APPROACH RESOURCES, INC. Item 1.01 Entry into a Material Definitive Agreement.
The information set forth below in Item 1.03 of this Report regarding the DIP Facility (as defined below) is incorporated herein by reference into this Item 1.01.
Item 1.03Bankruptcy or Receivership.
Chapter 11 Filing
As previously disclosed, on
As previously disclosed, on the Petition Date, the Debtors filed a number of
motions with the Court generally designed to stabilize their operations and
facilitate the Debtors' transition into Chapter 11. Certain of these motions
sought approval from the Court for the Debtors to execute, deliver and perform
under the DIP Facility (as defined below), to establish certain procedures to
protect the potential value of the Company's net operating loss carryforwards
("NOLs," and such motion, the "NOL Motion"), and to maintain insurance and cash
management programs (the "Administrative Motions"). On
The NOL Motion sought entry of a final order establishing certain procedures
(the "Procedures") with respect to direct and indirect trading and transfers of
stock of the Company, and sought related relief, in order to protect the
potential value of the Company's NOLs and certain other of the Company's tax
attributes for use in connection with the reorganization. Prior to the entering
of the NOL Order, the Court previously approved the Procedures on an interim
basis by order dated
Information regarding the Chapter 11 Cases, including the DIP Order, the NOL Order, the Administrative Orders and the NOL Motion and Procedures, is available through the Company's website under the Restructuring Information tab, which contains a link to the claims agent's website, https://dm.epiq11.com/approachresources. A direct or indirect holder of, or prospective holder of, stock issued by the Debtors that may be or become a Substantial Stockholder or a direct or indirect holder of, or prospective holder of, a substantial amount of claims against the Debtors should consult the NOL Motion and Procedures.
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Additionally, as previously disclosed, the Debtors are considering, among other things, sales of all or substantially all of their assets pursuant to Section 363 of the Bankruptcy Code.
Debtor-In-Possession Financing
As previously disclosed, in connection with the Bankruptcy Petitions, the
Debtors filed a motion (the "DIP Motion") seeking, among other things, final
approval of
The DIP Facility contains the following terms:
• a senior secured super priority debtor-in-possession credit facility
in an aggregate principal amount of up to $41.25 million consisting
of (i) a new money revolving credit facility in the principal amount
of $16.5 million (the "New Money DIP Loans") and (ii) a refinancing
"roll-up" term loan in the principal amount of $24.75 million (the
"Roll-Up Loans" and, together with the New Money DIP Loans, the "DIP
Loans");
• proceeds of the DIP Facility may be used by the Debtors to (i) pay
certain costs, fees and expenses related to the Chapter 11 Cases;
(ii) make payments provided for in the DIP Motion, including in
respect of certain "adequate protection" obligations and (iii) fund
working capital needs, capital improvements and other general
corporate purposes of the Debtors, in all cases subject to the terms
of the DIP Facility and applicable orders of the Court;
• the maturity date of the DIP Facility will be the earliest to occur
of (i) seven months after the Petition Date; (ii) the entry of an
order approving a sale pursuant to Section 363 of the Bankruptcy
Code; (iii) the effective date of any Acceptable Plan (as defined in
the DIP Facility) or any other Chapter 11 plan; (iv) the conversion
of any of the Debtors' cases to a case under Chapter 7 of the
Bankruptcy Code; (v) the entry of an order for dismissal of any of
the Chapter 11 Cases; and (vi) at the election of the DIP
Administrative Agent, the date on which any event of default under
the DIP Facility is continuing;
• interest will accrue at a rate per annum equal to the Adjusted LIBO
Rate for one-month periods (with a floor of 2%) plus 6% or the
Alternate Base Rate plus 5%;
• the Company is required to pay the following fees: (i) a facility
fee of 2% on the new money commitments, (ii) an unused commitment
fee of 1% per annum, (iii) letters of credit fees, including a 6%
per annum participation fee to each participating lender and an
additional fronting fee of 0.25% per annum to the issuing bank, in
each case, on the average daily amount of LC Exposure (as defined in
the DIP Facility), and (iv) customary agency and arrangement fees;
• the obligations and liabilities of the Debtors owed to the
administrative agent and participating lenders under the DIP
Facility and related financing documents will be entitled to super
priority claims status and super priority security interests and
liens on all of the Debtors' assets, subject to limited exceptions;
• in addition to prepayment events and events of default, the DIP
Facility will provide for certain customary covenants applicable to
the Company, including covenants requiring (i) weekly delivery of an
operating debtor-in-possession budget (the "DIP Budget") and
variance report, with all permitted variances subject to capital
expenditure restrictions on certain leases; and (ii) compliance with
the approved DIP Budget subject to permitted variances of (A) 10% on
aggregate weekly disbursements, (B) 15% on individual line item
weekly disbursements, and (C) 10% on actual aggregate monthly
. . .
Item 2.03 Creation of a Direct Financial Obligation or Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth above in Item 1.03 of this Report regarding the DIP Facility is incorporated herein by reference into this Item 2.03.
Cautionary Note Regarding Forward-Looking Statements
This Report on Form 8-K contains "forward-looking statements" within the meaning of the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this report, the words "will," "believe," "intend," "expect," "may," "should," "anticipate," "could," "estimate," "plan," "predict," "project," "potential" or their negatives, or other similar expressions or the statements that include those words, are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words.
These forward-looking statements are largely based on the Company's expectations, which reflect estimates and assumptions made by the Company's management. These estimates and assumptions reflect the Company's best judgment based on currently known market conditions and other factors. Although the Company believes such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond the Company's control. In addition, management's assumptions about future events may prove to be inaccurate. The Company cautions all readers that the forward-looking statements contained in this report are not guarantees of future performance, and the Company cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur.
These statements are subject to significant risks, uncertainties, and assumptions that are difficult to predict and could cause actual results to differ materially and adversely from those expressed or implied in the forward-looking statements, including risks and uncertainties regarding:
• the Company's ability to continue as a going concern;
• the Company's ability to successfully complete a marketing and sales
process under Chapter 11;
• potential adverse effects of the Chapter 11 Cases on the Company's
liquidity and results of operations;
• the Company's ability to obtain timely approval by the Court with
respect to the motions filed in the Chapter 11 Cases;
• objections to the Company's sale process or other pleadings filed
that could protract the Chapter 11 Cases;
• employee attrition and the Company's ability to retain senior
management and other key personnel due to the distractions and
uncertainties, including the Company's ability to provide adequate
compensation and benefits during the Chapter 11 Cases;
• the Company's ability to comply with the restrictions imposed by the
DIP Financing and other financing arrangements;
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• the Company's ability to maintain relationships with suppliers,
customers, employees and other third parties and regulatory
authorities as a result of the Chapter 11 filing;
• the effects of the Bankruptcy Petitions on the Company and on the
interests of various constituents, including holders of the
Company's Common Stock;
• the Court's rulings in the Chapter 11 Cases and the outcome of the
Chapter 11 Cases generally;
• the length of time that the Company will operate under Chapter 11
protection and the continued availability of operating capital
during the pendency of the proceedings;
• risks associated with third party motions in the Chapter 11 Cases,
which may interfere with the Company's ability to consummate a sale;
and
• increased administrative and legal costs related to the Chapter 11
Cases and other litigation and inherent risks involved in a
bankruptcy process.
Forward-looking statements are also subject to the risk factors and cautionary
language described from time to time in the reports and registration statements
the Company files with the
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
10.1 Senior Secured Super Priority Debtor-In-Possession Credit
Agreement, dated as of December 18, 2019 , by and among the
Company, as borrower, the guarantors party thereto, JPMorgan
Chase Bank, N.A ., as administrative agent and issuing bank, and
the financial institutions or other entities from time to time
parties thereto as lender
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