California Resources Corp. (CRC), Santa Clarita, Calif., filed Chapter 11 petitions July 15 in the US Bankruptcy Court for the Southern District of Texas in accordance with a restructuring support agreement (RSA).
The RSA was agreed with holders of 84% of its 2017 term loans, 51% of its 2016 term loans, and its Elk Hills midstream joint venture partner, Ares Management LP.
The pre-arranged restructuring aims to eliminate over $5 billion of debt and mezzanine equity interest and consolidate CRC’s ownership of the Elk Hills power plant and cryogenic gas plant upon court approval.
Liquidity will be bolstered by $1.1 billion debtor-in-possession financing which also refinances in full CRC’s current revolving loan facility, the company said.
Term Lenders have agreed to backstop a $450 million equity rights offering and a $200 million second lien exit financing facility.
The company said it will continue to operate in the ordinary course.
“We have consistently operated within cash flow, significantly reducing the outsized debt burden we inherited from Occidental Petroleum at our December 2014 spin-off (OGJ Online, Feb. 14, 2014). However, today’s unprecedented market conditions, including oversupply and reduced demand due to COVID-19, require that we further reduce our debt through a Chapter 11 process,” said Todd A. Stevens, president and chief executive officer.
Ares has agreed to contribute its equity interests in Elk Hills Power LLC, a joint venture between CRC and a portfolio company of Ares. At emergence, Ares would exchange its joint venture interests for equity and new CRC notes in the reorganized company subject to the terms and conditions of the RSA. The joint venture’s cryogenic gas plant, 500-megawatt power plant and related assets will continue to operate in the ordinary course and upon emergence will be wholly-owned by CRC.