Rosehill Resources Inc. and Rosehill Operating Company, LLC announced that they have commenced voluntary Chapter 11 cases under the United States Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas, pursuant to the terms of the previously announced Restructuring Support Agreement (the “RSA”) between the Company, the lenders under Rosehill’s revolving first lien credit facility, holders of Rosehill’s second lien notes and the Company’s Series B Preferred Stock, and Tema Oil and Gas Company, as the holder of approximately 66.8% of the equity interests in the Company and 35.2% of the equity interests in Rosehill Operating and party to the Company’s Tax Receivable Agreement (collectively, the “Consenting Creditors”).

In connection with the Chapter 11 Cases, Rosehill has filed customary motions authorizing it to proceed with its operations in the ordinary course, including to enter into a $17.5 million junior convertible secured debtor-in-possession delayed-draw term loan facility with U.S. Bank National Association, as administrative agent and collateral agent for the Lenders.

The DIP Credit Agreement contemplates a junior convertible secured debtor-in-possession delayed-draw term loan facility in the aggregate principal amount of $17,500,000 (the “DIP Facility”). The Loans (as defined in the DIP Credit Agreement) under the DIP Facility will bear interest at a rate of 8.00% per annum.

The DIP Credit Agreement includes conditions precedent, representations and warranties, affirmative and negative covenants, and events of default customary for financings of this type and size.

Upon the consummation of the Plan, each Holder (as defined in the DIP Credit Agreement), except to the extent that such Holder agrees to a less favorable treatment, will receive its pro rata share of (i) its allocated share under the DIP Credit Agreement of 1.69% of the common equity of the reorganized Rosehill Operating (the “New Rosehill Equity”) on account of the backstop fee payable to the lenders under the DIP Credit Agreement and (ii) 24.15% of the New Rosehill Equity on account of the outstanding principal amount of Obligations under the DIP Facility.

The terms of the DIP Credit Agreement are subject to approval by the Bankruptcy Court. Accordingly, the terms of the DIP Credit Agreement are subject to change, and there can be no assurance that the DIP Credit Agreement will be consummated. The Company anticipates closing the DIP Credit Agreement promptly following approval by the Bankruptcy Court of the DIP Motion, and that $8,750,000 of the DIP Facility will be funded within three business days after the entry by the Bankruptcy Court of an order approving the DIP Facility on an interim basis, and that the remaining $8,750,000 of the DIP Facility will be funded within three business days after the entry by the Bankruptcy Court of an order approving the DIP Facility on a final basis.

The Company currently expects that the DIP facility will provide sufficient liquidity to meet its financial obligations during the duration of the Chapter 11 Cases.  The Company expects to continue to operate its business during the Chapter 11 Cases without material disruption to its vendors, partners or employees. 

As previously announced, under the RSA, Rosehill and the Consenting Creditors have reached an agreement on the terms of a prepackaged plan of reorganization (the “Plan”).  Following consummation of the Plan, the Company’s equity will be owned solely by certain of the Consenting Creditors and holders of the Company’s preferred stock, and holders of general unsecured claims, including the Company’s trade creditors and vendors, will pass through the Chapter 11 Cases with their claims unimpaired by the bankruptcy and being satisfied in full. Additionally, pursuant to the Plan, all of the common equity of the Company will be cancelled and receive no recovery.

Gibson, Dunn & Crutcher LLP and Haynes and Boone, LLP are acting as legal counsel, and Jefferies LLC and Opportune LLP are acting as financial advisors to Rosehill in connection with the Chapter 11 Cases.