Source: Dow Jones Corporate Filings
 
A bankruptcy judge Tuesday approved Stallion Oilfield Services Ltd.'s Chapter 11 plan, paving the way for the Houston oil-drilling-service company's exit from bankruptcy protection under the control of its bondholders and unsecured lenders, according to the company's bankruptcy lawyer.
 
Judge Brendan Linehan Shannon of the U.S. Bankruptcy Court in Wilmington, Del., signed off on Stallion's plan, which slashes some $540 million in debt off the company's books, at a confirmation hearing Tuesday morning, according to Stallion's bankruptcy attorney, Jonathan Henes.
 
"This is a great day for Stallion Oil Services," said Henes, a partner at Kirkland & Ellis. "The plan significantly deleverages its capital structure and, as a result, Stallion, with its strong management team, is poised for success."
 
Creditors unanimously approved the plan, Henes said. Stallion had signed up most of its leading creditors in support of the plan before filing for Chapter 11 protection in October, a key element in the company's quick exit from bankruptcy protection, Stallion's financial adviser said.
 
"This case demonstrates how identifying issues well in advance and creating a constructive negotiating atmosphere leads to a quick bankruptcy process," said Sam Greene, a managing director at investment bank Miller Buckfire, Stallion's financial adviser.
 
Stallion, which provides construction and logistics services for drilling rig operations, sought Chapter 11 protection after an "unprecedented decline" in the number of rigs in action, as oil and gas suppliers slowed drilling activities.
 
The company missed its chance to raise $400 million in the public stock markets when rising oil prices drove a drilling boom, and bargained for a revamped balance sheet instead.
 
The restructured Stallion will have an enterprise value of between $533 million and $619 million, according to its Chapter 11 plan.
 
Under its plan, senior secured lenders owed $246 million will share $25 million in cash and $221 million in new senior secured debt under the plan, unless Stallion lines up new financing sufficient to pay them off in full in cash.
 
Bondholders and unsecured lenders are swapping some $543 million worth of debt for 98% of the equity in the new company while general unsecured creditors, such as trade vendors, are being paid in full, in cash, under the plan.
 
Founded in 2002, Stallion grew rapidly throughout the past decade, posting 2008 service revenue of more than $607 million. It employs about 1,700 people at 65 field offices in the U.S., according to court papers.
 
But before the company was able to launch its initial public offering of stock, the decline in the oil and natural gas industry caught up to Stallion, instead forcing layoffs and restructuring talks.
 
The company's new owners are betting Stallion's fortunes will improve along with the economy. By taking it over in Chapter 11, they will be positioned to profit from a renewed appetite for energy companies like Stallion.
 
Industry data indicates that there's been a halt in the steep decline in the number of drilling rigs in Stallion's service area, suggesting the situation has begun to stabilize, court documents said.