Endeavour International Corp. (NYSE: END) (LSE: ENDV) has executed a restructuring support agreement (RSA) with holders of more than two-thirds of its 12% first priority notes, 12% second priority notes, 7.5% convertible bonds, and 5.5%/6.5% convertible notes to restructure the company's debt obligations.
In connection therewith, the company and certain of its subsidiaries have each filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the US Bankruptcy Court for the District of Delaware. The company's UK subsidiaries and certain other affiliates have not sought bankruptcy protection and will continue to operate outside of any reorganization proceedings. Endeavour and its debtor affiliates will continue to operate as "debtors in possession" in the Chapter 11 proceedings.
Pursuant to the RSA, the company's existing debt will be reduced by $568 million, including the cancellation of all of the company's notes and reduce its annual interest burden by 43%. As consideration for such cancellation, the reorganized company would issue $262.5 million of new 9.75% notes to the holders of its 12% first priority notes; an aggregate of $237.5 million of new 3.5% convertible preferred shares to holders of its 12% first priority notes, and 12% second priority notes; and common shares to holders of its 12% second priority notes, 7.5% convertible bonds, 6.5% convertible notes, and 5.5% convertible notes. All of the company's existing equity securities, including its shares of common stock and preferred stock, will be cancelled, without receiving any distribution.
The $440 million senior secured term loan incurred by Endeavour Energy UK Ltd. and certain other of the company's foreign subsidiaries will not be affected by the restructuring.
Endeavour expects its oil and gas operations to continue in the ordinary course throughout the Chapter 11 proceedings. The company believes that the rights and protections afforded it by a court-supervised reorganization process will provide Endeavour with the time and flexibility it needs to address its financial challenges, de-lever its balance sheet and position the Company for the longer term.
The filing is principally the result of a series of events during a period of time when the company was involved in the development of two large assets in the UK North Sea. In Endeavour's circumstances, its two large North Sea developments – Bacchus and Rochelle – were each over a year delayed in coming to first production, which caused cost overruns from the original cost projections. These delays also substantially impacted the cash flow and operating margins that the company would have received had the projects come online as scheduled. To maintain its ownership rights in these valuable assets, Endeavour incurred additional debt at a high cost of capital. As of the filing, the large capital commitment for most of the North Sea assets has been completed and the assets are online.
The company is in the process of filing various “first-day” motions seeking customary relief from the US Bankruptcy Court to facilitate its transition into the Chapter 11 proceedings.