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Halcon files for pre-packaged Chapter 11

Company expects to wipe out more than $750 million in debt

Shale player Halcon Resources has filed for a pre-packaged Chapter 11 bankruptcy after spending the last year reshuffling management, evaluating strategic options, and settling with activist investors.

Halcon’s second restructuring in three years would eliminate more than $750 million of debt while reducing the company’s annual interest expense by more than $40 million. The plan was approved by unsecured noteholders on 2 August.

Holders of the company’s $625 million outstanding unsecured notes are set to receive 91% of the common stock of the reorganized company.

Existing common shareholders will receive 9% of the new common shares, along with a warrant providing them with an opportunity to purchase up to 30% of the new common shares at prices based on unsecured noteholders achieving certain recovery levels, Halcon said. The company said it expects to emerge from bankruptcy within 60 days.

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The Houston-based company has undergone several changes in 2019, most recently replacing its chief executive officer, Floyd Wilson, with Richard Little in June. Wilson resigned in February, along with former chief financial officer Mark Mize.

Halcon since March said it had been evaluating strategic options including asset sales and a potential merger or acquisition. The company is active in the Permian basin in the Midland and Delaware sub-basins.

In April, Halcon settled with activist shareholder Fir Tree Partners, agreeing to add two board director slots.

Fir Tree last October began pressuring Halcon to sell off its Pecos County acreage to de-lever its balance sheet and accelerate drilling in Ward County. The firm had said Halcon did not have the excess capital or scale to drill in both plays simultaneously. The company in March said it would suspend drilling in the Hackberry Draw prospect in Pecos until commodity prices recovered.

Halcon will continue to operate as normal, as it "expects to have sufficient liquidity to meet its financial obligations during the restructuring."

A $35 million debtor-in-possession credit facility from unsecured noteholders will allow the company to fund operations during the Chapter 11 process, Halcon said.

Halcon in 2016 had filed for a reorganization that wiped out $1.8 billion in debt and $222 million in preferred stock.

The company’s stock was delisted from the New York Stock Exchange and has been trading on the OTC Pink market since July.

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