Debt Restructuring and Refinancing in a Distressed Industry

Petroplex Acidizing

Midland, Texas

Challenge

Permian Basin Oil Field service provider of acidizing to major oil field developers. Acidizing is a well maintenance activity to restock well productivity. Annual sales $20 million; down from peak of $70 million.Company had $120 million of secured debt. 


  • EBITDA plummeted from nearly $30 million/year to $2 million/year as oil price fell from $100 to $30 a barrel
  • Oil industry price decline had significantly reduced well drilling activity such that the Company’s job volume and pricing levels both plummeted by over 50%
  • Management did a good job of adjusting cost structure so company was able to stay EBITDA positive
  • Oil prices were starting to normalize around $50/barrel
  • PE firm owner was willing to inject additional capital if lenders would provide debt restructure with multi-year turnaround runway

Solution

  • MorrisAnderson created valuation based upon a 3-year forward looking and industry gradually recovering assumptions
  • Negotiated a consensual debt restructuring which converted secured debt into a performing Tranche A and non-performing Tranche B
  • New PE capital inserted pari passu with performing Tranche A debt and lender received minority warrants

Results

  • Recapitalization was done out of court
  • Company’s EBITDA has increased to $6 million/year
  • Company is adequately servicing secured debt
  • Company has 3-year runway which provides opportunity for oil industry to recover and secured lender to recoup their full investment and PE firm to recover their pari passu debt and have a longer term potential equity recovery
  • $15 million revolver refinanced

Daniel F. Dooley

Dan Dooley, CTP, is a Principal and CEO at MorrisAnderson based out of Chicago. He has a strong national reputation in crisis management, operations improvement, debt refinancing/restructuring and C-level positions. He is a frequent speaker at industry conferences and a regular author for industry periodicals. Dan has served on the Board of Directors of both… Read More

Kyle Putzstuck

Kyle Putzstuck, CPA, is a Director at MorrisAnderson. Kyle brings an extensive background in the accounting and private equity industry and uses that background as basis to structure practical solutions through comprehensive financial analysis. Prior to joining Morris Anderson, Kyle held positions as the assistant controller for Z Capital Partners, a leading global alternative investment… Read More