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Warning Of Bankruptcy, Goodrich Petroleum Skips Interest Payments, Eyes Debt Swap

Goodrich Petroleum today announced that it will not make its March 15 and April 1 coupon payments and again warned it may seek bankruptcy protection if its distressed exchange offers are not successful.

As reported, Goodrich last week extended the deadline on its offer to exchange its 8.875% notes due 2019 and four series of convertible notes into common shares to March 16 after participation by noteholders remained practically unchanged.

The company today said is exercising the grace period on its $5.2 million interest payment due on the 8.875% notes due 2019, $4 million interest payment due on its 8% second-lien senior secured notes due 2018 and $3 million interest payment due on its 8.875% second-lien senior secured notes due 2018. These interest payments are due March 15, 2016.

Goodrich has also elected to exercise its right to a grace period with respect to a $0.2 million interest payment due on its 5% convertible notes due 2029, a $2.4 million interest payment due on its 5% convertible notes due 2032 and a $0.2 million interest payment due on its 5% convertible exchange notes due 2032. These interest payments are due on April 1, 2016.

The company will hold a conference call on March 9, 2016, at 10 a.m. CST to discuss the proxy materials filed Feb. 12 and exchange offers.

As reported, Goodrich is the latest in a growing number of struggling E&P credits attempting financial engineering through distressed bond exchanges. Rather than an uptier swap, however, Goodrich is offering to swap its 8.875% notes due 2019 and four series of convertible notes for common shares, according to a company statement.

As at the March 2 deadline, approximately 60% of existing unsecured notes eligible for exchange have been tendered, from 59.7% as of Feb. 24.

Goodrich is also offering to exchange its preferred shares into common shares and both its 8% second-lien notes due 2018 and 8.875% second-lien exchange notes due 2018 for similarly structured bonds, but with PIK toggle payment or payment-deferral options. The transaction follows a previous debt swap completed in September that produced the 8.875% second-lien notes via an uptier swap from a portion of its 8.875% unsecured notes.

As at March 2 deadline, approximately 36% of existing preferred stock eligible for exchange has been tendered, up slightly from 34.7% as of Feb. 24.

As reported, Goodrich warned in its exchange offer that its ability to make the interest payments "is at significant risk as a result of the sustained continuation of the current commodity price environment."

"If the company is unable to complete the recapitalization plan, including the exchange offers, and address its near-term liquidity needs, it may need to seek relief under the U.S. Bankruptcy Code," the company warned in the exchange offer.

Lazard, as restructuring advisor, and Vinson & Elkins L.L.P., as restructuring counsel, are working on a plan of reorganization that the company expects to implement if the exchange offers are unsuccessful, the company said.

Details of the multi-tiered transaction, with a pro forma capital structure after the exchange and liquidation preference tiers, can be found here. Georgeson is the information agent and American Stock Transfer & Trust Company is the exchange agent. —Rachelle Kakouris

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