by Kyle Younker, Alexander Gladstone, and Madalina Iacob
Bonanza Creek has retained Perella Weinberg to assist the E&P company in exploring restructuring and financing alternatives, according to two sources familiar with the matter. The company has also enlisted the restructuring team at longtime corporate counsel Davis Polk, said one of the sources and two additional sources.
To safeguard its interest, an ad hoc group of unsecured bondholders has organized with Evercore as financial advisor and Kirkland & Ellis as legal counsel, said three of the sources.
The slump in oil prices has pressured Denver-based Bonanza’s liquidity, recently setting off a borrowing base deficiency on its reserve-based loan.
Bonanza last month started the process of curing the USD 88m borrowing base deficiency by making monthly paydowns on the facility, with the first installment due last month. The company’s borrowing base was slashed to USD 200m from USD 475m on 20 May, resulting in the deficit, filings show.
In search of a much-needed liquidity bump, Bonanza has been exploring third party capital alternatives, as well as a new money transaction with existing bondholders, one of the sources familiar said.
Bonanza Creek management has also been re-marketing its Rocky Mountain Infrastructure assets after a USD 255m purchase agreement with Meritage Midstream was terminated earlier this year. As of its most recent earnings call on 6 May, Bonanza Creek management was also seeking to sell assets in the Mid-Continent region, and said they would update the market on both processes on its 2Q16 investor call.
The company recorded a cash balance of USD 218m as of 31 March.
Bonanza Creek’s USD 300m 5.75% senior unsecured notes due 2023 last traded yesterday at 45, up almost five points from 40.75 on 30 June, MarketAxess shows. Its USD 500m 6.75% senior unsecured notes due 2021 also changed hands yesterday at 45, up from 41.5 on 8 July.
The company’s equity ended the day up 20% at USD 2.28, for a USD 109.6m market cap.
Officials at Bonanza Creek, Perella Weinberg, Davis Polk, Evercore, and Kirkland & Ellis did not respond to requests for comment.