S&C advised California Resources Corporation, the largest oil and natural gas producer in California, as lead debtor’s counsel in its Chapter 11 restructuring. CRC made a quick exit from Chapter 11 on October 27, three months after filing for a court-supervised restructuring. This complex matter was resolved through a consensual plan that achieved:
- the exchange of $4.4 billion in debt for equity;
- the continuation of CRC as a NYSE-listed company;
- the acquisition by CRC of critical midstream assets previously held in a joint venture with affiliates of Ares Management L.P., in exchange for equity and debt of the reorganized company;
- the securing of $1.4 billion of exit financing, consisting of a $540 million revolving credit facility, $300 million of secured notes and a second lien term loan of $200 million;
- the payment in full of all trade and general unsecured claims through an innovative structure, despite limited financial creditor recoveries; and
- no continuing litigation with any stakeholders.
In addition, the company raised $450 million through a fully subscribed rights offering and issued warrants to acquire up to five percent of its new common stock.
The plan was approved by Judge David Jones of the U.S. Bankruptcy Court for the Southern District of Texas on October 13.
“This is a fascinating company and a deserving client,” said Jim Bromley
, co-head of S&C’s Restructuring
practice. “We focused early on the need to acquire full ownership of CRC’s critical midstream assets and minimize the time in Chapter 11, despite the size and complexity of the capital structure. It was a prime example of how aggressive upfront planning can drive consensus and eliminate the extra cost and risks prevailing in too many other oil and gas bankruptcies.”
In addition to Jim Bromley, the S&C team that advised CRC was led by Andy Dietderich
, co-head of the Restructuring practice, and included special counsel Alexa Kranzley