtors, certain of the Debtor's claimholders, others parties in interest and various parties related thereto, each in their capacity as such, from various claims and causes of action, as further set forth in Article VII of the Plan.
Certain Information Regarding Assets and Liabilities of the Debtors
Information regarding the assets and liabilities of the Debtors as of the most
recent practicable date is hereby incorporated by reference to Legacy's
Quarterly Report on Form 10-Q for the period ended
Item 7.01 Regulation FD Disclosure
On
In accordance with General Instruction B.2 of Form 8-K, the information under this heading shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act, except as shall be expressly set forth in such a filing.
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Forward-Looking Statements
This Current Report on Form 8-K may include "forward-looking statements" within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. All statements, other than statements of historical facts, included in this
press release that address activities, events or developments that Legacy
expects, believes or anticipates will or may occur in the future, are
forward-looking statements. Words such as "anticipates," "expects," "intends,"
"plans," "targets," "projects," "believes," "seeks," "schedules," "estimated,"
and similar expressions are intended to identify such forward-looking
statements. These forward-looking statements rely on a number of assumptions
concerning future events and are subject to a number of uncertainties, factors
and risks, many of which are outside the control of Legacy, which could cause
results to differ materially from those expected by management of Legacy. Such
risks and uncertainties include, but are not limited to, the Debtors' ability to
obtain
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit No. Description
2.1 Order Confirming the Joint Chapter 11 Plan of Reorganization for
Legacy Reserves Inc. and Its Debtor Affiliates dated November 15,
2019
99.1 Press release dated November 15, 2019 --------------------------------------------------------------------------------
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