Apollo, MAST become energy company’s owners

Approval of Venoco’s restructuring plan has left two of the company’s creditors as majority owners.  

Apollo Capital Management and MAST Capital will become majority owners of Venoco, an oil and gas producer, after the company emerges from bankruptcy.

Judge Kevin Gross of the Wilmington, Delaware, federal bankruptcy court confirmed a plan that will eliminate almost $1 billion in debt and bring the company out of Chapter 11 protection, according to court minutes.

The plan exchanges the first-lien notes Apollo and Mast held prior to the Chapter 11 filing for 90 percent of the equity in a reorganized Venoco. The second-lien notes, also held by Apollo and MAST, will be exchanged for warrants for 10 percent of the new equity. 

Venoco is an independent oil and gas producer based in Denver. Founded in 1992, the company's primary assets are located in Southern California. It has interests in 141 producing wells, with 88 percent of those assets being oil, according to the company's bankruptcy filing.

Venoco entered bankruptcy protection in March, after choosing not to make a February interest payment on its unsecured notes. The company fell victim to what it characterised in its filing as a “perfect storm” of challenges. In addition to the decline in the oil prices and warmer winter weather that suppressed natural gas demand, Venoco said a pipeline rupture to an offshore oil field responsible severely inhibited the company's production, also contributing to its need for bankruptcy protection.

“With capital markets essentially closed to the entire sector due to commodity pricing,” the company wrote, “the only viable alternative for the debtors was ultimately determined to be an equitisation of a substantial portion of the debtors debt so that debtors could raise new equity for ongoing operations.” 

As part of its filing, Apollo provided Venoco with a $35 million debtor-in-possession (DIP) financing.

According to the filing, Venoco hired financial advisors in November 2014 to advise it on how to increase liquidity and address its capital structure. The company owed $327 million in senior PIK toggle notes; $195 million in first-lien notes; $172 million in second-lien notes; $324 million in senior notes; and $1 million in general unsecured claims

MAST Capital is a Boston-based credit hedge fund.

Apollo Capital Management is a subsidiary of Apollo Global Management, an alternative investment manager with $173 billion in assets under management in private equity, real estate and credit funds.