Energy XXI Ltd. (NASDAQ:EXXI) has filed Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. The company and certain of its subsidiaries have entered into a Restructuring Support Agreement (the RSA) with holders of more than 63% of the company's secured second lien 11.0% notes on the material terms of a balance sheet restructuring plan.
Through the Chapter 11 restructuring, Energy XXI plans to eliminate more than $2.8 billion in debt from its balance sheet. The RSA eliminates substantially all of the company's prepetition funded indebtedness other than its first lien reserve based loan facility. The RSA also provides that John Schiller will continue as the reorganized company's CEO and a member of its board of directors. The company is continuing negotiations with a steering committee of lenders under the company's first lien reserve based loan facility that is not party to the RSA at this time.
Energy XXI expects operations to continue as normal throughout the court-supervised financial restructuring process, including paying royalty and surety obligations in the ordinary course. In addition, the company expects to maintain compliance with its existing long-term plan with the Bureau of Ocean Energy Management throughout the restructuring process.
The company believes it has sufficient liquidity, including approximately $180 million of cash on hand as of March 31, 2016 and funds generated from ongoing operations, to continue its operations and support the business in the ordinary course during the financial restructuring process.
Energy XXI has filed various motions with the Bankruptcy Court in support of its financial restructuring. The company intends to continue to pay employee wages and provide benefits without interruption in the ordinary course of business. The company also expects to pay suppliers and vendors in full under normal terms for goods and services provided on or after the Chapter 11 filing date, and anticipates making royalty payments and payments to working interest owners when due. The company expects to receive Bankruptcy Court approval for the requests in its motions.
CorEnergy Infrastructure Trust Inc., owner of the Grand Isle Gathering System that serves EXXI offshore fields in the vicinity of Grand Isle, Louisiana, noted that the bankruptcy filing of Energy XXI Ltd. and its failure to make interest payments to its creditors within the applicable cure period would have constituted defaults under the terms of the GIGS Lease, however, to facilitate post-filing financing arrangements between the EXXI Debtor Group and its lenders, CorEnergy provided a conditional waiver to certain remedies available to it as a result of these non-monetary defaults.
CorEnergy's tenant under the GIGS Lease, Energy XXI GIGS Services LLC, has not filed for bankruptcy. Therefore, its obligations under the GIGS Lease are currently not subject to the proceedings affecting the EXXI Debtor Group. CorEnergy has not compromised any remedies available to it for any default by GIGS Services under the GIGS Lease.
"GIGS Services relies on our subsea pipeline and onshore facilities to provide critical transportation, storage and processing services for the EXXI Debtor Group," said CorEnergy CEO, Dave Schulte. Regarding the waiver, Schulte commented, "As long as our tenant remains in compliance with our lease, including the timely payment of rent, we intend for GIGS Services to maintain its operations of our asset."
PJT Partners LP is serving as Energy XXI's financial advisor, Opportune LLP is serving as Energy XXI's restructuring advisor, and Vinson & Elkins LLP is serving as Energy XXI's legal advisor.