After a quiet past week, Atlas Energy Group LLC (OTCMKTS: ATLS) this week dropped something that looked like a bombshell: a restructuring plan that will enormously impact existing shareholders. If you are a shareholder in Atlas, you must now know what’s happening and its ramifications.
Converting debt to equity
Atlas Energy Group LLC (OTCMKTS: ATLS) said it in so many words, but the simple thing to understand is that the company has reached a debt restructuring package with nearly all of its lenders. In the words of the management, Atlas has entered into a restructuring support agreement (RSA) that should see it emerge stronger from Chapter 11 bankruptcy process.
Details of the RSA
It seems all the existing but a few of Atlas’ existing lenders bought its restructuring idea. The company said that 100% of its Second Lien lenders and 100% of its Revolving credit lenders fully endorsed the RSA. However, it was just 80% of senior notes holders who accepted the RSA, but that doesn’t change anything in the company’s plan as it will continue with the restructuring.
Eliminating $900 million in debt
According to Atlas Energy Group LLC (OTCMKTS: ATLS), the agreement that it has put in place with its lenders would see it drop $900 million in debt. On top of that, the company is looking to lower its interest expense burden by $80 million annually. As such, the restructuring is expected to significantly repair Atlas’ balance sheet and bolster its liquidity position.
What happens to equity ownership in Atlas Energy Group LLC (OTCMKTS: ATLS)?
Now the big deal is in how the ownership arrangement in the restructured Atlas Energy Group LLC (OTCMKTS: ATLS) will look like. First, Atlas will take on a new name after the restructuring process, with the proposed new name being Titan Energy LLC.
The transaction that will wipe $900 million debt from Atlas’ books will also see 100% of the company’s common stock go to the lenders participating in the restructuring. As such, the company said that existing common and preferred units will all be canceled when it comes out of the restructuring proceedings.