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Debt-saddled Energy XXI files for Chapter 11 bankruptcy

TheHouston-based Energy XXI Ltd. filed for Chapter 11 bankruptcy protection, thelatest victim of the extended oil and gas commodity price collapse.

TheApril 14 filing, in federal bankruptcy court in the Southern District of Texas,was not unexpected. The company in February reported a $1.31 billion loss forthe fiscal second quarter, and it had suspended dividend payments on itspreferred shares. Data from S&P Capital IQ indicated that the company hadliabilities of more than $4 billion at the end of calendar 2015, including $3.6billion in long-term debt.

Inits bankruptcy filing, Energy XXI said it has assets of between $1 billion and$10 billion and debts that fell into the same category.

Shortlyafter the bankruptcy filing became public, Energy XXI announced that it hadentered into a restructuring support agreement, or RSA, with holders of morethan 63% of its secured second-lien 11% notes.

"Throughthe Chapter 11 restructuring, Energy XXI will eliminate more than $2.8 billionin debt from its balance sheet, substantially deleverage its capital structureand position the company for long-term success," the company said. "TheRSA eliminates substantially all of the company's prepetition fundedindebtedness other than its first lien reserve based loan facility, resultingin a significantly deleveraged balance sheet upon the company's emergence fromthe Chapter 11 bankruptcy process."

Aspart of the RSA, John Schiller will continue to serve as CEO and a member ofthe board.

"Thecompany is also continuing ongoing negotiations with a steering committee oflenders under the company's first lien reserve based loan facility that is notparty to the RSA at this time," Energy XXI said.

Thecompany said it expects to continue normal operations through the bankruptcyprocess.

"Today'sannouncement reflects the next step in our efforts to respond proactively tothe challenging market environment. Over the last several months, we haveworked to actively manage our balance sheet, and after thoroughly evaluatingour options with the help of our outside advisors, we determined that enteringthese agreements and implementing them through a court-supervised process isthe best course of action for Energy XXI and all our stakeholders,"Schiller said. "We are confident that we are taking the right steps toprovide Energy XXI a solid foundation for a successful future."

EnergyXXI said it believes that the $180 million it had on hand at March 31 willprovide sufficient liquidity to continue operations.

PJT Partners LP is serving as Energy XXI's financialadviser, with Opportune LLP as restructuring adviser and Vinson & ElkinsLLP as legal adviser.