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Significant first day motions can be accessed by clicking on the case title above.
CASE DETAILS
On July 19, 2020 (the “Petition Date”), Permian Holdco 1, Inc. and three affiliates (collectively, the “Debtors”) each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. The Debtors are represented by Young Conaway Stargatt & Taylor, LLP. The case has been assigned to the Honorable Mary F. Walrath. A hearing on the Debtors’ first day motions was held on July 21, 2020 (First Day Hearing Agenda). The due date for the committee questionnaire is Friday, July 24, 2020 and 4:00 p.m.
INTRODUCTION
The Debtors manufacture above-ground wellsite fluid containment and processing systems for oil and natural gas exploration and production companies, and a variety of processing equipment, walkways, and stairways used at wellsites, conducting business under the industry brands Permian Tank & Manufacturing and Lide Industries. All of the Debtors’ revenue is earned in the U.S.; the Debtors primarily serve the oil and natural gas liquids producing regions of the Permian Basin, the Anadarko/Woodford Basin, Mississippian Lime, the Eagle Ford Shale, and the Bakken Shale, and the natural gas producing regions of the Barnett Shale and the Haynesville Shale. The Debtors operate two manufacturing facilities in Texas and one in South Dakota. The Debtors’ revenue for fiscal year 2018 and 2019 was $97.5 million and $63.6 million, respectively, and their revenue for the 2020 fiscal year is $14.5 million through June 30, 2020.
As of the Petition Date, the Debtors employed approximately eighty-one employees, all of whom are employed on a full-time basis. Forty-seven employees are paid hourly, and thirty-four are salaried. The Debtors do not utilize any independent contractors. Substantially all of the employees are located at the Debtors’ production facilities and corporate headquarters in Odessa, Texas.
The ongoing decline in oil and natural gas prices and other industry-related challenges have negatively impacted the Debtors’ liquidity and negated certain operational improvements the Debtors made in 2018 and 2019. The Debtors’ weak 2019 topline performance, which accelerated in the fourth quarter of the Debtors’ 2019 fiscal year, stressed the Debtors’ already challenged cost structure and depressed their margins. Volume and margins for the Debtors declined across all of their business units in the 2019 fiscal year, and the Debtors have not generated a positive adjusted EBITDA since January 2019. In 2020, the Debtors continued to experience poor performance and a sharp decline in revenue, primarily due to the collapse of the energy market, market instability, a lack of demand caused by COVID-19, legacy operational issues, and management turnover.
Despite months of significant efforts at negotiations, the Debtors were unable to effectuate an out-of-court restructuring and, with mounting liquidity constraints and increasing pressure from vendors, determined that a chapter 11 process would be the only viable path to preserving and maximizing the value of their assets.
DEBTORS’ FINANCIAL POSITION
As of the Petition Date, the Debtors owe approximately $28.6 million in outstanding principal under a prepetition credit facility with New Mountain Finance Corporation (“New Mountain”) and affiliated lenders, approximately $19,435,000 in unsecured promissory notes with certain shareholders, and $31,382,000 in additional promissory notes from a 2016 restructuring. Another of the Debtors also received $4,698,500 from Prosperity Bank under the Paycheck Protection Program (“PPP”). As of the Petition Date, approximately $2,610,570 of the funds remains and will continue to be used (the stalking horse purchase agreement described below contemplates the Debtors’ purchaser assuming all obligations under the PPP loan). In addition, as of the Petition Date, the Debtors’ have approximately $8,600,000 in outstanding trade liabilities. (Affidavit pp. 8-11)
DEBTOR-IN-POSSESSION FINANCING AND SALE PROCESS
The Debtors’ chapter 11 strategy is aimed at maximizing value for all stakeholders, including their employees, customers, and vendors, via a sale of all or substantially all of their assets. In connection with the sale, an affiliate of New Mountain has submitted a binding credit bid for the assets in the form of a stalking horse purchase agreement. The agreement will serve as the baseline for all prospective bidders to negotiate from, and will be subject to higher or otherwise better bids for the assets. (Sale Motion pp. 4-16)
To enable the Debtors to fund the administration of the cases and pursue the sale, the Debtors have also negotiated and obtained post-petition financing from New Mountain in the form of a $5 million secured term loan (of which $1,375,000 will be advanced by the lenders in the interim), less a roll up of $1.275 million in connection with the Debtors’ prepetition secured obligations. (DIP Motion pp. 7-21)
Several milestones are included as conditions to the Debtor’s financing and the stalking horse purchase agreement (DIP Motion p. 21):
- Within two days of the Petition Date, the Obligors shall have filed a Sale Motion.
- Within three business days of the Petition Date, the Court shall have held a hearing to consider approval of the proposed Interim Order and entered the Interim Order.
- Within fourteen days of the Petition Date, the Court shall have held a hearing to consider approval of the proposed Bidding Procedures Order and entered the Bidding Procedures Order.
- Within thirty-five days of the Petition Date, the Court shall have held a hearing to consider approval of the proposed Final Order and entered the Final Order.
- Within sixty-five days of the Petition Date, the Court shall have entered the Sale Order.
- Within fourteen days after entry of the Sale Order, the APA Closing Date or a closing on an APA Alternative Transaction shall have occurred.
Significant first day motions can be accessed by clicking on the case folder above and the link below.
TOP UNSECURED CREDITORS LIST AND FIRST DAY MOTIONS
- Taxes & Fees Motion
- Prepetition Claims Motion
- Employee Wages Motion
- DIP Motion
- Sale Motion
If we can be of service, please contact me.
Rafael X. Zahralddin-Aravena
Commercial Bankruptcy and Commercial Restructuring Chair
Elliott Greenleaf, P.C.
The I.M. Pei Building
Wilmington, Delaware 19899
Direct: 302-384-9401
Cell: 302-545-2888