Breitburn Energy Partners Files for Chapter 11 Bankruptcy – WSJ

Breitburn Energy Partners LP filed for chapter 11 bankruptcy protection Sunday, taken down by plunging oil prices.Business operations will continue while Breitburn negotiates a restructuring of its balance sheet, continuing talks with creditors that began a month ago, Chief Executive Hal Washburn said in a release.The decision to file for bankruptcy was made when it became “abundantly clear that those negotiations could not be concluded and an appropriate restructuring consummated on an out-of-court basis” in time to avert a cascade of defaults that would have squeezed Breitburn’s liquidity, James Jackson, chief financial officer of a Breitburn subsidiary, wrote in a court filing.Breitburn’s hedging assets, contracts that cushion the company’s cash holdings against price volatility, will be a central factor in restructuring talks, according to the court papers. The company estimates proceeds of its hedging agreements could be up to $500 million. Outside bankruptcy, hedges  are “a significant source of liquidity.”In bankruptcy, however, a dispute is brewing with Breitburn’s senior lenders, many of whom are also counterparties to the hedge agreements. The company hopes negotiations will avoid litigation over the question of whether it is entitled to use the hedging proceeds, according to court papers. Meanwhile, Breitburn has come to terms with senior lenders on financing arrangements that will support normal operations in bankruptcy.The Los Angeles company joined a crowd of oil-and-gas firms in bankruptcy, including Linn Energy LLC, which also attracted investors with partnership tax benefits. In April, Breitburn suspended distributions to preferred investors and skipped bond interest payments.Distributions to common shareholders were cut, then suspended last year, as Breitburn took steps to get its finances in line with plunging oil prices.Citing the “prolonged decline in commodity prices,” Mr. Washburn said Breitburn’s existing debt is unsustainable. In papers filed in the U.S. Bankruptcy Court in New York, Breitburn reported assets of $4.7 billion and debts of $3.4 billion as of March 31.

Source: Breitburn Energy Partners Files for Chapter 11 Bankruptcy – WSJ

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