Friday, October 4, 2013

GMX Resources Files Plan Support Agreement ($GMXR)

From an 8-K filing today,

"Under the plan of reorganization contemplated by the Plan Support Agreement, the current debtor-in-possession financing facility will be extended so that the Company may continue operating in Chapter 11 as it seeks confirmation of the proposed plan or reorganization. Further, in exchange for the secured portion of their claims in the approximate amount of $338 million, the holders of the Senior Secured Notes would receive 100% of the equity in the reorganized Company upon its emergence from bankruptcy and/or equity in an affiliate of the reorganized GMXR. Holders of the Company’s Senior Secured Second-Priority Notes due 2018 shall be treated as general unsecured creditors. Under the proposed plan of reorganization, if the general unsecured creditors’ class votes to accept the plan or reorganization, holders of allowed general unsecured claims would receive interests in a trust (the “Litigation Trust”) funded with (i) $1.5 million in cash; and (ii) the Debtors’ potential causes of action listed on Schedule A to the Restructuring Term Sheet. Further, if the class of holders of general unsecured claims vote to accept the plan or reorganization, the holders of Senior Secured Notes will waive recovery on their unsecured deficiency claim. If the class of holders of general unsecured claims does not vote to accept the plan of reorganization, the $1.5 million in cash will not be funded in the Litigation Trust and, the holders of Senior Secured Notes and debtor in possession lenders will participate in recovery from the Litigation Trust on account of their DIP loan claims, superpriority adequate protection claims and deficiency claim. Any equity interest in the Company, of any kind, existing prior to the consummation of the restructuring will be cancelled under the terms of the plan of reorganization."
Only a year ago, the dream was still alive for GMXR shareholders. Now, the first lien secured debt is revealed to be the fulcrum security! The equity got wiped out completely.

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