California Resources Corp Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K, dated July 23, 2020, details material definitive agreements entered into by California Resources Corporation ("CRC") and its subsidiaries (the "Debtors") following their voluntary Chapter 11 bankruptcy filing on July 15, 2020. The report covers the execution of debtor-in-possession (DIP) financing and amendments to restructuring support agreements.
On July 16, 2020, the New York Stock Exchange notified CRC of its intent to delist the company's common stock. Upon deregistration, the stock will remain registered under Section 12(g) of the Exchange Act.
Key Financial Metrics and Agreements
The filing outlines the establishment of two superpriority DIP credit facilities to fund operations and refinance existing debt:
- Senior DIP Facility: Approximately $483 million total facility.
- Includes a $400 million new money subfacility ($250 million in new loans and ~$150 million for existing letters of credit).
- Includes an $83 million roll-up of existing revolving credit facility commitments.
- Immediate Availability: $85 million in new money and $31 million in letters of credit were available at closing.
- Future Availability: The remaining $250 million in new money loans will be available upon entry of a final non-appealable court order.
- Maturity: Six months after the Petition Date (January 2021).
- Junior DIP Facility: $650 million term loan facility.
- Used to refinance the Company's existing revolving credit facility in full.
- Maturity: Six months after the Petition Date (January 2021).
- Equity Rights Offering: A proposed $450 million offering to raise capital for the reorganized entity.
- Tranche A: $405 million offered to holders of Stipulated 2017 Secured Claims.
- Tranche B: $45 million offered to holders of Deficiency/Unsecured Debt Claims.
Material Changes and Restructuring Plan
The Debtors filed a Joint Plan of Reorganization on July 24, 2020, supported by an Amended and Restated Restructuring Support Agreement (Amended RSA). Key distribution terms under the Plan include:
- Revolving Credit Facility (RBL) Holders: To be paid in full.
- Stipulated 2017 Secured Claims: Will receive 83.6% of the common stock in Reorganized CRC and 100% of Tranche A subscription rights.
- Deficiency/Unsecured Debt Claims: Will receive 16.4% of the common stock in Reorganized CRC and 100% of Tranche B subscription rights.
- Existing Equity: Will receive no distributions.
- Backstop Commitment: Backstop Parties have committed to purchase unsubscribed stock. In consideration, they will receive 37.5% of Tranche A and 50% of Tranche B, plus a 10% premium in common stock. If terminated, the Company owes a $22.5 million cash payment.
Outlook, Risks, and Contingencies
The execution of the DIP facilities and the restructuring plan is subject to final approval by the United States Bankruptcy Court for the Southern District of Texas. The Senior and Junior DIP Facilities are subject to earlier termination upon the occurrence of certain events specified in the credit agreements. The Equity Rights Offering is conditioned on the confirmation of the Chapter 11 plan and court approval.
The filing notes that the Company's common stock is facing delisting from the NYSE, which will impact trading venues and liquidity.
Investor Verification Checklist
- Verify the status of the Bankruptcy Court's final order approving the Senior DIP Facility to confirm the availability of the remaining $250 million in new money loans.
- Confirm the exact effective date of the NYSE delisting and the subsequent trading venue for CRC common stock.
- Review the full text of the Amended RSA and Backstop Commitment Agreement (Exhibits 10.3 and 10.4) for specific conditions precedent to the Equity Rights Offering.
- Monitor the progress of the Chapter 11 Plan confirmation hearing to validate the proposed equity distribution percentages (83.6% vs. 16.4%).
- Assess the impact of the $650 million Junior DIP and $483 million Senior DIP on the company's leverage and interest expense post-reorganization.