FS Investment Corporation (FSIC) is now set to own a majority stake in Warren Resources once the Houston-based oil and gas property developer leaves Chapter 11 protection.
FSIC, Franklin Square's business development company which is sub-advised by GSO Captial, will exchange a portion first lien debt for 82.5 percent of the new common stock issued by a reorganised Warren Resources once its restructuring proposal takes effect.
Under the bankruptcy-exit plan, first lien creditors, owed $177 million, will also be lenders on a new first lien facility for at least $130 million. The debt will mature May 2020, and will be priced at Libor plus 9 percent, with a 1 percent Libor floor, which will be paid in cash. An additional 1 percent interest will be paid in kind. First lien creditors were also owed a $71 million unsecured claim, bringing their total claims to $248 million.
A representative for FSIC did not get back to PDI by press time.
Warren Resources, which would issue 100 million new shares, will distribute the remaining 17.5 percent of new equity to second lien lenders. The new shares will be subject to dilution through a management incentive programme that will give company directors, officers and managers up to 6 percent of new common stock.
The debtor sought court protection in June after long being battered by low oil prices.
The debt-for-equity swap comes on the heels of FSIC boosting its energy exposure by 2 percent in the second quarter. The BDC's management attributed the increase to new transactions in its portfolio companies and to an increase in oil prices, though prices have fallen to $43.38 from the just over $49 in mid-August when FSIC reported its quarterly earnings.