Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
C&J Energy Services Ltd. Files for Chapter 11 Bankruptcy Protection
Author: Joel R. Glucksman
Date: August 16, 2016
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C&J Energy files Chapter 11
C&J Energy Services Ltd., one of the largest oil field service companies, has announced that it recently filed for Chapter 11 bankruptcy protection. According to The Wall Street Journal, the firm has negotiated a $1.4 billion deal with its senior bondholders, to resolve some of the issues connected to its insolvency.
C&J Energy spirals into debt
C&J Energy is a major service provider that builds and maintains oil wells throughout North America. The company felt the downward pressure of the collapse in oil and gas prices last year. The Journal reported that, after the substantial increase in hydraulic fracking, the company was able to go public and negotiate a $2.8 billion merger with Nabors Industries Ltd. But since 2014, the company’s stock price has dropped from $32 per share to 31 cents, in line with the historic oil price decline which resulted in losses of $872.5 million last year and $428.4 million so far this year. As a result, the company defaulted on several of its loans, which led to its debt restructuring agreements with senior lenders.
Since the start of 2015, 70 oil and gas-related companies based in North America have filed for Chapter 11 bankruptcy protection.
C&J Energy’s debt reorganization deals
As part of the negotiated deal, C&J Energy will exchange all of its outstanding debt to senior lenders for 100 percent ownership in the newly-formed firm. Reuters reported that the debt-for-equity swap will include more than 50 percent of its outstanding debtholders. In the meantime, the deal will also involve $100 million in additional financing from lenders, as well as a $200 million rights offering and $100 million debtor-in-possession. C&J’s new stock issued to seniors will include seven-year warrants and six percent of common stock with a $1.55 billion fixed price.
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