Whiting Petroleum: Restructuring Negotiated

Bankrupt Whiting Petroleum Corporation has negotiated a standard debt for equity swap. As spelled out in a press release, the company will be exchanging over $2.3 billion in debt for a 97% equity interest in the oil and gas explorer. Existing equity investors in the public company get to keep the remaining 3% and the opportunity to subscribe for more.

There is only one BDC with exposure, specialist non-traded BDC FS Energy & Power. The BDC has invested $5.2mn in the 2021 subordinated bond that is being swapped out. At 12/31/2019 the value of the position was discounted by only (2%). With this resolution, we expect FS Energy will take a realized loss of up to (90%), based on what the 2021 debt is trading for in the bond market. Lost is ($0.310mn) of investment income, but there may be some remote hope that whatever speck of a restructured Whiting Petroleum the BDC holds onto will be worth something one of these days. The company remains technically non Performing, until the bankruptcy court blesses the restructuring plan. However, given the certainty of that outcome, we’ve already upgraded the investment to performing status.

However, because the investment in Whiting is now non material by our standards, we’ll be discontinuing coverage once we see the final FS Energy & Power treatment in the IIQ 2020 results.