Linn Energy Files for Bankruptcy With Creditor Deal in Hand

  • Berry Petroleum to be split off under proposed restructuring
  • Texas explorer joins herd of floundering energy companies

Linn Energy LLC, reeling from the oil and gas slump, filed for bankruptcy protection in Texas with a debt-restructuring agreement that would split off Berry Petroleum Co.

“Like many others in our industry, Linn has been impacted by continued low commodity prices,” Chief Executive Officer Mark Ellis said in a statement Wednesday. 

The Houston-based exploration and production company intends to keep operating during the reorganization. Linn said it has enough cash on hand to run the business and doesn’t intend to arrange debtor-in-possession financing.

The collapse in oil and gas prices forced companies to slash more than $100 billion in spending globally and eliminate more than 250,000 jobs in 2015. The list of the largest U.S. bankruptcies this year has been dominated by energy companies.

In February, Linn tried to buy time by exhausting a $3.6 billion credit facility. That added about $919 million to its debt load, while its Berry Petroleum unit used up a $900 million facility. Linn also hired Lazard as financial adviser and Kirkland & Ellis LLP for legal counsel.

Dozens of Deals

Linn went public in 2006, with a market value of about $584 million. It expanded aggressively through the next decade with 62 transactions totaling about $17 billion, according to the company website. The expansion spree included the 2013 takeover of Berry, valued at $4.9 billion, and a $2.3 billion deal to buy oil and gas fields from Devon Energy Corp. 

The company’s stock plunged to less than 40 cents in May, compared with almost $14 a year earlier.

Under the proposed restructuring plan, Linn and Berry will once again become separate companies, according to an outline filed with securities regulators. Linn’s senior lenders will get $2.2 billion in new debt, while second-lien noteholders and unsecured creditors will get stock in the newly reorganized company.

Berry’s senior creditors may get new debt and also split new stock in the company once it is reorganized. How the stock will be allotted hasn’t been determined, Linn said in the regulatory filing. Linn said it may also start marketing Berry to investors, possibly by soliciting sponsors willing to fund a reorganization plan for the company.

Shareholders in Linn and Berry will get nothing, the company said.

The case is Linn Energy LLC, 16-60040, U.S. Bankruptcy Court, Southern District of Texas (Victoria).

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