U.S. corporate bankruptcy and restructuring activity was dominated by the energy sector in 2017 as oil and coal prices struggled to recover from their 2016 troughs, putting pressure on producers, field services companies, and midstream and upstream companies alike. In addition, independent power producers faced renewed headwinds from stagnant consumer demand and a lack of pricing power.
The energy industry is certainly no stranger to volatility and cyclical highs and lows. Throughout the ups and downs in the sector, Kramer Levin’s Bankruptcy and Restructuring team has been actively engaged in the most significant and complex cases, leading negotiations and finding consensual solutions.
Extracting wins for unsecured creditors when the bottom fell out of the coal market
The largest coal producer in the United States, Peabody Energy Corp., was caught short when prices for coal sank relentlessly from 2012 to 2016, declining by more than 50 percent in that period. Unable to service a debt load of $10.1 billion, Peabody filed for Chapter 11 bankruptcy protection in April 2016. Kramer Levin represented Elliott Capital Management and Aurelius Capital Management as holders of unsecured notes before and during the Chapter 11 proceedings, which culminated in a plan of reorganization that became effective April 3, 2017. Our clients participated in Peabody’s DIP financing, litigation and a mediation that achieved an agreement enabling distributions to unsecured creditors that were several times larger than the recoveries in other recent coal industry bankruptcies.
Improved recovery in major offshore drilling restructuring
Declining commodity prices — in this case, oil prices — were also the driving factor when one of the world’s largest offshore drilling companies, Seadrill Ltd., filed for Chapter 11 bankruptcy protection in September 2017. Prior to filing, Seadrill had reached an agreement with most of its banks and certain noteholders to inject new capital into the company — but that agreement was not optimal for many of Seadrill’s unsecured creditors.
Kramer Levin is representing Seadrill’s official committee of unsecured creditors. After extensive investigation and difficult negotiations, the committee agreed to support a revised plan under which unsecured creditors will receive a 50 percent greater recovery than that proposed under the debtor’s original plan.
Other recent energy industry bankruptcies in which we have played a key role, representing either creditors committees or ad hoc groups of noteholders, include Energy Future Intermediate Holdings Inc., FirstEnergy Solutions, Southcross Holdings, Longview Power, Westmoreland Coal Corp., Arch Coal Inc. and CHC Group Ltd.