Cases & Deals

Steering committee implements restructuring support agreement with frac sand producer

Clients Steering Committee of Lenders

Jones Day represented three members of a steering committee of lenders of a company that produces and distributes frac sand and proppant materials used in oil and gas shale drilling. In late October 2013, Jones Day was hired by those lender clients to assist them and the wider lender steering committee in analyzing various issues associated with the potential restructuring of the company's debt and disposition of certain of the company's material assets. Operating under a forbearance agreement, which was continued serially during our engagement, we assisted in the negotiation and implementation of a restructuring support agreement, which served as a roadmap to the potential restructuring of the company. Although the restructuring support agreement expired by its terms before a restructuring transaction was consummated, the proppant market improved dramatically and in July 2014, a private equity firm led a $680 million equity and debt investment in the company. Proceeds from that transaction were used to repay existing lenders at a premium to par.

As one of the first deals in the wave of recent oil and gas restructurings, the engagement foreshadowed the severe distress that would ultimately wreak havoc on the energy sector. The structure of the restructuring support agreement was also innovative not only because of its complexity, which contemplated toggling between a sale of substantially all of the company's assets to a third party and a standalone restructuring of the entire company, but also because it required considerable creativity to address potential negative tax ramifications facing the company's executive leadership group under each restructuring scenario.