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Evercore recaps Davis Petroleum

Evercore Capital Partners has agreed to take over Davis Petroleum in a $150m management recapitalisation. Sankaty Advisors and Red Mountain Capital Partners are co-investing in the deal.

New York-based Evercore Capital Partners has led a recapitalisation in Davis Petroleum, teaming with company management and co-investors Red Mountain Capital Partners and Bain Capital-affiliate Sankaty Advisors to take a control stake in the company’s equity for $150 million (€126 million).

The transaction is being facilitated through a pre-packaged Chapter 11 bankruptcy filing in which all of the company’s creditors will be paid in full, according to a statement.

Davis Petroleum, based in Houston, is a family-owned, independent oil-and-gas exploration outfit. The company was founded by Jack Davis in 1940s, and he eventually passed the business on to his son Marvin Davis, the late billionaire, who is perhaps best known for flipping movie studio 20th Century Fox and golf resort Pebble Beach in two high-profile deals in the 1980s. Marvin Davis’ son Gregg Davis ultimately took over the business, and he will continue on in his role as president and CEO following the Evercore-led deal.

Evercore has been an active investor in energy in the past. Out of the firm’s first fund, Evercore led an investment in electric company Continental Energy Services and has also targeted the exploration space before, through its investment in Energy Partners Ltd. Most recently, out of the firm’s second fund, Evercore invested in Michigan Electric Transmission Co.

Regarding the recapitalisation, Gregg Davis, noted, “This transaction structure is the best alternative available to Davis Petroleum. Upon completion of the recapitalisation process in just a few weeks, all creditors will be paid in full, we will have a strong balance sheet, and ample liquidity to complete development of our Gulf of Mexico projects and continue growth in our onshore regions of operation.”

As part of the deal, Evercore is installing former International Paper CEO John Dillon on the company’s board of directors, and the firm intends to infuse additional capital into the company on a going-forward basis.

Evercore, led by co-CEOs Austin Beutner and Roger Altman, has a link to the Davis family in its corporate advisory business. Jason Sobol, who is a vice president at the firm, had previously served in the same capacity at Davis Companies, which was the holding company for entities controlled by Marvin Davis. He had also served as a principal at Stone Canyon Venture Partners, the family’s affiliated venture fund.