Hi-Crush Inc., et al., submitted a Plan and a Disclosure Statement.
The Plan contemplates certain transactions, including, without limitation, the following transactions (described in greater detail in Section IV herein):
* The Chapter 11 Cases will be financed by two debtor-in-possession financing facilities, including (a) the DIP ABL Facility, which consists of a $25 million super priority senior secured asset-based revolving loan financing facility, which will refinance and satisfy in full the Debtors’ obligations under the Prepetition Credit Agreement and (b) the DIP Term Loan Facility, which consists of a $40 million super priority secured delayed-draw term loan financing facility funded by the members of the Ad Hoc Noteholders Committee.
* On the effective date of the Plan, the Reorganized Debtors will enter into a new credit agreement providing for a new senior secured asset-based revolving loan facility with an aggregate principal commitment amount of $25 million and a $25 million letter of credit sublimit (the “Exit Facility Loans”), which will refinance and replace the DIP ABL Facility;
* As set forth in the Restructuring Term Sheet (which is attached as Exhibit A to the Restructuring Support Agreement, itself attached as Exhibit A to the Plan), the Debtors will conduct a $43.3 million Rights Offering to eligible Holders of Allowed Prepetition Notes Claims and Allowed General Unsecured Claims, to be fully backstopped by the Backstop Parties on the terms and conditions set forth in the Backstop Purchase Agreement, and in accordance with the Rights Offering Procedures, pursuant to which the rights offering in the New Secured Notes Term Sheet (attached as Exhibit 3 to the Restructuring Term Sheet)and described in further detail below:
* The New Secured Convertible Notes (including the Put Option Notes) to be issued pursuant to the Rights Offering and the Backstop Purchase Agreement are, in the aggregate, convertible into 95% of the total number of shares of New Equity Interests that are issued on the Effective Date after giving effect to the consummation of the Restructuring Transactions (subject to dilution by the New Management Incentive Plan Equity);
* The New Secured Convertible Notes will be convertible at any time in whole or in part at the sole option of the holder thereof; and
* There are no mandatory conversion events with respect to the New Secured Convertible Notes except for mandatory conversion upon the consummation of a merger or acquisition transaction involving all, or substantially all, of the Reorganized Debtors’ assets that has been consented to by holders of at least two-thirds in amount of the aggregate principal amount of all then outstanding New Secured Convertible Notes.
* The claims arising under the DIP Term Loan Facility will be paid in full in cash from the proceeds of the Rights Offering.
The treatment of certain Classes of Claims and Equity Interests will be as follows:
— Payment in full of all administrative expense claims, DIP Facility Claims, priority tax claims, other priority claims, other secured claims, and secured tax claims (or such other treatment rendering such claims unimpaired);
— With respect to holders of Prepetition Notes Claims and General Unsecured Claims:
(a) Subscription rights to participate in the Rights Offering (which shall be attached to each applicable claim and transferable with such claim as set forth in the Rights Offering Procedures, but such subscription rights may only be exercised to the extent the holder is an Accredited Investor as of the Questionnaire Deadline) in accordance with the Disclosure Statement Order and the Rights Offering Procedures; and
(b) Its pro rata share of 100% of the New Equity Interests Pool, subject to dilution by(i) the New Equity Interests issued upon conversion of the New Secured Convertible Notes and (ii) the New Management Incentive Plan Equity;
Holders of Prepetition Notes Claims and General Unsecured Claims are advised that the new equity interests issued to the holders of Allowed Prepetition Notes Claims and Allowed General Unsecured Claims under the plan are (a) subject to dilution by (i) the new equity interests to be issued upon conversion of the new secured convertible notes and (ii) the new management incentive plan equity and (b) subject to the terms of the new stockholders agreement of reorganized parent, in substantially the form to be filed with the plan supplement, which agreement shall contain terms and conditions acceptable to the debtors and the required consenting noteholders.
Upon conversion of the New Secured Convertible Notes, holders of such New Secured Convertible Notes will (a) own 95% of the new equity interests and (b) share ownership of the remaining 5% of the new equity interests pro rata with holders of Allowed Prepetition Notes Claims and Allowed General Unsecured Claims who do not participate in the rights offering, in each case, subject to dilution by the new management incentive plan equity. accordingly, the Debtors recommend that eligible holders of Prepetition Notes Claims and General Unsecured Claims participate in the rights offering to maximize their recovery under the Plan.
— The New Equity Interests issued pursuant to the Plan to the holders of Prepetition Notes Claims and General Unsecured Claims is (a) subject to the terms of the New Stockholders Agreement of Reorganized Parent, in substantially the form to be filed with the Plan Supplement, which agreement shall contain terms and conditions acceptable to the Debtors and the Required Consenting Noteholders, and (b) subject to dilution by (i) the New Equity Interests issued upon conversion of the New Secured Convertible Notes and (ii) the New Management Incentive Plan Equity; and
— The Old Parent Interests will be cancelled, and each holder of an Old Parent Interest will not receive any distribution or retain any property on account of such Old Parent Interest.
— After the Effective Date, the New Board will adopt a management equity incentive plan for the benefit of the new management of the Reorganized Debtors. The New Management Incentive Plan Equity issued pursuant to such management equity incentive plan shall dilute all New Equity Interests equally, including the New Equity Interests issued upon conversion of the New Secured Convertible Notes after the Effective Date.
Class 5 General Unsecured Claims total $86.7 million, and holders of these claims may recover 26.2% to 37.4%. Each Holder of an Allowed Class 5 Claim will receive, in full satisfaction, settlement, discharge and release of, and in exchange for, such Allowed Class 5 Claim its Pro Rata share of the following or such other less favorable treatment as to which the Debtors or Reorganized Debtors, as applicable, and the Holder of such Allowed Class 5 Claim will have agreed upon in writing:
(i) The Subscription Rights (which will be attached to each Allowed General Unsecured Claim and transferable with such Allowed General Unsecured Claim as set forth in the Rights Offering Procedures, but such Subscription Rights may only be exercised to the extent such Holder is an Accredited Investor) in accordance with the Disclosure Statement Order and Rights Offering Procedures.
(ii) 100% of the New Equity Interests Pool, shared Pro Rata with the Holders of Allowed Prepetition Notes Claims (subject to dilution by (A) the New Equity Interests issued upon conversion of the New Secured Convertible Notes and (B) the New Management Incentive Plan Equity).
A full-text copy of the Disclosure Statement dated July 27, 2020, is available at https://tinyurl.com/y2a4sbyo from PacerMonitor.com at no charge.
[Proposed] Counsel for the Debtors and Debtors-in-Possession:
Timothy A. (“Tad”) Davidson II
Ashley L. Harper
HUNTON ANDREWS KURTH LLP
600 Travis Street, Suite 4200
Houston, Texas 77002
Telephone: (713) 220-4200
Facsimile: (713) 220-4285
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George A. Davis
Keith A. Simon
David A. Hammerman
Annemarie V. Reilly
Hugh K. Murtagh
LATHAM & WATKINS LLP
885 Third Avenue
New York, New York 10022
Telephone: (212) 906-1200
Facsimile: (212) 751-4864
Hi-Crush Inc. is a fully-integrated provider of proppant and logistics services for hydraulic fracturing operations, offering frac sand production, advanced wellsite storage systems, flexible last mile services, and innovative software for real-time visibility and management across the entire supply chain. The Company’s strategic suite of solutions provides operators and service companies in all major U.S. oil and gas basins with the ability to build safety, reliability and efficiency into every completion.
Hi-Crush and its affiliates sought protection under Chapter 11 of the Bankruptcy Code (Bankr. S.D. Texas Lead Case No. 20-33495) on July 12, 2020. As of March 31, 2020, Debtors had total assets of $953.082 million and total liabilities of $699.137 million.
Judge David R. Jones oversees the cases.
The Debtors tapped Hunton Andrews Kurth LLP and Latham & Watkins LLP as their legal counsel, Alvarez & Marsal North America LLC as financial advisor, and Lazard Freres & Co. LLC as investment banker. Kurtzman Carson Consultants LLC is the claims and noticing agent and solicitation agent.