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Edge Petroleum filed its proposed plan of reorganization on Thursday, and a motion to establish an auction process to effect the sale of the assets. The company will also seek to achieve and implement that a Purchase and Sale Agreement dated September 30 with PGP Gas Supply Pool No. 3 as buyer, subject to a higher and better offer solicited, selected and approved as the winning bid.
Additionally, PGP will be entitled to a break-up fee of $6 million and an expense reimbursement of $500,000 in certain events, if the transaction does not close or PGP is not the winning bidder in the auction.
The assets being sold comprise of all the company's ownership interest in its direct and indirect subsidiaries, including Edge Petroleum Exploration Co., Miller Exploration Co., Edge Petroleum Operating Co., Inc., Edge Petroleum Production Co. and Miller Oil Corp.
The effective date for the sale of the assets is June 30. The purchase price for the assets is $191 million, subject to a downward adjustment related to certain changes in the NYMEX Strip Price over the five year period from January 1, 2010 through December 31, 2014, capped at about $23.9 million.
As per the proposed plan, the company's pre-petition lenders will receive 100% of the proceeds from the sale of the assets, provided the consenting lenders agreed to "gift" certain monies to other claim holders. Pursuant to the proposed plan, a liquidating trust will be created to facilitate payment of allowed claims and wind down the reorganized company, Edge Petroleum said.
According to the company, this filing and the plan are designed to protect the integrity of its operations and the value of the assets. The company and its subsidiaries intend to continue to manage their properties and operate their businesses in the ordinary course throughout the Chapter 11 process.
Edge Petroleum currently has about $226.5 million of outstanding principal under its credit agreement. The company noted that both the plan and the sale motion are supported by its supporting lenders who hold at least two-thirds of the outstanding principal amount of its senior secured bank debt under the company's Fourth Amended and Restated Credit Agreement.
The company said it is likely that investors and its 5.75% series A cumulative convertible perpetual preferred stockholders will have no value in the bankruptcy process, 'even under the most optimistic of scenarios.'
According to John Elias, chief executive officer of the company, "The Chapter 11 process allows us to preserve the value of our assets and to operate our business without interruption while we implement our restructuring and wind-down in a controlled, court-supervised environment."
The company expects the Bankruptcy Court to enter a ruling on the plan in early December.
Edge Petroleum has retained Akin Gump Strauss Hauer and Feld as legal counsel, and Parkman Whaling LLC as financial advisor.
On August 7, Edge Petroleum reported a narrower net loss attributable to common stockholders, compared to the previous year. The company's second quarter net loss attributable to common stockholders was $9.37 million or $0.40 per share, compared to a loss of $29.89 million or $1.04 per share in the same quarter of last year.
The company generated revenues of $11.78 million for the latest second quarter, compared to negative revenues of $7.54 million in the previous year. Total operating expenses for the quarter were $17.55 million, compared to $33.91 million in the prior year quarter.
EPEX closed Thursday's regular trade at $0.53, down from the previous close of $0.56, on 331,300 shares.
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