Hi-Crush Files Chapter 11

Hi-Crush has filed for Chapter 11 bankruptcy protection. The company reported a net loss for the first quarter of 2020 of $146.9 million, including $145.7 million of non-cash asset impairments associated with the write-down of certain production and terminal facilities. This resulted in basic and diluted loss of $1.46 per share, compared to net loss of $21.4 million and basic and diluted loss of $0.21 per share, including $11.1 million of non-cash asset impairments, for the fourth quarter of 2019.

According to the Houston Business Journal, Hi-Crush has been working to negotiate with holders of its 9.50% senior unsecured notes due 2026 and the lenders for its senior secured revolving credit facility (ABL credit facility) for a prearranged bankruptcy filing. However, the company might enter bankruptcy court without such an agreement.

“Regardless of whether the terms and conditions of a prearranged filing can be agreed upon with the debt holders, the company expects to file for protection from its creditors under the United States Bankruptcy Code,” a company release stated.

Hi-Crush was in default under the ABL credit facility as of June 22. The default was triggered because the company’s borrowing base decreased below a level specified in the ABL credit facility, per the release. However, Hi-Crush entered into a forbearance agreement with the ABL credit facility lenders to stave off the consequences of default until July 5. Hi-Crush had to make a $12 million deposit in a cash collateral account as a condition of the forbearance agreement.

As of June 22, Hi-Crush had $34.6 million in cash. The company had borrowed $25 million under its ABL credit facility in March, but had repaid all borrowings under that facility during the second quarter.

Hi-Crush cut its workforce by about 60% since mid-March and reduced its 2020 capital expenditure expectations by nearly 40% compared to its initial guidance. The company started 2020 with 747 employees, and executives expected total 2020 capital expenditures to range between $45 million and $60 million as of February, prior to the global pandemic and oil price war.

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