Penn Virginia files for bankruptcy--so does Linn Energy: Pretty Maids all in a row!
Penn Virginia Corp. of Radnor has filed for bankruptcy protection, joining the ranks of more than 50 oil and gas companies nationwide that have been capsized in the last year by the dramatic plunge in energy prices.
The company, whose oil production assets are concentrated in the Eagle Ford formation in Texas, announced Thursday it has filed a prearranged Chapter 11 restructuring that will reduce the company's long term debt of $1.2 billion by more than $1 billion.
The restructuring was filed in the U.S. Bankruptcy Court for the Eastern District of Virginia, Richmond Division.
"Like many other exploration and production companies, Penn Virginia has been significantly affected by the recent and continued dramatic decline in oil and natural gas prices," Edward B. Cloues II, chairman and interim chief executive, said in a statement. "We believe using the Chapter 11 process is the most efficient way to achieve our financial objectives and deleverage the company's balance sheet."
Founded in 1882 by Philadelphia coal barons, Penn Virginia is one of the region's oldest surviving businesses.
The company has received a commitment for $25 million in debtor-in-possession financing from lenders which, combined with the company's cash reserves and cash from operations, is expected to provide liquidity throughout the Chapter 11 reorganization process. Penn Virginia also obtained a commitment for up to $128 million in exit financing from its lenders, led by Wells Fargo as agent.
Penn Virginia has asked the court for authorization to generally continue its ongoing employee compensation and benefit programs without change. It anticipates emerging from Chapter 11 by the end of the summer.
Most of Penn Virginia's employees are located at its Houston operational office. The company employs contractors for its drilling operations.
Linn Energy
Linn Energy has filed for Chapter 11 bankruptcy protection in order to restructure its massive debt load.
The partnership has entered into a restructuring support agreement which calls for the wipeout of Linn Energy's common units.
LinnCo has been included as a debtor in the bankruptcy filing, and its shares would also be wiped out under the plan.
After months of speculation surrounding its deteriorating financial situation, Linn Energy (NASDAQ:LINE) filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of Texas on Wednesday. Along with this move, LinnCo (NASDAQ:LNCO) was included as a debtor in the bankruptcy filing, and as of the time of the bankruptcy filing, the company held a roughly 67% equity interest in Linn Energy. This sharp increase in ownership is largely due to an exchange offer, which LinnCo announced in March, that allowed unitholders of Linn Energy to exchange their units, on a one-for-one basis, for shares of LinnCo in a move to try to prevent the occurrence of cancellation of debt income (or CODI) in a restructuring scenario. This bankruptcy paints a bleak outlook for the partnership's units and for its debtholders, as the common unitholders will likely be completely wiped out and various creditors will hold the new equity of the firm, although the ultimate value of Linn Energy following a potential exit from bankruptcy, which is anticipated in late 2016, is highly uncertain.
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