Date Announced: 09/21/2016
client: Ad Hoc Group of Second Lien Lenders of Templar Energy LLC
Status: Closed – 09/2016
Value: $2 billion debt restructuring Read the case study
On September 21, 2016, Templar Energy, LLC (“Templar”), an oil and gas exploration and production company focused on the U.S. mid-continent region, completed its out-of-court restructuring and recapitalization. Acting as the company’s exclusive financial advisor, Moelis & Company’s involvement resulted in 100% of lenders consenting to an exchange offer and avoiding a potentially lengthy and costly in-court Chapter 11 bankruptcy.
Initially backed by financial sponsors First Reserve and Trilantic, Templar established a quality acreage position in the mid-continent in 2013-2014. This was done through a series of acquisitions financed with the issuance of $1.45 billion of second lien term loans. Shortly thereafter, precipitous decline in oil and natural gas prices rendered the company’s overlevered balance sheet unsustainable. In late 2015, Templar approached its second lien lenders regarding the formation of an ad hoc group, who subsequently hired Moelis & Company to advise on restructuring conversations.
Moelis & Company performed extensive diligence on the company’s asset base and operational capabilities and advised its clients that the company was better suited for a debt-to-equity exchange versus accepting a cash tender offer. The Firm negotiated a comprehensive restructuring solution, crafting the ultimate deal construct that provided the second lien lenders with the majority of new money investment rights (60%) and effective control of the company’s board.
Ultimately, Templar received total new money investment of $365 million and used the proceeds for the second lien cash payment and to pay down its first lien lenders, resulting in a substantially delevered company with ample liquidity. Through the debt-to-equity exchange and new preferred equity investment, second lien lenders own over 80% of the pro forma equity. They received $133 million of cash, 45% of the equity in the reorganized Templar (after dilution) and the participation rights in a fully-backstopped rights offering of participating preferred equity.