Lilis Energy (LLEX) Files Chapter 11

Lilis Energy, Inc. (NYSE: LLEX) announced today that it has filed petitions under Chapter 11 of the United States Bankruptcy Code to initiate voluntary cases in the United States Bankruptcy Court for the Southern District of Texas, Houston Division.

The Chapter 11 petitions were filed in accordance with a Restructuring Support Agreement (the “RSA”) entered into among the Company and certain of its subsidiaries, certain investment funds and entities affiliated with Värde Partners, Inc. (collectively, the “Värde Funds”), which collectively own all of the Company’s outstanding preferred stock, a subordinated portion of the indebtedness outstanding under the Company’s Second Amended and Restated Senior Secured Revolving Credit Agreement (as amended, the “Credit Agreement”), a portion of the Company’s common stock, and all other lenders under the Credit Agreement (the “RBL Lenders”).

Under the RSA, the Company and its subsidiaries, the RBL Lenders and the Värde Funds have agreed, subject to certain conditions set forth in the RSA, to support a restructuring of the Company and its subsidiaries under a Chapter 11 plan of reorganization (a “Plan”) to be proposed with terms set forth in the RSA. Such Plan, if consummated, is expected to reduce the Company’s funded debt obligations by more than $34.9 million, and right-size the Company’s bank indebtedness for future operations.

The Plan contemplated by the RSA further provides that shares of the Company’s common stock will be canceled for no consideration. The Company believes it is unlikely that the holders of shares of its common stock will receive any consideration for their shares under any plan approved by the Court, irrespective of whether such plan contemplates terms consistent with or similar to those agreed upon in the RSA. Consummation of any restructuring plan will be subject to confirmation by the Court and the satisfaction, or waiver by appropriate parties, of any conditions set forth in such plan and related transaction documents.

The Company expects to continue to operate in the ordinary course throughout the restructuring process without material disruption to vendors, suppliers and partners.

The Plan is contingent upon the Värde Funds’ election to provide, on or before August 17, 2020, an agreed equity commitment and provision of additional debtor-in-possession (“DIP”) financing. In the event the Värde Funds elect not to provide DIP financing and to make the equity investment in the Company or the Plan contemplated in the RSA is not otherwise pursued, the RSA provides that the Company will pursue an agreed sales process with respect to its assets. The RSA is also subject to termination by the RBL Lenders and the Värde Funds in the event certain milestones in the reorganization process are not met.

“Like many companies in the oil and gas industry, we have been impacted by the severe downturn in commodity prices throughout the COVID-19 pandemic,” said Joseph C. Daches, the Company’s Chief Executive Officer, President and Chief Financial Officer. “While facing this challenging environment, we have worked diligently to explore a variety of alternatives to cut costs, improve our liquidity and address debt maturities. We are pleased to receive the continued support of our lenders and preferred shareholders and are confident that Lilis Energy can emerge from Chapter 11 better positioned to meet the challenges that have faced us.”

With the filing, and subject to court approval, the Company has received a commitment from its bank lenders under its Credit Agreement to provide up to $15.0 million in DIP financing. The Company anticipates up to $5.0 million will be available on an interim basis. With the Company’s usual operating cash flows, these financings are expected to provide sufficient liquidity for the Company to continue to operate in the ordinary course through the restructuring process.

Additional information about these Chapter 11 cases can be accessed via PACER at https://www.pacer.gov and, subject to the Court’s approval, at https://cases.stretto.com/LilisEnergy or by calling (855) 364-4639 (Toll-Free) or (949) 266-6357 (Local).

Vinson & Elkins L.L.P. is serving as legal advisor to the Company, Barclays Capital is serving as investment banker for the Company, and Opportune LLP is serving as restructuring advisor to the Company.

New Director

On June 27, 2020, Markus Specks resigned as a director of the Company. Under their rights as holders of the Company’s outstanding preferred stock, the Värde Funds named Mr. Nicholas Winter, a Managing Director of Värde Partners, Inc. as their new designated director, replacing Mr. Specks.

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