Joel R. Glucksman
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201-896-7095 jglucksman@sh-law.comFirm Insights
RAAM Global Energy Co files for Chapter 11 Bankruptcy Protection
Author: Joel R. Glucksman
Date: February 4, 2016
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RAAM Global Energy Co files Chapter 11
RAAM Global Energy Co, one of the biggest energy companies in the U.S., recently announced that it had filed for Chapter 11 bankruptcy protection. According to a Bloomberg Brief report, RAAM’s filing continues a Chapter 11 bankruptcy trend for oil and gas companies due to the substantial drops in commodities’ prices. As a result, the company now seeks an asset auction sale, which the State of Louisiana has filed an objection against.
RAAM Global Energy Co falls into substantial debt with collapsing oil and gas prices
In its court documents, RAAM cited insolvency on one of its oil production fields in Texas and no foreseeable future recovery in oil and gas prices as its reasons for filing for Chapter 11 bankruptcy protection. According to Law 360, RAAM had accrued substantial debt for its offshore drilling operations in the Gulf of Mexico and its fields in Texas, Oklahoma and Louisiana following the initial collapse in oil and gas commodity prices in 2014.
The company listed assets comprised of between $1 million and $10 million, with staggering liabilities ranging from $100 million to $500 million. Its current debt load stands at $238 million in senior secured notes, with an additional $63.8 million in loans. In its bankruptcy petition, RAAM also stated that it failed to make an interest payment on its senior secured notes, which forced the company to seek debt refinancing in June. As part of its restructuring attempt, RAAM requested that its senior secured debt holders exchange the notes for 1.17 million in company common stock shares as well as a portion of new notes valued at $50 million. This attempt failed when it did not reach its 99 percent requirement as only 94.77 percent of senior secured noteholders agreed to the deal.
After it failed to secure the exchange deal, the company could not refinance its debt, which meant that it could not fund a new offshore drilling project because it could not obtain the necessary permits. This caused RAAM $186 million in after-tax losses, a write-down of $277 million and cutting 8.4 million crude oil barrels out of its production. As a result, the company became insolvent after it only reported $33.4 million in revenues as of June of this year.
The company’s reorganization plan is opposed by the State of Louisiana
RAAM stated in its bankruptcy filings that it intends to sell off its remaining assets through an auction process. According to Law 360, the company will seek a stalking horse bidder with approximately 99 percent of its debtors involved with the $85 million term-loan-financing facility reached in 2014.
Following RAAM’s Chapter 11 bankruptcy filing, the State of Louisiana announced that it had filed an objection to the petition. According to a Bankruptcy Company News report, as a portion of the company’s assets are situated on land owned by the State of Louisiana, RAAM cannot sell these assets as part of a stalking horse auction.
The significance of the filing is a downward trend in the energy sector
The prices of oil and gas have plummeted since 2014. RAAM’s decision to file for Chapter 11 bankruptcy protection is the most recent energy producer to become insolvent. In a report by The Deal, RAAM is the latest of the largest names to file in 2015, including Endeavour International Inc, WBH Energy LP, Cal Dive International Inc, Dune Energy Inc, Miller Energy Resources Inc , Milagro Oil & Gas Inc and BPZ Resources.
Are you a creditor in a bankruptcy? Have you been sued by a bankrupt? If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.
- Practices: Bankruptcy & Creditors' Rights, Corporate Transactions & Business, Bankruptcy Litigation
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
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