Shale producer Magnum Hunter files for bankruptcy protection

Magnum Hunter Resources Corp., Irving, Tex., has filed for Chapter 11 bankruptcy in a restructuring that involves $200 million in debtor-in-possession financing and conversion of debt into equity.

The company said support of creditors for its restructuring plan will enable it to emerge from bankruptcy with greatly diminished debt next April.

It has entered a restructuring support agreement with lenders that hold nearly all its first-lien debt, 66.5% in principal amount of its second-lien debt, and 79% in principal amount of its senior unsecured notes.

The agreement provides for conversion into equity of nearly all of Magnum Hunter's prepetition funded indebtedness and 100% of the company's contemplated postpetition debtor-in-possession financing.

The debtor-in-possession financing is a senior secured multidraw term loan backstopped by lenders in the restructuring support agreement. Magnum Hunter expects the financing to support stabilization of the company's operations. The debt-equity conversion will occur when the company exits bankruptcy.

"We expect the entire process to be efficient, cost effective, and quick," said Gary C. Evans, Magnum Hunter chairman and chief executive officer.

On Sept. 30, Magnum Hunter reported total assets of $1.457 billion and total liabilities of $1.117 billion. For the first 9 months of 2015 it had a loss of $232 million, compared with a $234 million loss in the comparable period of 2014.

The company's operations are mostly in the Marcellus and Utica shale regions of the Appalachian basin. The company also has interests in acreage and production in Kentucky and has primarily nonoperating leasehold working interests in the Williston-Bakken shale region of North Dakota. 

Magnum Hunter also has 45% equity ownership interest in Eureka Hunter Holdings LLC, which is not part of the bankruptcy.

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