Linn Energy Has New Deal With Creditors to Take Over Company

  • Unsecured bondholders get 60% of gas driller, lawyer says
  • Company to try to get senior lenders to join bankruptcy deal

Gas driller Linn Energy LLC announced a new deal with bondholders to divide up the company after it reorganizes and exits bankruptcy sometime next year, lawyers told the judge overseeing the case.

Unsecured noteholders will own about 60 percent of Linn, with the rest going to second-lien bondholders, Gerard Uzzi of Milbank, Tweed, Hadley & McCloy, an attorney for noteholders, said in federal court in Houston on Tuesday. More precise numbers will be worked out later, he said. 

So far, investors owed about $3 billion of the company’s $5 billion in bond debt have signed onto the plan, Uzzi said. The coalition backing the proposal will try Tuesday afternoon to persuade investors holding another $700 million in debt to sign up, he said.

“We’ve made a huge amount of progress in this case,” said Stephen E. Hessler, an attorney for Linn at Kirkland & Ellis.

Linn and its sister company, Berry Petroleum Co., filed for bankruptcy in May with tentative plans to split up and give each entity to separate groups of creditors in exchange for reducing their debts. Linn owed $7.7 billion and Berry $1.7 billion. Lower-ranking creditors objected to the plan, leading to fresh negotiations.

Wee Hours

The latest talks ended at 2 a.m. on Saturday with the Linn bondholder deal, Uzzi said.

The company must now try to persuade senior lenders, whose agent is Wells Fargo & Co., to sign on. Those lenders previously agreed to a restructuring proposal in which they would get about $2.2 billion in new debt.

The agreement contemplates new exit financing consisting of a $1.4 billion revolving loan and a $300 million term loan, the company said in a regulatory filing on Tuesday. Terms include annual year-end borrowing base re-determinations beginning April 2018.

Linn entered into a backstop commitment letter with some noteholders on Oct. 7 for a $530 million investment, according to the filing. Linn debtors will pay a commitment premium equal to 4 percent of the $530 million.

In the coming weeks, the company will file a reorganization plan setting out the new details, Hessler said. Once creditors have a chance to vote, the proposal will go before U.S. Bankruptcy Judge David R. Jones in Houston for approval as early as February, Hessler said.

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

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