Business Context and Reporting Period
Company: California Resources Corporation (CRC)
Filing Date: July 15, 2020
Event: Voluntary Chapter 11 Bankruptcy Filing
Jurisdiction: United States Bankruptcy Court for the Southern District of Texas (Case No. 20-33568)
Status: Debtors-in-Possession continuing operations under court jurisdiction.
Key Financial Metrics and Capital Structure
Outstanding Indebtedness in Default: Approximately $5.24 billion across various credit agreements and notes.
Proposed Senior DIP Facility: Up to $483 million (approx. $400 million new money, $83 million roll-up).
Proposed Junior DIP Facility: $650 million committed by Consenting Parties.
Equity Rights Offering: $450 million, backstopped by RSA parties.
Revenue/Profit/Cash Flow: The filing text does not provide specific revenue, profit, or cash flow figures for the reporting period.
Material Changes and Restructuring Plan
The filing details a comprehensive restructuring plan (the "Plan") under a Restructuring Support Agreement (RSA) with key creditors holding significant portions of the 2016 Term Loan (50.8%), 2017 Term Loan (84.4%), and Second Lien Notes (8.2%).
- Capital Structure Reorganization:
- 2017 Term Loan Holders (Secured Portion): To receive 91% of Reorganized CRC common stock and 91% of subscription rights.
- Deficiency/Unsecured Class: Includes 2016 Term Loan, Second Lien Notes, and unsecured notes. Originally slated for 9% equity; modified proposal offers 14.61% common stock and 9% subscription rights to encourage support.
- Existing Equity: Will receive no recovery.
- Settlement with Ares Entities: Mutual release of claims regarding the Elk Hills Power joint venture. CRC granted a "Conversion Right" to acquire Ares' equity in Elk Hills Power for secured notes and common stock, exercisable until December 31, 2021.
- Timeline: Debtors obligated to emerge from Chapter 11 no later than 135 days after the Petition Date (unless extended).
Outlook, Risks, and Contingencies
Management Commentary: The Company cautions that trading in common stock is highly speculative. Stock prices may bear little relationship to actual recovery values. Existing shareholders face the risk of significant or complete loss.
Risks and Contingencies:
- Plan Consummation: No assurance the restructuring will be completed; the RSA may be terminated by creditors or the Debtors under specific conditions.
- Market Volatility: Ongoing COVID-19 pandemic impacts economic uncertainty and capital markets.
- Tax Attributes: Procedures established to preserve Net Operating Losses (NOLs) by restricting stock transfers and declarations of worthlessness.
- Legal Stay: Enforcement of the $5.24 billion in defaulted debt is automatically stayed under the Bankruptcy Code.
Investor Verification Checklist
- Verify the final approval status of the Senior DIP Facility ($483M) and Junior DIP Facility ($650M) by the Bankruptcy Court.
- Confirm the voting outcome of the "Deficiency/Unsecured Debt Claims" class regarding the modified equity recovery (14.61%).
- Monitor the 135-day deadline for emergence from Chapter 11 and any requests for extensions.
- Review the "Cleansing Material" (Exhibit 99.2) with caution, as the filing explicitly states these values are illustrative and not reliable forecasts.
- Assess the status of the Settlement Agreement with Ares Entities regarding the Elk Hills Power joint venture.