GMX Resources (GMXR) Petitions for Ch. 11 Bankruptcy; Enters DIP Agreement

April 1, 2013 9:28 AM EDT
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GMX Resources (NYSE: GMXR) filed a voluntary petition for reorganization under Chapter 11 in the U.S. Bankruptcy Court (the "Bankruptcy Court") for the Western District of Oklahoma. In connection with this petition, GMXR is pursuing an asset purchase agreement with holders of its Senior Secured Notes due 2017 who own a majority of these secured notes (collectively referred to below as the "Principal Senior Secured Noteholders") to acquire substantially all of the Company's operating assets and undeveloped acreage. The Company's joint venture, Endeavor Gathering LLC, in which the Company owns a 60% membership interest, is not included in the filing.

Upon finalizing the contemplated asset purchase agreement with the Principal Senior Secured Noteholders, the sale will then be subject to a public auction and receipt of competing, and potentially higher and better offers, pursuant to procedures to be approved by the Bankruptcy Court.

Over the past year, the Company implemented various strategic initiatives to increase oil production, improve supply chain and production efficiencies, and reduce costs to increase cash flow. While these operating initiatives resulted in some success, natural gas commodity prices have remained low, and the Company's oil and gas operations require ongoing additional capital expenditures. To meet these financial requirements, the Company has actively sought financing alternatives to solve its liquidity needs. The Company has been unsuccessful in finding any viable funding solution to meet its long-term liquidity needs. Based on discussions with the Company's various creditor groups and advice from the Company advisors, the Company believes that the rights and protections afforded under a court-supervised reorganization process, including access to financing and a proposed sale of the Company assets, will provide the Company the ability to meet its immediate financial needs to preserve the value of assets and to provide for the greatest recovery to its stakeholders.

The Company has obtained a commitment for debtor-in-possession (DIP) financing from the Principal Senior Secured Noteholders, which will provide up to $50 million of additional financing to fund the Company's operating expenses. Upon approval by the Bankruptcy Court, the new financing and cash generated from the Company's ongoing operations will be used to support its business and the Company's efforts to negotiate and implement a sale of its assets.

As is customary in cases such as this, the Company has filed various "first day" motions with the Bankruptcy Court seeking authority from the Bankruptcy Court that will enable it to continue business operations without interruption. The requests include authority to honor royalty obligations, pay salaries and provide benefits to employees, and pay ongoing undisputed obligations to vendors and suppliers, and to approve the DIP financing.

The Company has notified the New York Stock Exchange (NYSE) of its Chapter 11 filing and as is customary, GMXR anticipates delisting procedures to begin which the Company will not contest. Additional information regarding GMXR's Chapter 11 proceedings can be found at or by calling 877-854-0023 (within U.S.) or +1-503-597-7711 (outside U.S.)

The Company's financial advisors on the restructuring are Jefferies LLC, and its legal advisors are Andrews Kurth LLP.

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