Frac-sand supplier, brought down by coronavirus pandemic and slumping oil and gas prices, will use bankruptcy to jettison unprofitable railcar leases
PHOTO: JESSICA LUTZ/REUTERS
By Becky Yerak
June 10, 2020 6:25 pm ET
Vista Proppants & Logistics LLC, a frac-sand supplier backed by investment firms First Reserve Corp. and Ares Capital Corp., has filed for bankruptcy, saying it is facing unprecedented problems due to the coronavirus pandemic.
Vista said the chapter 11 bankruptcy, from which it expects to emerge in about four months, will help it reduce its debt and free itself from dozens of railcar leases that it says it no longer needs.
Proppants are small granular particles, often sand, that are part of the fluid mixture injected into a well to hold open the fractures created during the hydraulic fracturing, or fracking, process, according to the U.S. Geological Survey.
The frac-sand sector had already been troubled by a slump in natural-gas and oil prices. Suppliers that filed for bankruptcy last year, also aiming to shed railcar leases, include Shale Support Global Holdings LLC and Emerge Energy Services LP.
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The Covid-19 pandemic compounded Vista’s problems, forcing it to deal with such logistical challenges as travel restrictions, social-distancing guidelines, business restrictions and local “shelter in place” orders, it said.
Revenue and profits have been insufficient to meet financial obligations, including servicing its debt, and support its capital spending needs, Vista said.
The Fort Worth, Texas, company said it has lined up $11 million in financing from a supportive senior lender group that includes Ares, MSD Partners LP and Angelo Gordon & Co. The financing will help cover costs and limited business operations during the bankruptcy, including paying employees and vendors, Vista said. The lenders will have the right to offer a credit bid for the company, or buy it by forgiving some of its loans.
Vista said it would continue with limited day-to-day operations until the oil-and-gas industry rebounds. Its operations include mining, processing and transporting—with a fleet of 100 vehicles—industrial sand, mostly for oil and gas wells in Texas and Oklahoma. It has 56 employees after having furloughed most of its workforce.
The company’s biggest debt is a roughly $370 million secured term loan. Other debts include almost $16 million owed under a secured asset-based lending facility provided by PlainsCapital Bank.
Energy-focused private-equity firm First Reserve holds a roughly 31% stake in Vista, according to a filing in U.S. Bankruptcy Court in Fort Worth.
Ares Capital Corp., a business-development company managed by private-equity firm Ares Capital Management LLC, owns a small equity stake, around 2%, the filing said.
Ares Capital Corp. also is a senior lender to Vista. The frac-sand supplier has a loan from Ares with a face value of roughly $150 million and a fair value of $71 million, according to a Securities and Exchange Commission filing. Ares has already written down its $9.7 million common equity investment in Vista to zero, the SEC filing shows.
Vista and six related companies have hired law firm Haynes & Boone LLP. The case, which has been consolidated under number 20-42002, has been assigned to Judge Edward Morris.