Seventy Seven Energy Files for Bankruptcy

Oil field services company Seventy Seven Energy Inc. filed for bankruptcy protection Tuesday with a plan to eliminate more than $1 billion in debt and hand control of the business to its bondholders.

The Oklahoma City company, spun off from Chesapeake Energy Corp. in 2014, is the latest victim of the downturn in oil and natural gas prices, which has claimed dozens of companies in the oil patch since the start of last year.

The company filed for protection in U.S. Bankruptcy Court in Wilmington, Del., with a "prepackaged" chapter 11 plan after garnering support from its creditors to support the restructuring proposal. Such preapproved plans are becoming increasingly popular with companies and investors, who want to minimize the time and expense of chapter 11 balance sheet restructuring.

"The successful completion of the solicitation process and today's filing represent the next step forward in our financial restructuring," said Jerry Winchester, the company's chief executive.

Under the terms of the previously floated plan, which eliminates $1.1 billion, the company's 2019 unsecured bondholders will receive at least 96.75% equity in the restructured company in exchange for forgiveness of the $650 million they're owed. A second group of bondholders are slated to get a 3.25% equity stake plus warrants for 15% of the new common stock if they vote to support the plan.

The company's term-loan lenders will receive a 2% payout of their loan upfront and a better collateral package securing the remaining loan, which will be carried over. The incremental term-loan lenders will be paid at least $15 million upfront, and the remaining $84 million balance of its loan will remain in place.

Additionally, current equity holders will receive warrants for 20% of new common stock if all the debtholders vote for the plan.

Seventy Seven said its trade creditors, suppliers and contractors will be paid in the ordinary course of business. The company's lenders, led by Wells Fargo, have agreed to provide $100 million in financing to fund the chapter 11 case, which Seventy Seven hopes to have completed within 60 days.

Seventy Seven is an oil-field servicer that provides drilling, hydraulic fracturing and oil field rental services to exploration and production companies. The company had cited the shakeout in the oil patch for its need to restructure more than $1.7 billion in debt.

It first raised the possibility of bankruptcy in a February regulatory filing after hiring advisers from Lazard to help it restructure its business.

The law firm Baker Botts is handling the chapter 11 matter, and the company has hired Alvarez & Marsal as its restructuring adviser. The case number is 16-11409 and Judge Laurie Selber Silverstein has been assigned the case.

Stephanie Gleason contributed to this article.

Write to Patrick Fitzgerald at [e-mail]

(END) Dow Jones Newswires

June 07, 2016 14:15 ET (18:15 GMT)

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