Gulfport Energy (GPOR) Spiked 19.85% on Tuesday; what waits ahead after Bankruptcy filing?

Gulfport receives “first day” motions approval and the company is now in a position to borrow$90 Million in Debtor-in-Possession Financing on an interim basis.

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On November 13, 2020, Gulfport Energy Corp. (GPOR) fell up to 100% on filing the bankruptcy. Yesterday, the stock soared as high as 55% after company received a response from the U.S. Bankruptcy Court for the Southern District of Texas.

GPOR traded at the day’s high of $0.19 after a massive drop from $0.23 about a week ago. Gulfport closed the session on Tuesday trading at $0.16 up by 19.85%.

The shares price was driven after the court responded to the company. The oil and gas exploration and production company has obtained the clearance to borrow around $90 million in debtor-in-possession (DIP) financing.

After obtaining the “first day” motions approval, GPOR will continue paying employee wages, royalties, and certain of its suppliers and vendors.

The DIP financing will support business operations that are in progress as part of its restructuring strategy.

In addition, the company is now allowed to enter into new hedging arrangements pursuant to an agreement with certain prepetition lenders.Gulfport is looking forward to using the bankruptcy proceedings to uplift its balance sheet and reduce its cost structure. The cost cut policy will help the company to obtain a more sustainable capital structure.

As per the Chapter 11 reorganization plan, Gulfport will push off the newly reorganized organization enduring heavy leverage in course of exiting the bankruptcy. The company intends to lower its current debt of $2.4 billion by $1.2 billion.

The plan points to a $580 million exit facility for GPOR including $550 million in new unsecured notes and $55 million in preferred stock. For now, the shareholders are not getting any recovery and they are in a position to sell the stock. The high leverage could push Gulfport towards the bankruptcy court again.

As announced on Nov. 14, 2020, Gulfport along with its wholly-owned subsidiaries have entered into a Restructuring Support Agreement with approximately 95% of its revolving credit facility lenders and noteholders of more than two-thirds of its senior unsecured notes. The following agreement is based on the filing of bankruptcy in the court.

Reaction of Investors

In recent 13D filings, it was discovered that a significant number of GPOR’sshareholders have sold their shares just before the bankruptcy filing. Based on the filings, Shah Capital sold around 13.3 million shares. While, Firefly Value Partnerssold more than 19 million shares during the last month.

Moreover, Moody’s Investors Servicehas lowered Gulfport’s probability of default rating to D-PD from Ca-PD. The other rating includes Ca senior unsecured rating and Caa3 Corporate Family Rating (CFR). The overall outlook of Gulfport Energy Corp. (GPOR) is negative.


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