Atlas Resource Partners Files for Reorganization Bankruptcy

by San Antonio Attorney

Atlas Resource Partners LP sought for bankruptcy protection on July 27, 2016 after a deal was made to cut about $900 million of its debt.

Despite the considerable reduction of the company’s debt through the Chapter 11 reorganization, the investors may still have to pay a large tax bill because of the business’ status as a partnership.

Atlas’ plan, which was laid out a week ago, will not include any payout to unit holders as their rights to ownership will be lost.  Unlike in a corporation where there are shareholders, a partnership has unit holders and these investors will likely shoulder tax bill for the discharge debt of Atlas in Chapter 11 bankruptcy.

The company proposed a reorganization plan where debt is swapped for equity with senior bondholders, who have mostly agreed to the deal.  In order to implement the deal, Atlas filed for Chapter 11 bankruptcy.

The agreement involves creating two groups of bondholders that would trade $668 million in debt in exchange for a 90% stake in the reorganized company.

At present, the company’s $670 million revolving loan would be paid off using the impending liquidated hedge positions, and an additional $410 million financing would be given once Atlas leaves bankruptcy.

The 10 percent equity of the company would be provided to the junior holders of $250 million debt in exchange for reducing the interest rate of the loan.

After completing the deal, the tax status of Atlas will become that of a traditional corporation and it will be renamed to Titan Energy.

Based on court papers filed in the Manhattan bankruptcy court, the Pittsburgh-based company declared assets and liabilities between $1 billion and $10 billion.  The producer of oil and gas has wells in 17 different states.  Its financial statement shows that that the decrease in commodity prices have affected their revenues and liquidity position.

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