Key Energy To File For Bankruptcy

Source: Houston Chronicle

The Houston company Key Energy Services filed for Chapter 11 protection on Monday after working for months to nail down a bankruptcy plan that its creditors would support.

Key said in the filing it had $1.1 billion in assets and $1.2 billion in debts. The bankruptcy would cut liabilities to $250 million.

The Bank of New York Mellon is listed as the largest unsecured creditor, owed $675 million. Investment firms connected to billionaire Mark Rachesky - who has bought controlling interests in such struggling companies as moviemaker Lions Gate Entertainment - own the largest share of Key's voting securities, according to the filings.

The Bank of New York Mellon did not return requests for comment. A spokesman for Rachesky's company, MHR Fund Management, declined to comment, as did Key.

Key, an oil field services provider, is among the latest energy companies to file for bankruptcy and is a reminder that the impact of the two-year oil bust continues to be felt despite recent signs of a recovery. At least 180 North American oil companies and service providers, about half based in Texas, have filed for bankruptcy since the start of 2015, according to Dallas law firm Haynes and Boone.

More are coming. Basic Energy Services, based in Fort Worth, said Monday it had reached an agreement with debt holders to file for bankruptcy by Tuesday.

Key, like many other companies, expanded too quickly during the oil boom and racked up hundreds of millions of dollars in debt that it was unable to support as oil prices plunged from $107 a barrel in the summer of 2014 to $26 in February. By the end of 2015, the company had amassed nearly $1 billion in long-term debt and run up more than $1 billion in operations losses, according to regulatory filings.

The restructuring plan would convert debt into stock and give creditors control of the company, all but wiping out current shareholders. The California private equity firm Platinum Equity, which agreed to support the plan, would be the largest shareholder.

Key's approach to restructuring the company has become common as struggling energy companies seek to cast off debts they couldn't sustain with low oil prices, analysts said. Crude prices have rebounded to more than $50 a barrel over the past few months.

Crude settled at $50.52 cents a barrel in New York Monday, down 33 cents.