Bennu Oil & Gas: Files For Chapter 7 Liquidation

F rom DJ News: December 1 2016:

Bennu Oil & Gas LLC, which was formed to purchase ATP Oil & Gas Corp.’s troubled drilling assets following the Deepwater Horizon oil spill, has filed for chapter 7 bankruptcy protection, indicating its intention to liquidate.

Bennu, whose privately held operations were concentrated off the coast of Louisiana, sought chapter 7 on Wednesday at the U.S. Bankruptcy Court in Houston. The company no longer operates, court papers show.

In chapter 7, a trustee will be appointed to marshal and then sell off the company’s remaining assets, with proceeds eventually distributed to creditors. In court papers, Bennu valued its total assets at $10 million to $50 million and total liabilities at $500 million to $1 billion.

In August, Texas’ Beal Bank USA successfully forced an affiliate of Bennu Oil & Gas, Bennu Titan LLC, into an involuntary chapter 11 bankruptcy and later won a judge’s order appointing an independent trustee to take control of the affiliate. Bennu Titan owns an offshore multicolumn drilling and production platform in the Gulf of Mexico that was being used by Bennu Oil & Gas. The platform has since been shut down.

“Everything has been shut down in an environmentally responsible way,” Richard Levy, who served as Bennu Oil & Gas’s lead restructuring attorney, said Thursday.

Beal Bank, the Dallas-based bank founded by Texas billionaire Andrew Beal, says it is owed $180.4 million stemming from a $350 million term loan it made to Bennu Titan in 2010. Court papers show a lack of funding from the parent crippled Bennu Titan’s ability to service its debt and ultimately sealed its fate.

According to Mr. Levy, nearly a year of out-of-court negotiations failed to produce an agreement that could have allowed the platform to continue operating.

“In the end, we concluded that reaching an agreement with all the relevant stakeholders was impossible,” he said.

ATP Oil & Gas also was liquidated in bankruptcy after its operations were disrupted following the drilling moratorium imposed after the Deepwater Horizon oil-spill disaster in 2010. Bennu Titan was formerly named ATP Titan, court papers show.

According to the Bennu Oil & Gas’s website, which has since been taken down, a bennu is a heron-like bird that symbolized new life in ancient Egypt, much like the phoenix did in ancient Greece. The company says the bird represents its strategy of trying to create new value in the Gulf of Mexico in the aftermath of the spill.

“Senior management did everything they could,” Mr. Levy said. “I wish it had a happier ending.”

For the 3 BDCs with exposure in any form to Bennu Oil & Gas, the outlook must be grim.

According to Advantage Data , total exposure is $59mn at cost and $22mn at fair market value.

PennantPark Investment (PNNT) and Sierra Income Corporation (Sierra) have $31mn at cost in second lien debt to Bennu Oil & Gas.

We project-given that the value of first lien claims are greatly in excess of the Company’s assets -the entire amount will be written off in Chapter 7.

The second lien debt was already on non-accrual since the IQ of 2016, so the impact on investment income will be nil, but the Realized Loss might be in excess of Unrealized Losses already booked.

Most impacted will be PNNT with $8.6mn of fair value still on the books.

OHA Investment (OHAI) has a royalty interest in oil revenues being pumped from a Bennu platform.

However, the Company is no longer operating. As a result, we expect a full write-off of the $27.8mn exposure, which was still carried at $12.3mn at September 30 2016.

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