Franklin Square’s BDC could end up in control of Warren Resources if the Houston oil and gas company emerges from Chapter 11 under its current bankruptcy-exit proposal.
Multiple funds of FS Investment Corporation, which are sub-advised by Blackstone-owned GSO Capital Partners and are Warren Resources’ first-lien lenders, could end up with 82.5 percent of the new common stock issued by a restructured debtor. The company filed the reorganisation plan in a Houston federal bankruptcy court on 20 June.
Warren Resources, which would issue 100 million new shares, would hand the remaining 17.5 percent of new equity to second-lien lenders. All of the shares would be subject to dilution through a management incentive programme that would give company directors, officers and managers up to 6 percent of new common stock.
Alongside the majority stake, the FS Investment vehicles would extend a new $130 million first-lien facility to Warren Resources upon it leaving court protection. A representative for FS Investment was not available for comment.
GSO has offered the debtor a $20 million debtor-in-possession loan it can access while in bankruptcy. A bankruptcy judge, who must approve access to the money, has not entered an ordering approving use of the facility. The postpetition financing would carry a rate of L+11 percent, and increase by 2 percent upon a default. The facility would come due, among other potential dates, on 31 October or once the company exits Chapter 11.
Warren Resources filed for Chapter 11 protection on 2 June after succumbing to continually low oil prices. The company has operations in California, the Rocky Mountains, and northeastern Pennsylvania. It develops oil and gas properties and coalbed methane natural gas alongside producing dry natural gas.
A Warren Resources investor relations representative was not available for comment.