Halcon looks to restructure balance sheet

Yesterday after the close, Houston, TX-based Halcón Resources Corp. (NYSE:HK) noted an agreement in principal has been reached on terms of a plan to restructure the company’s balance sheet. The agreement, in principal, was struck with select holders of Halcon’s 13.0% 3rd Lien Notes due 2022, its three tranches of senior unsecured notes comprised of its 9.75% Senior Notes due 2020, its 8.875% Senior Notes due 2021, and its 9.25% Senior Notes due 2022, its 8.0% Convertible Note due 2020 and its 5.75% Perpetual Convertible Preferred Stock.

The Restructuring Plan, if implemented, will result in the elimination of approximately $1.8 billion of debt and approximately $222 million of Preferred Equity, and will reduce the company's ongoing annual interest burden by more than $200 million.

Stakeholder

Treatment

 Senior Secured Revolver  

   - New or amended reserve based facility to be provided by existing lenders

 2L Notes

   - Unaffected and reinstated

 3L Notes

   - Fully equitized into 76.5% of the pro forma equity
   - Receive $50M cash plus accrued and unpaid interest through March 31, 2016  

 Unsecured Notes

   - Receive 15.5% of the pro forma equity
   - Receive warrants for 4% of the pro forma equity (4 year term, $1.33B equity strike)
   - Receive $37.6M cash plus accrued and unpaid interest through May 15, 2016 

 Convertible Note

   - Receive 4% of the pro forma equity
   - Receive $15M cash
   - Receive warrants for 1% of the pro forma equity (4 year term, $1.33B equity strike)

 Preferred Equity 

   - Receive $11.1M cash

 Existing Common Equity

   - Receive 4% of the pro forma equity

Following the execution of the RSA, Halcon plans to solicit the support of additional affected stakeholders for the restructuring plan. If certain voting thresholds are satisfied through the solicitation process, the Restructuring Plan will be executed through an accelerated pre-packaged Chapter 11 bankruptcy filing.

PJT Partners is acting as financial advisor, Weil, Gotshal & Manges LLP is acting as legal counsel and Alvarez & Marsal is acting as restructuring advisor to Halcon in connection with the Restructuring Plan.  Houlihan Lokey Capital Inc. is acting as financial advisor and Latham & Watkins LLP is acting as legal advisor to the select ad hoc committee of 3L Notes.  Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal advisor to the select ad hoc committee of Unsecured Notes.

This agreement is subject to the negotiation and execution of certain definitive documentation, including a Restructuring Support Agreement to be entered into with select Affected Stakeholders.

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