U.S.S. Full Strike

On December 13, 2016, the United States Bankruptcy Court for the Southern District of Texas Houston Division confirmed the Second Amended Joint Chapter 11 Plan of Reorganization (“Plan”) for Energy XXI Ltd (EXXIQ). The Plan became effective on December 30, 2016, and EXXIQ shares were canceled.

CONTRACT ADJUSTMENT
Effective December 30, 2016, existing EXXIQ options are adjusted to no longer call for the delivery of Energy XXI Ltd shares upon exercise.

The option symbol EXXIQ will not change.

In settlement of EXXIQ exercise/assignment activity, an EXXIQ put exerciser (or call assignee) will receive a cash payment of the full aggregate strike price amount on the exercise settlement date. An EXXIQ put assignee (or call exercise) will pay this amount on the exercise settlement date. Settlement will take place through OCC’s cash settlement system on the third business day after exercise.

Since EXXIQ options are American-style, they are exercisable at the election of the holder. Expiration processing for EXXIQ options will take place in the normal fashion, including automatic exercise thresholds.

ACCELERATION OF EXPIRATIONS
Pursuant to OCC Rule 807, equity stock option contracts whose deliverables are adjusted to call for cash-only delivery will be subject to an acceleration of the expiration dates for outstanding option series. (See OCC Information Memo 23707) Additionally, the exercise by exception (ex by ex) threshold for expiring series will be $.01 in all account types.

All series of Energy XXI Ltd options whose expiration dates are after 1-20-2017 will have their expiration dates advanced to 1-20-2017.

"Energy XXI Successfully Completes Financial Restructuring" $EXXIQ

HOUSTON, Dec. 30, 2016 -- Energy XXI Ltd (“Energy XXI” or the “Company”) today announced that it has successfully completed its financial restructuring and emerged from Chapter 11. Through this process, Energy XXI has substantially improved its financial position by eliminating more than $3.6 billion of debt from its balance sheet.

Effectively immediately, Energy XXI common stock will cease trading on the OTC Market.

"Energy XXI Plan of Reorganization Confirmed By Court" $EXXI $EXXIQ

HOUSTON, Dec. 13, 2016 - Energy XXI Ltd today announced that the United States Bankruptcy Court for the Southern District of Texas, Houston Division has indicated that it will confirm the Company’s Plan of Reorganization and issue a written ruling and confirmation order to that effect. The Company expects to complete its financial restructuring process and emerge from Chapter 11 before the end of the calendar year, after the conditions to the Plan are satisfied.

First EXXI post was in January 2015.

In Today's EXXI Docket...

It is an unfortunate reality that the legacy shareholders of Energy XXI Ltd are billions of dollars out of the money. Faced with this reality, the Equity Committee—knowing that its valuation arguments will fail and that shareholders are entitled to nothing—has filed the above-described motions designed to transform worthless equity interests into a variety of potential unsecured tort claims, with the goal of having those purported claims certified as a class, estimated at an astronomical value, and voted against the plan in sufficient magnitude to control the general unsecured claims class at EXXI, the Bermuda parent company from which public equity was issued. This creative approach aimed at thwarting an otherwise-consensual reorganization is contrary to the Bankruptcy Code and must be rejected.

Energy XXI Confirmation Hearing Set for December 13

"The Confirmation Hearing will commence before the Honorable David R. Jones, Chief Bankruptcy Judge for the Southern District of Texas, Houston Division at the United States Courthouse, Room 400, 515 Rusk Street, Houston Texas 77002 on December 13, 2016 at 9:00 a.m. (Central Time) and will continue from day-to-day thereafter on dates that are convenient for the Court."

New Milestone Dates in Energy XXI Restructuring $EXXI

From the Plan Support Agreement filed November 14, 2016:

4. Milestones. Subject to Section 7, the Debtors shall implement the Restructuring Transactions on the following timeline (each deadline, a “Milestone”):
(a) no later than December 15, 2016, the Court shall have commenced the Confirmation Hearing;
(b) no later than December 31, 2016, the Court shall have entered the Confirmation Order; and
(c) no later than January 31, 2017, the Effective Date shall have occurred

Dockets for other restructurings we are following:

• Energy XXI
• Peabody Energy
• Linn Energy

Energy XXI Confirmation Hearing Set for November 7

The Confirmation Hearing will commence before the Honorable David R. Jones, Chief Bankruptcy Judge for the Southern District of Texas, Houston Division at the United States Courthouse, Room 400, 515 Rusk Street, Houston Texas 77002 on November 7, 2016 at 2:30 p.m. (Central Time) and will continue, to the extent necessary, on November 8, 2016 and such later dates as are convenient for the Court.

Dockets for remaining cases in bankruptcy:

• Energy XXI
• Peabody Energy
• Linn Energy

Resolution to EXXI Creditor Dispute?

Some interesting provisions:

WHEREAS, on September 8, 2016, the Debtors, the first lien agent, the ad hoc committee of Second Lien Noteholders, the ad hoc committee of EGC Unsecured Noteholders, the indenture trustee for the EGC Unsecured Noteholders, the ad hoc group of EPL Unsecured Noteholders, the indenture trustee for the EPL Unsecured Noteholders, and the official committee of unsecured creditors attended an in-person settlement meeting during which no agreement was reached to amend the Plan;
WHEREAS, following the filing of the Disclosure Statement and the Plan, the Debtors, in consultation with the Independent Directors and their respective Boards, have continued to engage in extensive, good-faith, arms’ length negotiations with the Restructuring Support Parties on the terms of the Plan;
WHEREAS, as a result of these negotiations, the Parties decided to amend the Restructuring Support Agreement as set forth in this Amendment;

--

(c) Section 4(j) of the Restructuring Support Agreement is hereby deleted and replaced in its entirety with the following:
no later than October 13, 2016, the Bankruptcy Court shall have entered the Confirmation Order; and

(d) Section 4(k) of the Restructuring Support Agreement is hereby deleted and replaced in its entirety with the following:
no later than October 27, 2016, the Debtors shall consummate the transactions contemplated by the Plan (the date of such consummation, the “Effective Date”), it being understood that the satisfaction of the conditions precedent to the Effective Date (as set forth in the Plan and the Term Sheet) shall be conditions precedent to the occurrence of the Effective Date.

--

Each holder of an EXXI Convertible Notes Claim receives such holder’s Pro Rata share of, on the Effective Date, .2% of the New Equity under the Plan, subject to dilution by the Management Incentive Plan.

--

11.6% of the New Equity will be deposited into a trust (the “EGC Intercompany Note Trust”) and distributed in accordance with the EGC Intercompany Note Trust Distribution.

--

The Management Incentive Plan shall be capped at 5%.

Debtwire Piece on P&A Liabilities in GOM Oil and Gas

Good article:

As one of the most indebted operators in the Gulf, Energy XXI (EXXI) poses a major risk to taxpayers given its potential USD 1.2bn decommissioning liabilities, according to government data as of 30 August. [...]

Unable to come up with the necessary cash, the now bankrupt Energy XXI is privately negotiating a tailored plan with BOEM. That plan however, threatens to significantly influence the level of payouts for investors who thought they were first in line for repayment of their bankruptcy claims, said three sources familiar with the case. These so-called senior secured creditors may now have to play second fiddle to the government, who is demanding that P&A costs are covered first. Negotiations over the plan also threaten to derail the company’s exit from bankruptcy as EXXI will be forced to prove that it can meet its P&A obligations to the government before being permitted to operate, the sources noted.

It looks like the Arch Coal case could get confirmed tomorrow, but the EXXI case has been dragging.

EXXI Confirmation Hearing Postponed Until September 21

[T]he“Confirmation Hearing” with respect to the Debtors’ Proposed Joint Chapter 11 Plan of Reorganization [Docket No. 810] (as may be modified, amended, or supplemented, the “Plan”) originally scheduled to commence on September 13, 2016 at 9:00 a.m. (Central Time) before the Court has been adjourned to Wednesday, September 21, 2016 at 11:00 a.m. (Central Time).

The deadline for parties to file objections to confirmation of the Plan has been extended from September 6, 2016 at 4:00 p.m. (Central Time) to Wednesday, September 14, 2016 at 4:00 p.m. (Central Time).

September 13: Confirmation Hearings for Energy XXI and Arch Coal

Looks like both cases have Confirmation Hearings scheduled for September 13, 2016.

Dockets for Recent Bankruptcy Cases

• Energy XXI
• Arch Coal
• Peabody Energy
• Goodrich Petroleum
• Linn Energy

Energy XXI Unsecured Creditors' Motion to Adjourn Disclosure Statement Hearing

[T]he Committee requests that, pursuant to section 105 of the Bankruptcy Code, the Court (a) adjourn the Hearing with respect to the Disclosure Statement Motion by at least three (3) weeks (to a date that is not earlier than July 14, 2016) to afford the Committee and the Debtors an appropriate opportunity to engage in settlement discussions related to the Plan, and (b) extend the applicable objection deadline with respect to the Disclosure Statement Motion to a date that is not more than five (5) days prior to the date this Court sets for the adjourned hearing on such motion. The Committee submits that the foregoing limited extension will not unduly prejudice any party in interest, and may result in significant benefits to the Debtors and their estates, especially if this negotiation is fruitful and can redirect these chapter 11 cases toward a consensual, rather than litigated, resolution. [...]

Indeed, at the June 10, 2016 hearing on the Committee’s Motion to Compel, the Court expressed concerns regarding the disclosure of insider transactions and related releases and instructed the Debtors to make more fulsome disclosures. This request resulted in the Debtors filing an amended Plan and Disclosure Statement on June 14, 2016 [Docket Nos. 502 and 503].

While the Debtors’ amended Disclosure Statement now includes some discussion of certain potential causes of action that could be brought by the Debtors’ estates involving Mr. Schiller, Mr. Louie, and the board of directors generally related to the personal loans made to Mr. Schiller and various transactions between the Debtors and the parties making such loans (and takes the position that such claims do not have merit), the Committee submits that the disclosure is still missing material facts. [For instance, the Debtors should include: (a) (i) the timing, amount, maturities, and parties providing the vendor loans, and (ii) whether and when the vendor loans were or will be repaid; (b) (i) when Mr. Louie’s appointment as a director of the Debtors was first discussed with the board, (ii) when Mr. Schiller received the loan from Mr. Louie (and the amount and terms thereof), (iii) when Mr. Louie was asked to join the board, and (iv) whether and when Mr. Schiller repaid the loan to Mr. Louie; and (c) (i) the date when the Debtors’ officers first considered entering into the acquisition of M21K, LLC (“M21K”), (ii) when the M21K acquisition was first discussed with the board, (iii) the amount of the obligations assumed in the M21K acquisition, and (iv), the valuation, if any, the Debtors made of the assets obtained at the time of the transaction.]

The Committee seeks the adjournment because these cases must now either change direction or become mired in expensive, time consuming litigation. The Committee submits that these cases should be placed, at least for a short time period, on a track of negotiation and asks the Court to adjourn the June 23rd hearing for three weeks to nudge the Debtors and the Second Lien Noteholders to engage with the Committee on serious negotiations for a consensual plan. As noted above, the Plan described in the Disclosure Statement cannot be crammed down and the changes necessary to make it potentially acceptable to unsecured creditors would be too fundamental to allow for modification rather than re-solicitation if the current Disclosure Statement were approved.

Moreover, the Committee is not alone in its view that even the amended disclosure is inadequate. At the recent June 15, 2016 Equity Committee Hearing, following testimony provided by, among others, a representative of PJT Partners (the Debtors’ investment banker and financial advisor), the Court expressed serious concerns regarding, among other things, (a) allegations of misrepresentations by the Debtors’ management, (b) the personal loans provided to the Debtors’ CEO, and (c) proposed distributions under the Plan to management pursuant to a management incentive plan contemplated by the Plan.

In furtherance of the exercise of its fiduciary duties, the Committee, through its professionals, has been diligently investigating the foregoing (and other) prepetition conduct and transactions. In the event the Court grants the adjournment sought in this Motion, the Committee intends to use the adjournment period to negotiate with the Debtors and the Second Lien Noteholders to arrive (hopefully) at a consensual resolution of their differences regarding the Plan. The Committee is hopeful that the parties will arrive at a Plan structure that will provide for treatment that is capable of consensual confirmation in place of the terms provided under the current Plan, specifically: (a) removal of the impermissible “death trap” structure; (b) appropriate allocation of the value of unencumbered estate assets among creditors, including unsecured creditors; and (c) tailored releases to avoid prejudice to creditors and interest holders.

Energy XXI Amended Disclosure Statement

"The Debtors expect the Chapter 11 Cases to proceed quickly. Should the Debtors’ projected timelines prove accurate, the Debtors could emerge from chapter 11 by September 2, 2016. No assurances can be made, however, that the Bankruptcy Court will enter various orders on the timetable anticipated by the Debtors."

Energy XXI Management Incentive Plan in Restructuring Support Agreement $EXXI

The Plan Supplement shall include a long-term management incentive plan (the “ Management Incentive Plan ”) for the Reorganized Debtors. Such Management Incentive Plan will reserve up to 8% of the total New Equity on a fully diluted basis (the “ Equity Pool ”). The Management Incentive Plan will be a comprehensive equity based award plan with the New Board to formulate the types of equity based awards (including stock option and restricted stock units) on terms and conditions determined by the New Board. Awards under the Management Incentive Plan will be awarded to the Reorganized Debtors’ officers, directors, employees, and consultants at the discretion of the New Board; provided, however, that 3% of the Equity Pool will be allocated by the New Board to such officers, directors, employees, and consultants no later than 60 days after the Effective Date on terms and conditions determined by the New Board, including the type of equity based awards. Subject to the foregoing, the New Board will determine the additional terms of the Management Incentive Plan after the Effective Date, including the allocation, granting, and vesting of applicable awards under the Management Incentive Plan.

Milestones From Energy XXI Restructuring Support Agreement $EXXI

As provided in and subject to Section 6, the Debtors shall implement the Restructuring Transactions on the following timeline (each deadline, a “ Milestone ”):

    (a)     no later than April 14, 2016 at 10:00 a.m. (Eastern Time), the Debtors shall commence the Chapter 11 Cases by filing bankruptcy petitions with the Bankruptcy Court (such filing date, the “ Petition Date ”);

    (b)     no later than April 14, 2016, EXXI will file a winding up petition with the Bermuda Court commencing the Bermuda Proceeding;

    (c)     on the Petition Date, the Debtors shall file with the Bankruptcy Court (i) a motion seeking entry of the Interim Cash Collateral Order and the Final Cash Collateral Order; and (ii) a motion seeking to assume this Agreement (the “ RSA Assumption Motion ”);

    (d)     no later than April 18, 2016, the Bankruptcy Court shall have entered the Interim Cash Collateral Order;

    (e)     no later than May 16, 2016, the Debtors shall file with the Bankruptcy Court: (i) the Plan; (ii) the Disclosure Statement; and (iii) a motion (the “ Disclosure Statement and Solicitation Motion ”) seeking, among other things, (A) approval of the Disclosure Statement, (B) approval of procedures for soliciting, receiving, and tabulating votes on the Plan and for filing objections to the Plan, and (C) to schedule the hearing to consider confirmation of the Plan (the “ Confirmation Hearing ”);

    (f)     no later than May 25, 2016, the Bankruptcy Court shall have entered the Final Cash Collateral Order;

    (g)     no later than July 1, 2016, the Bankruptcy Court shall have entered an order authorizing the assumption of this Agreement (the “ RSA Assumption Order ”);

    (h)     no later than July 1, 2016, (i) the Bankruptcy Court shall have entered an order approving the Disclosure Statement and the relief requested in the Disclosure Statement and Solicitation Motion; and (ii) no later than five (5) business days after entry of the order approving the Disclosure Statement and Solicitation Motion, the Debtors shall have commenced solicitation on the Plan by mailing the Solicitation Materials to parties eligible to vote on the Plan;

     (i)     no later than August 8, 2016, the Bankruptcy Court shall have commenced the Confirmation Hearing;

    (j)     no later than August 19, 2016, the Bankruptcy Court shall have entered the Confirmation Order; and

    (k)     no later than September 2, 2016, the Debtors shall consummate the transactions contemplated by the Plan (the date of such consummation, the “ Effective Date ”), it being understood that the satisfaction of the conditions precedent to the Effective Date (as set forth in the Plan and the Term Sheet) shall be conditions precedent to the occurrence of the Effective Date.

Energy XXI Files For Bankruptcy $EXXI

From the 8-K filing:

On April 14, 2016, Energy XXI Ltd, a Bermuda exempted company (the “Company”), Energy XXI Gulf Coast, Inc., an indirect wholly-owned subsidiary of the Company (“EGC”), EPL Oil & Gas, Inc., an indirect wholly-owned subsidiary of the Company (“EPL”) and certain other subsidiaries of the Company listed on Schedule 1 of the Restructuring Support Agreement (as defined below) (together with the Company, EGC and EPL, the “Debtors”) filed voluntary petitions for reorganization (the petitions collectively, the “Bankruptcy Petitions”) in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Bankruptcy Court”) seeking relief under the provisions of chapter 11 of Title 11 (“Chapter 11”) of the United States Code (the “Bankruptcy Code”) under the caption In re Energy XXI Ltd, et al ., Case No. 16-31928.

Prior to filing the Bankruptcy Petitions, on April 11, 2016, the Debtors entered into a Restructuring Support Agreement (the “Restructuring Support Agreement”) with certain holders (the “Second Lien Noteholders”) of EGC’s 11.000% Senior Secured Second Lien Notes due 2020 (the “Second Lien Notes”), providing that the Second Lien Noteholders party thereto will support a restructuring of the Debtors, subject to the terms and conditions of the Restructuring Support Agreement. The restructuring transactions contemplated by the Restructuring Support Agreement will be effectuated through a joint prearranged plan of reorganization in accordance with the terms and conditions of the term sheet dated April 11, 2016 (the “Term Sheet”), a copy of which is attached as Exhibit A to the Restructuring Support Agreement (as may be amended, restated, supplemented, or otherwise modified from time to time, the “Plan”). The Plan will represent a settlement of various issues, controversies, and disputes. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Restructuring Support Agreement.

 Existing common stock and preferred stock of the Company would be extinguished, and existing equity holders would not receive consideration in respect of their equity interests.

The Debtors, on behalf of the holders of claims (the “First Lien Claims”) arising on account of the Company’s Second Amended and Restated First Lien Credit Agreement (the “Revolving Credit Facility”) and subject to further negotiations with the lenders (the “Lenders”) under the Revolving Credit Facility, will use their best efforts to ensure that at emergence, the amount drawn under the Revolving Credit Facility either (i) remains outstanding or (ii) is refinanced with a new facility with terms acceptable to the Second Lien Noteholders party to the Restructuring Support Agreement (the “Restructuring Support Parties”) who hold, in aggregate, at least 66.6% in principal amount of the Second Lien Notes Claims (as defined below) held by the Restructuring Support Parties (the “Majority Restructuring Support Parties”); provided, however that (a) $228 million of letters of credit usage remains outstanding and (b) other terms, including a borrowing base redetermination holiday, are acceptable to the Debtors and the Majority Restructuring Support Parties. If the Debtors are unable to obtain the foregoing treatment of the First Lien Claims, then the Debtors will use their best efforts to obtain treatment acceptable to the Debtors and the Majority Restructuring Support Parties.

Holders of claims relating to the Second Lien Notes (the “Second Lien Notes Claims”) will receive their pro rata share of 100% of the common stock in the reorganized company (the “New Equity”) on account of such Second Lien Notes Claims, subject to dilution from the issuance of New Equity in connection with the long-term management incentive plan for the reorganized Debtors (the “Management Incentive Plan”) and the Warrant Package (as defined below).

Holders of allowed priority claims (other than a priority tax claim or administrative claim) will receive either: (i) cash equal to the full allowed amount of such claim or (ii) such other treatment as may otherwise be agreed to by such holder, the Debtors, and the Majority Restructuring Support Parties.

Holders of secured claims (other than a priority tax claim, First Lien Claim, or Second Lien Notes Claim) will receive, at the Debtors’ election and with the consent of the Majority Restructuring Support Parties, either: (i) cash equal to the full allowed amount of such claim, (ii) reinstatement of such holder’s claim, (iii) the return or abandonment of the collateral securing such claim to such holder, or (iv) such other treatment as may otherwise be agreed to by such holder, the Debtors, and the Majority Restructuring Support Parties.

If the holders of claims relating to the unsecured EGC notes (the “EGC Unsecured Notes Claims”), the unsecured EPL notes (the “EPL Unsecured Notes Claims”) and the Company’s senior unsecured convertible notes (the “EXXI Convertible Notes Claims”) vote to accept the Plan, then such holders will receive their pro rata share of the package of out-of-the-money warrants equal to an aggregate of up to up to 10% of the New Equity (subject to dilution from the Management Incentive Plan) with a maturity of 10 years and an equity strike price equal to (i) the principal amount of the Second Lien Notes Claims less the original issue discount of approximately $53.5 million plus (ii) accrued and unpaid interest (the “Warrant Package”). If, however, the holders of such claims vote to reject the Plan, then such holders will not receive a distribution under the Plan. Subject to the terms of the Plan, the Warrant Package will be divided amongst the classes of EGC Unsecured Notes Claims, EPL Unsecured Notes Claims, or EXXI Convertible Notes Claims, consistent with their respective legal entitlements.

John D. Schiller, Jr. will continue as the New Entity’s Chief Executive Officer and a member of its board of directors.

Just Saw Energy XXI Headline... $EXXI

ENERGY XXI SAID TO PLAN BANKRUPTCY FILING AS SOON AS THURSDAY

Wasn't long ago that they made their big acquisition:

March 12, 2014 6:10 p.m. ET

Energy XXI Ltd. agreed to acquire EPL Oil & Gas Inc. in a $1.53 billion cash-and-stock deal that will create the largest publicly traded oil-and-gas producer in the shallow waters of the U.S. Gulf of Mexico.

"Energy XXI Makes EPL Interest Payment and Enters Grace Period on EGC Interest Payments" $EXXI

Energy XXI today announced that it has made the interest payment due on its EPL Oil and Gas, Inc. 8.25% Senior Notes. This follows the Company’s decision to defer this interest payment originally due on February 16, 2016, commencing a 30-day grace period.

As previously announced, the Company continues to work with its financial and legal advisors to analyze a variety of solutions to reduce its overall financial leverage, while maintaining primary focus on preserving liquidity. As part of this process, Energy XXI continues to engage in discussions with its debtholders and other stakeholders to develop and implement a comprehensive plan to restructure its balance sheet. Operations are continuing as normal while these discussions are ongoing.

As Energy XXI continues these discussions, the Company has elected not to make interest payments due on Energy XXI Gulf Coast, Inc.’s (“EGC”) outstanding 11% Senior Secured 2nd Lien Notes and EGC’s outstanding 6.875% Senior Notes due on March 15, 2016, commencing a new 30-day grace period. The decision not to make these interest payments does not constitute an event of default; however, if the Company does not make the interest payments or restructure the debt before the grace period expires, the holders of the notes could accelerate amounts due under the notes and a default and acceleration under the Company’s other debt instruments could also occur.

In addition, the Company has obtained an extension on the waiver to certain requirements under its Second Amended and Restated First Lien Credit Agreement (provided pursuant to the Thirteenth Amendment and Waiver dated February 29, 2016) until April 15, 2016, unless terminated earlier pursuant to the terms of the waiver. In conjunction with the waiver, the Company has agreed to reduce its borrowing base from $500 million to $377.7 million and unwind certain hedging transactions and use the proceeds therefrom to repay amounts of outstanding loans to EPL under the Credit Agreement, with the repayments resulting in a further reduction in the borrowing base of EGC and EPL. The full details of the waiver agreement have been filed on form 8-K with the Securities and Exchange Commission.

Distressed Bond Update: $BTU $EXXI $LINE

• EXXI the 3% holdco note traded FLAT at 0.60 today. The other unsecured debt trading around 3 cents. Market does not seem to be expecting them to make the interest payments at the end of the 30 day grace period. Also, they have suspended payment on the preferred and have received a NASDAQ notice of deficiency.
• LINE debt is trading for 5 cents or less, with current yields getting up close to 200%!
• The BTU 4.75% subordinated note traded at 1.6 cents, a current yield of close to 300%! The other unsecured debt (with higher coupons) is trading for around 3 cents.