Mayer Brown: Oil companies, lenders negotiate restructuring support agreements

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David Baggett, founder and managing partner of Opportune LLP, said companies preparing for redeterminations focused on cutting field expenses as they tried to conserve cash.

“Liquidity is king,” Baggett said. “The banks are trying to be helpful in this price environment.” He said exploration and production companies generally do not thrive during a bankruptcy.

“You want support from creditors. You don’t want a free-fall bankruptcy that goes on,” Baggett said. He said companies filing for bankruptcy this year often already have arranged negotiated restructuring support agreements, or RSAs, with their creditors.

The key in RSAs is who signed them, Baggett said, adding the agreements outline details such as an employee-retention plan.

“Some of the timetables are getting tighter,” and more timetables are being discussed than in past bankruptcies, Baggett said.

Geoff Richards, Canaccord Genuity head of US debt finance and restructuring, said the RSAs almost look like a restructuring plan. RSAs are designed as a map regarding how a company plans to exit Chapter 11 reorganization bankruptcy, he said.

Kelley noted the process of getting oil executives and lenders to sit down at a table and talk can become “quite complex.”

Baggett described banks as being “more proactive,” adding that he sees banks becoming more involved to ensure that oil companies arrange loan terms that they can fulfill.

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