RE:RE:Spartan vs Westbrick…Again
Yes, the price SDE paid for BXE’s assets was very low. Less than the amount offered by Westbrick (actually its parent, KKR).
Here’s what happened, based on my slightly fuzzy recollection of the documents we read from over a year ago (E&OE). If any of the below is incorrect, I am happy to be corrected:
PwC was appointed the monitor to oversee a Sale and Investment Solicitation Plan (“SSIP”) for BXE and its assets.
At the end of this extensive process, SDE was the only entity to submit an offer, the amount of which was less than the amount of secured debt owing to creditors.
Subsequent to the SSIP terminating, KKR’s credit arm, which was a secured lender to BXE as part of a “loan to own” type of strategy, submitted a credit bid for the assets in the amount of the secured loans outstanding. Somebody cried foul as the SSIP deadline had passed, and KKR argued under law as a secured creditor they were allowed to bid post deadline.
It was pointed out KKR can’t take title to the assets since they aren’t licensed to operate oil and gas properties. KKR counters their partially owned subsidiary Westbrick can take title, and PwC says no, Westbrick was contacted numerous times during the SSIP and expressed no interest so are excluded from participating in any way at this point.
Further muddying the waters, somebody alleges SDE was in possession of material non public information which assisted them in their bid and should therefore be disqualified.
At the end of it all, the judge rules that SDE was probably in possession of material non public info, but it was essentially nothing that anybody else couldn’t figure out, namely that KKR was a competing bidder and the bid amount was the balance owing of secured debt, typical in a credit bid. Judge also rules there is no point in having deadlines if anybody can show up after the deadline to submit an offer, so Westbrick is out.
Further, the judge canvassed both the monitor and creditors, and concluded everybody was happy to take SDE’s lower bid amount right now rather than gamble on a higher recovery in the future.
It is important to remember while all of this was going on, oil prices were collapsing, Covid was seriously disrupting business and legal proceedings and the future was particularly uncertain. Without those influences, maybe the outcome would have been different.
In any event, a classic example of “buy when there’s blood in the streets, even if the blood is your own”. Hence, the fantastic price.
Yes, we’ve wondered about CVE’s assets,particularly those surrounding SDE’s properties. Some of that would be a nice fit.
Also wondered about Hammerhead. Their assets would nicely fill the gap between the Inception and Simonette assets. It’s a big acquisition, but the ultimate parent Riverstone has Hammerhead unoffically for sale, is known to take back paper in asset sales (CDEV, TALO, PIPE) and SDE has already done deals with Riverstone indirectly via the CNOR acquisitions.
Food for thought.
Rick?