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Memorial Production readies restructuring plan for $1.3B of debt reduction

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Memorial Production readies restructuring plan for $1.3B of debt reduction

Memorial Production Partners reached agreements with senior noteholders giving the creditors nearly all of the partnership's common equity as part of a restructuring plan to get Memorial out from under about $1.3 billion of debt.

The plan support agreement with holders of 50.2% of Memorial's 7.625% senior notes due 2021 and 6.875% senior notes due 2022 would eliminate over $1.1 billion of principal in outstanding notes, according to a Dec. 23 news release. In exchange, the holders would receive 98% of the common equity interests of the restructured entity and may choose to receive an additional cash payment of up to $24.6 million.

The partnership's limited partners would be entitled to 2% of the restructured entity's equity and five-year warrants to acquire an additional 8% of the total outstanding equity in the entity, priced according to the outstanding principal plus interest on the notes.

The agreement would also be structured in a way that mitigates the negative tax impact of cancellation of debt income to the limited partners, according to the release. Memorial Production expects to emerge as a corporation after the proposed restructuring.

The oil and gas E&P partnership also came to an agreement in principle with its revolving credit facility agent, subject to approval of the lenders, according to the news release.

To prepare for the restructuring, Memorial monetized some of its hedge positions, the net proceeds of which were used to reduce outstanding borrowings under its revolving credit facility by about $190 million. Memorial expects to file for Chapter 11 bankruptcy protection in the coming weeks.

Perella Weinberg Partners LP is serving as financial adviser to Memorial, and Weil Gotshal & Manges LLP is serving as legal counsel. Miller Buckfire & Co. LLC is financial adviser and Davis Polk & Wardwell LLP is legal counsel for the noteholders.