ATP Oil & Gas Corp. (ATPG), the Gulf of Mexico oil producer that filed for bankruptcy last week, was given preliminary approval by a judge for $618 million in financing.
U.S. Bankruptcy Judge Marvin Isgur in Houston yesterday gave interim approval to the financing from Credit Suisse Group AG (CSGN) and other lenders after requiring changes to some terms.
“What we have is a situation where the debtor is absolutely out of cash, and the alternatives we are left with are to allow the debtor to proceed in a disorderly or orderly liquidation now or to give the debtor an opportunity to get back on its feet,” the judge said.
ATP filed for bankruptcy Aug. 17, blaming the 2010 Deepwater Horizon oil rig explosion in the Gulf of Mexico and the drilling moratorium that followed. Houston-based ATP operates about 90 percent of its wells in the Gulf, according to a court filing, and the moratorium blocked plans to drill and bring online six wells in 2010 and 2011, it said.
ATP also drilled disappointing wells, missed production targets and stumbled to execute marquee offshore oil developments. During the past three years, the company lost the equivalent of $1.1 million a day as equipment failures and unforeseen geological hurdles in the Gulf of Mexico frustrated efforts to lift crude output.
The bankruptcy financing provides $250 million in new money and refinances $367.6 million in debt, according to court papers. Lenders include Credit Suisse, Fortress Credit Opportunities I LP and MSD Credit Opportunity Master Fund LP. ATP said it plans to initially borrow as much as $80 million in new money.
Isgur said in an order that ATP was “prejudiced” by the refinancing because the debt will be required to be paid in full in cash.
“Nevertheless, the court sustains ATP’s business judgment that the risk of such a cash payment requirement is justified by the benefits of the $250 million in new cash,” he wrote.
Isgur said ATP won’t default if it seeks appointment of a chief restructuring officer who hasn’t been approved by “any other person or entity.” ATP was initially required to find a CRO acceptable to lenders, according to court papers. The judge also authorized ATP to pledge assets of its subsidiaries for a loan of as much as $25 million.
ATP Chief Financial Officer Albert Reese testified at the hearing that the company can’t operate without the financing. Operations in the Gulf “will immediately come to a grinding halt,” he said. The company said it filed for bankruptcy with less than $10 million in cash.
ATP said the financing will allow the company to complete a pipeline for two wells in the Gulf known as the Clipper wells.
ATP is scheduled to return to court Sept. 20 for final approval of the loan.