SAExploration Holdings announced that it and certain of its subsidiaries have entered into a Restructuring Support Agreement (the “RSA”) with holders of 100% of the advances under its credit facility, holders of approximately 82.4% of the advances under its senior loan facility and holders of 100% of its outstanding 6.0% Senior Secured Convertible Notes due 2023 (the “Convertible Notes”). The parties to the RSA also hold in the aggregate approximately 67.4% of the outstanding equity interests of the Company (including outstanding warrants, but excluding outstanding the Convertible Notes) on a fully diluted basis. To implement the RSA and position SAE for future growth, the Company and certain of its subsidiaries have voluntarily filed petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division (the “Bankruptcy Court”).
During the restructuring process, the Company expects to maintain global business as usual. The Company has filed customary motions that will allow it to maintain employee wages and benefits as well as meet vendor agreements and pay expenses. The Company will continue to be led by the current executive management team.
“After several months of careful consideration of how best to navigate the uncertainty of the global economy due to the coronavirus pandemic, along with the decreased demand for oil, our debt levels, and the difficulties associated with monetizing Alaskan tax credits, SAE’s Board of Directors and management, along with our advisors, concluded that the best path forward for SAE and its stakeholders is to seek Chapter 11 protection,” said Mike Faust, SAE’s CEO. “Our industry has been hit hard. However, the good news is, we expect to operate seamlessly during the restructuring, retain employees and pay our expenses. Our management team should remain in place. Once we emerge from Chapter 11, we expect to be well positioned for growth and to continue meeting the needs of our customers.”
The proposed plan of reorganization (the “Plan”) would eliminate approximately $74 million, net in debt from the Company’s balance sheet. The Plan contemplates (i) the entry into a new first lien exit facility in an aggregate principal amount of $15.0 million with lenders under the existing credit facility, senior loan facility and Convertible Notes, (ii) the refinancing of the existing credit facility with a new second lien exit facility in an aggregate principal amount of $20.5 million with the existing lenders, and (iii) the elimination of $89.0 million of principal plus accrued interest with respect to the existing senior loan facility and the Convertible Notes, in exchange for new common stock to be issued by the reorganized Company, subject to dilution by (x) new common stock to be issued to the lenders under the new first lien exit facility that will represent 95% of the outstanding new common stock to be issued by the reorganized Company, and (y) new common stock to be issued to the parties backstopping the new first lien exit facility that will represent 2.5% of the outstanding new common stock to be issued by the reorganized Company. The new common stock to be issued by the reorganized Company will be subject to further dilution by new common stock to be issued by the reorganized Company in connection with a management incentive plan.
The Company has requested that the Bankruptcy Court (i) approve commencement of solicitation on the Plan by September 16, 2020; (ii) set October 19, 2020 as the date that votes on the Plan must be received by Epiq Corporate Restructuring, LLC, the Company’s voting agent, unless the deadline is extended; and (iii) set September 8, 2020 as the record date for voting. Subject to Bankruptcy Court approval of the Plan and the satisfaction of certain conditions to the Plan and related transactions, the Company has proposed to consummate the Plan and emerge from chapter 11 before the end of November 2020. There can be no assurances that the Plan will be approved or confirmed by the Bankruptcy Court by that time, or at all.
Additional information, including court filings and other documents related to the reorganization proceedings, is available on a website administered by the Company’s claims agent, Epiq Corporate Restructuring, LLC, at https://dm.epiq11.com/SAExploration.
More detailed information on the restructuring can be found in the RSA, Plan and Disclosure Statement, which are included with the Form 8-K to be filed with the Securities and Exchange Commission.
Porter Hedges LLP is acting as legal counsel and Imperial Capital, LLC is acting as financial advisor to the Company in connection with its restructuring efforts.