November 7, 2018 – PetroQuest Energy Firm requested Court authority to (i) assume the $50,000,000 Exit Facility Commitment Letter, dated as of November 6, 2018 and (ii) pay related fees and expenses (the “Commitment Expenses”) [Docket No.17]. The Debtors' motion notes, “On November 6, 2018, as contemplated by the Restructuring Support Agreement, the Debtors entered into the Commitment Letter with the Commitment Parties (as defined in the Commitment Letter). In the Commitment Letter, the Commitment Parties have agreed to backstop the entire $50,000,000 of the Exit Facility (the ‘Commitments’), subject to implementation of a subscription process as part of the Debtors’ chapter 11 plan of reorganization. On the Effective Date, the Debtors will use the proceeds of the Exit Facility to repay their obligations to the Prepetition Term Loan Lenders.
In consideration for the agreement to provide the Commitments, the Debtors have agreed to pay the Commitment Parties a put option premium equal to 3.00% of the principal amount of the Exit Facility in the form of New Equity, which New Equity shall be valued in accordance with the plan (the ‘Put Option Premium’). In light of the amount of the Exit Facility and the percentage of the Put Option Premium of the amount thereof, the Debtors believe that the Put Option Premium is within the range of similar premiums or commitment fees, if not lower than such range….The Debtors’ assumption of the Commitment Letter is an exercise of their sound business judgment. In consultation with their advisors and other interested parties, the Debtors have concluded that the Exit Facility is necessary for the Debtors to exit chapter 11. The Exit Facility is one of the key elements to the viability of the Plan. If the Debtors do not receive the funds derived from the Exit Facility, it will be difficult if not impossible to consummate the Plan. In that case, the Restructuring Support Agreement would no longer be binding, which, at a minimum, will make completing the Debtors’ reorganization much more difficult and costly, and at worst, could make the Debtors’ reorganization impossible without a viable and accelerated alternative. The funding of the Exit Facility can only be assured by obtaining the commitment of the Commitment Parties to backstop the Exit Facility through assumption of the Commitment Letter.”