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SAExploration Wraps Debt-for-Equity Restructure, Nets New Loan

SAExploration entered into a new $30 million term loan agreement as part of a successful debt-for-equity restructuring.

Bondholders received new second-lien notes and equity at below-par value.

SAExplorationIn exchange for $138 million of 10% secured notes due 2019, the company issued $69 million of new 10% (11% PIK) secured second-lien notes due 2019, and 6.4 million of new common stock, following a reverse stock split.

The company announced in June it had entered a comprehensive restructuring support agreement with holders of 66% of 10% secured notes. At the close of the offer, which expired on July 22, nearly 99% of notes were exchanged.

Liens on the new second-lien notes due 2019 are subordinate to liens on an existing $20 million revolver with Wells Fargo dating from November 2014, as well as on the $30 million multi-draw senior secured term loan that SAE entered into on June 29 with certain 10% secured noteholders.

As of May 16, the borrower owed $13.4 million under the revolver.

Low oil and natural gas prices hurt the company, as well as a delayed payment for a large receivable from a specific customer due to uncertainty over tax credits from the State of Alaska.

In a debut high-yield bond issue, SAExploration placed $150 million of 10% secured notes due 2019 at par in June 2014 via sole bookrunner Jefferies. Proceeds refinanced debt and funded equipment purchases for operations in Alaska.

SAExploration provides seismic data acquisition services to oil-and-gas E&P companies, specializing in logistically challenging, remote, and environmentally sensitive regions such as Arctic Alaska, tropical South America, and shallow and deep-water marine environments. — Abby Latour

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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LCD’s Distressed Weekly offers comprehensive news, analysis, data, and market calendars covering the distressed leveraged loan and high yield bond segments. This encompasses debt that’s trading at steep discounts or issuers which have recently underwent credit defaults or downgrades into junk territory.

Here’s some of what’s you’ll see in each Distressed Weekly.

  • Full distressed market news stories from LCD News
  • Weekly Market Wrap-up
  • Recent debtor-in possession loans
  • Recent loan covenant amendments
  • Bankruptcy hearing deadlines
  • Loan, high yield bond returns
  • YTD leveraged loan defaults
  • Chapter 11 Exit Pipeline
  • LCD’s Restructuring Watchlist
  • Upcoming loan maturities

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Dakota Plains Amends Forbearance Agreement; Eyes Aug. 1 Restructuring Plan

Midstream energy company Dakota Plains disclosed that it has entered into an amendment to the forbearance agreement it entered into in May. The company has also entered into an amendment to its revolver and secured a one-time waiver of revolver loan borrowing requirements.

Under the terms of the amendment made to the forbearance agreement, the termination date has been extended to Aug. 31, from July 25. Also, the company is required to submit a restructuring plan to SunTrust Robinson Humphrey, the administrative agent, before Aug. 1 together with a timeline for completing the restructuring plan.

Meanwhile, lenders have agreed to an amendment that would increase aggregate revolver commitments to $20.5 million, from $20 million, and approved a one-time waiver of certain revolver loan borrowing requirements to allow a funding in the amount of $500,000 on or around July 6.

As of March 31, 2016, there was $55.4 million outstanding under the credit facility.

In December 2015, the company extended the maturity date of a tranche B term loan that then totaled $22.5 million to January 2017, from December 2015, and modified certain covenants.

Under the terms of that amendment, the leverage ratio was set at 9.42x through the fiscal quarter ending June 30, 2016, then at a ratio of 7.52x in the fiscal quarter ending Sept. 30, 2016; 5.15x in the fiscal quarter ending on Dec. 31, 2016; and 3.5x for each fiscal quarter ending on or after March 31, 2017. The deal is also covered by a fixed-charge coverage ratio set at 1.5x. As a result of that amendment, pricing under the tranche B term loan increased by 25 bps, to L+950.

The credit facility also includes a tranche A term loan due December 2017, which then totaled $15 million, and a $57.5 million revolver due December 2017. Pricing on the tranche A term loan and revolver ranges from L+350–425, tied to a leverage-based grid.

Dakota Plains obtained the credit facility in December 2014 to buy interests from its former partner in an oil-transloading joint venture, a sand-transloading joint venture, and an oil-marketing joint venture, and to refinance unsecured promissory notes. —Richard Kellerhals

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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Download LCD’s Distressed Debt Weekly – Free!

LCD’s Distressed Weekly offers comprehensive news, analysis, data, and market calendars covering the distressed leveraged loan and high yield bond segments. This encompasses debt that’s trading at steep discounts or issuers which have recently underwent credit defaults or downgrades into junk territory.

Here’s some of what’s you’ll see in each Distressed Weekly.

  • Full distressed market news stories from LCD News
  • Weekly Market Wrap-up
  • Recent debtor-in possession loans
  • Recent loan covenant amendments
  • Bankruptcy hearing deadlines
  • Loan, high yield bond returns
  • YTD leveraged loan defaults
  • Chapter 11 Exit Pipeline
  • LCD’s Restructuring Watchlist
  • Upcoming loan maturities

Download your complimentary copy here! (We’ll send you a link.)


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CVC Credit Partners Raises €650M for Stressed/Distressed Fund

CVC Credit Partners today announced the final close of its Global Special Situations Fund, which focuses on stressed and distressed corporate credit, predominantly across Europe.

cvc credit partners logoRoughly €650 million was raised, which exceeds the €600 million target. The fund received commitments from investors in North America, Latin America, Asia, Europe, and the Middle East.

With more than €1.86 billion already committed to the strategy via separately managed accounts and its credit opportunities vehicles, CVC Credit Partners’ credit opportunities and special situations strategies now have total commitments of more than €2.5 billion.

CVC Credit Partners is the credit management business of CVC. — Luke Millar

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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Distressed Debt: Blackstone Acquires Minority Stake in Marathon Asset Management

Marathon Asset Management today announced that Blackstone Strategic Capital Holdings, a vehicle managed by Blackstone Alternative Asset Management (BAAM) acquired a passive, minority interest in the firm.

marathon logoMarathon will keep autonomy over its business management, operations, and investment processes, and will continue to be led by its existing management team, which includes Gabriel Spiegel, Andy Springer, Stuart Goldberg, and Jamie Raboy.

Marathon currently manages about $12.75 billion in assets in global corporate credit, distressed, special situations, structured credit, emerging markets, and leveraged loans.

Concurrent with the announcement, Andrew Rabinowitz will now be President and Chief Operating Officer after previously serving as a partner of the firm.

Vijay Srinivasan, senior managing director, will also run global credit research, taking over the role from Richard Ronzetti who announced his retirement. — Staff reports

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This story first appeared on www.lcdcomps.com, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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How did ACAS become a takeover target? Answer’s in the portfolio mix

How did American Capital become a takeover target? The answer lies in the lender’s equity-heavy, low-yielding investment portfolio mix.

Ares Capital, which trades on the Nasdaq under the ticker ARCC, announced on May 23 it would buy American Capital in a $3.4 billion deal, excluding the company’s mortgage management businesses. American Capital trades on the Nasdaq as ACAS.

One of American Capital’s strategies was its trademarked One Stop Buyout, where it could invest in debt ranging from senior to junior, as well as preferred and common stock, acquiring control of an operating company through a transaction.

However, the accumulation of equity did not allow the company to maintain the steady dividend growth that investors had grown to rely on.

In November 2008, the company stopped paying dividends and began evaluating them quarterly to better manage volatile markets. At the same time, American Capital announced an expansion into European middle market investing through the acquisition of European Capital. Also that year, American Capital opened an office in Hong Kong, its first office in Asia.

The news of the dividend policy change triggered a plunge in American Capital shares. Shares have persistently traded below book value since.

At its peak, the One Stop Buyout strategy accounted for 65% of American Capital’s portfolio. It has since slashed this to under 20% of the portfolio, of which less than half of that amount is equity. It continues to sell off assets.

In a reflection of the change in investment mix, S&P Global Ratings placed Ares Capital BBB issuer, senior unsecured, and senior secured credit ratings on CreditWatch negative, as a result of the cash and stock acquisition plan.

“The CreditWatch placement reflects our expectation that the acquisition may weaken the combined company’s pro forma risk profile, with a higher level of equity and structured finance investments,” said S&P Global analyst Trevor Martin in a May 23 research note.

At the same time, S&P Global Ratings placed the BB rating on American Capital on CreditWatch positive after the news.

“The CreditWatch reflects our expectation that ACAS will be merged into higher-rated ARCC upon the completion of the transaction, which we expect to close in the second half of 2016. Also, we expect ACAS’ outstanding debt to be repaid in conjunction with the transaction,” S&P Global analyst Matthew Carroll said in a research note.

Not the first time
But Ares Capital says it has a plan. In 2010, Ares acquired Allied Capital, a BDC which pre-dated the financial crisis. On a conference call at the time of the deal announcement, management said it plans a similar strategy for integrating American Capital, of repositioning lower yielding and non-yielding investments into higher-yielding, directly sourced assets.

Ares Capital managed to increase the weighted average yield of the Allied investment portfolio by over 130 bps in the 18 months after the purchase, and reduce non-accrual investments from over 9% to 2.3% by the end of 2012, Michael Arougheti said in the May 23 investor call. Arougheti is co-chairman of Ares Capital and co-founder of Ares.

“The Allied book was a little bit more challenged, or a lot more challenged, than the ACAS portfolio is today,” Arougheti said. Ares Capital’s non-accrual investments totaled 1.3% on a cost basis, or 0.6% at fair value, as of March 31.

“Remember, that acquisition was made against a much different market backdrop. And so, while the roadmap is going to be very similar… this can be a lot less complicated that that transaction was for us.”

The failings of American Capital’s strategy reached fever pitch last November, when the lender capitulated to pressure from activist investor Elliott Management just a week after it raised an issue with the spin-off plan.

American Capital’s management had proposed in late 2014 spinning off two new BDCs to shareholders, and said it would focus on the business of asset management. However, in May last year, management revised the plan, saying it would spin off just one BDC.

But Elliott Management stepped in, announcing in November that it acquired an 8.4% stake. It later increased its stake further, becoming the largest shareholder of American Capital. The company argued that even the new plan would only serve to entrench poorly performing management, and called for management to withdraw the spin-off proposal.

American Capital listened. Within days, American Capital unveiled a strategic review, including a sale of part or all of the company.

One reason for the about-face was likely its incorporation status in Delaware, which made the board vulnerable to annual election. Incorporation in Maryland, utilized by other BDCs, is considered more favorable to management, in part because the election of boards is often staggered.

Although American Capital had shrunk its investment portfolio in recent quarters, it had participated in the market until recently.

Among recent deals, American Capital helped arrange in November a $170 million loan backing an acquisition of Kele, Inc. by Snow Phipps Group. Antares Capital was agent. In June 2015, American Capital was sole lender and second-lien agent on a $51 million second-lien loan backing an acquisition of Compusearch Software Systems by ABRY Partners. — Abby Latour

Follow Abby on Twitter @abbynyhk for middle-market deals, leveraged M&A, BDCs, distressed debt, private equity, and more.

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C&J Energy Enters into Forbearance Agreement Following Covenant Breach

C&J Energy Services entered into a forbearance agreement with its lenders after the company’s temporary limited waiver agreement with respect to its covenant violation expired on May 31.

As reported, C&J Energy recently engaged Kirkland & Ellis and Fried Frank as legal advisors and Evercore as financial advisor to explore strategic alternatives, which could include a refinancing or restructuring of its capital structure to address its liquidity issues and high debt levels or a potential Chapter bankruptcy filing, according to the company’s 10-Q filing.

The company’s B-1 term loan due 2020 (L+550, 1% LIBOR floor) was marked at 66.5/69.5 this morning, from 65/68 yesterday, according to sources. The B-2 term loan due 2022 (L+625, 1% floor) is marked at 66/69, versus 64.5/67.5 yesterday.

C&J Energy, which fell out of compliance with the minimum-cumulative-consolidated-bank-EBITDA covenant governing its credit agreement, said lenders have agreed to forbear from exercising default remedies or accelerating any indebtedness through June 30 as a result of the covenant violation or any default that results from the non-payment of interest.

The company said it will continue discussions with its creditors regarding the company’s debt and capital structure.

The loans were syndicated in March via a Citi-led arranger group to back the purchase of the Nabors unit. The B-1 loan was issued at 86 and the B-2 tranche at 84.

Bank of America Merrill Lynch is administrative agent.

NYSE-listed C&J Energy Services is an independent provider of premium hydraulic fracturing, coiled tubing, wireline, pump-down, and other complementary oilfield services with a focus on complex, technically demanding well completions. The company is rated CCC–/Caa3 with negative outlook on both sides. — Rachelle Kakouris

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This story first appeared on www.lcdcomps.com, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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Seven Leveraged Loan/High Yield Issuers Join LCD’s Restructuring Watchlist

Seven debt issuers joined LCD’s Restructuring Watchlist last week, bringing the total number of entities on the list to 44.

The Watchlist tracks companies with recent credit defaults or downgrades into junk territory, issuers with debt trading at deeply distressed levels, as well as those that have recently hired restructuring advisors or entered into credit negotiations. It is compiled by LCD’s Matthew Fuller and Rachelle Kakouris.

Joining the Watchlist last week:

  • Communications software concern Avaya , which hired GS and Centerview to address capital structure issues
  • Oil exploration & production co. EXCO Resources, which hired Akin Gump as legal advisor, and said it will retain a financial advisor
  • Halcon Resources, another E&P firm; it inked a restructuring agreement via Chapter 11
  • Luxembourg-based Satellite concern Intelsat, which recently lowered the price on the co.’s bond buyback
  • Internet radio concern iHeartMedia , which is negotiating a debt buyback (and reportedly is hiring advisors)
  • Stone Energy, which skipped a coupon payment
  • Calgary-based oil waste concern Tervita, which deferred an interest payment

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It will be no surprise to learn that, of the 44 issuers on the Watchlist, 18 hail from the energy/O&G sectors, with another three in the mining/commodities space. – Tim Cross

The Restructuring Watchlist is published each week in LCD’s Distressed Weekly. You can follow LCD on Twitter or learn more about us here. LCD is an offering of S&P Global Market Intelligence

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Linn Energy Delisted from NASDAQ; LinnCo Exchange Offer Extended

Linn Energy said yesterday it received notice that it and LinnCo would be delisted from trading on NASDAQ, as of today’s open.

The company said that the two companies are expected to begin trading on the OTC Pink Sheets marketplace today under the symbols LINEQ and LNCOQ, respectively.

Separately, the company also said yesterday it had extended its offer to exchange Linn units for shares in LinnCo, to 12 a.m. EDT on June 30. The terms of the exchange have not changed.

As reported, the exchange offer’s purpose is to permit holders of Linn units to maintain their economic interest in Linn through LinnCo, an entity that is taxed as a corporation, rather than a partnership, which may allow Linn unitholders to avoid future allocations of taxable income and loss, including cancellation of debt income that could result from the Chapter 11.

Roughly 12.07 million shares have been exchanged so far, representing about 69% of Linn Energy’s outstanding units, the company said. — Alan Zimmerman

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This story first appeared on www.lcdcomps.com, LCD’s subscription site offering complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.