C&J Energy Services Seeks to Reduce Debt through Bankruptcy Filing

by San Antonio Attorney

C&J Energy Services filed for bankruptcy on July 20, 2016 after striking a deal of $1.4 billion debt-for-equity swap with the lenders.

C&J, a well construction service provider to oil and gas producers, operates in the United States and Canada, recently filed for Chapter 11 protection in the United States Bankruptcy court in Houston.  The bankruptcy filing involves a debt restructuring plan with senior lenders.

The bankruptcy plan includes a debt-for-equity swap following the agreement of lenders to forgive debts owed.  In return, 100% ownership of the restructured company will be given to them.

The energy company, based in Bermuda, was established by Josh Comstock in Corpus Christi, Texas.  Under Comstock’s leadership, the company fulfilled a merger with Nabors Industries.

Hydraulic fracking boom boosted the company’s growth through acquisition and debts.

When the oil prices dropped, the company was adversely affected by it.  The company’s stock cost only 31 cents a share last Wednesday.

The company suffered losses of $872.5 million last 2015 and another $484.4 million during the first quarter of 2016.  The energy company became non-compliant with debt agreements and negotiations among the lenders.

The restructuring plan involves $100 million worth of bankruptcy financing, $100 million worth of bankruptcy-exit facilities and another rights offering, which costs $200 million.  These funds are aimed to replenish the company’s declining liquidity.

The company is set to issue seven year warrants that are easily convertible into 6% of new common stocks costing at a $1.55 billion strike price.  The company will maintain operations after its Chapter 11 filing.  The deal with the lenders assures that it will be an easier road to fixing bankruptcy.

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