C&J Energy Services Inc. (C&J) is a large public fracking service provider specializing in well construction, completions and services. C&J experienced a period of rapid growth over the past 10-12 years as horizontal unconventional drilling of the shale formations became more prevalent. However, their 2015 acquisition of a competitor’s completion services business left the company with a significant amount of debt that coincided with a severe drop in oil prices – leading C&J to file for Chapter 11 bankruptcy in mid-2016.
Because of Carl Marks Advisors’ expertise working with legal counsel and creditors to develop favorable, outcome-focused financial solutions for companies going through in-court restructurings, as well as their deep knowledge of the oilfield industry and relevant experience working on transactions involving fracking service companies, Carl Marks Advisors was engaged by C&J to represent the unsecured creditors committee. The objective was to recover maximum value for them in the restructuring.
At the time Carl Marks Advisors was engaged, C&J had $1.5 billion of secured debt and the company valuation was suggested to be $750 million by the debtor and its lenders. The original restructuring support agreement proposed by the senior lenders and debtors called for the unsecured creditors to receive nothing.
Carl Marks Advisors found that management’s plan for C&J’s financial future and the basis of the company’s valuation was based on outdated and skewed projections. In depth industry knowledge and credibility enabled Carl Marks Advisors to challenge the company valuation based on early indications of recovery in the industry and more realistic assumptions around pricing and utilization that were supported by public peers and research analysts.
Carl Marks Advisors evaluated all bids submitted and after consultation with CFE, the Sponsor and the Bridge Lenders determined that a joint bid from Macquarie Group (“Macquarie”) and Techint Engineering and Construction (“Techint”) (together the “Consortium”) would provide the greatest value and best path for Norte III to reach commercial operation in a timely manner. As part of the transaction, Techint took over as the engineering, procurement, and construction contractor but will continue to work with the Sponsor to finalize construction of the Project. In connection with the acquisition of the Project, the Consortium was able to secure new financing from ten different financial institutions. The Bridge Lenders were able to restructure their existing loan while continue to support Norte III by participating in the new financing.