Apollo-Backed EP Energy Files for Bankruptcy After Struggling Under Buyout Debt
The Apollo-led investment group that acquired the oil company in 2012 recouped a portion of their cash soon after the buyout.
More than seven years after its $7.2 billion leveraged buyout by Apollo Global Management, EP Energy Corp. has filed for bankruptcy protection.
The Houston-based oil and gas developer said in a regulatory filing Friday that on October 3 it sought a Chapter 11 reorganization in the U.S. Bankruptcy Court for the Southern District of Texas. Apollo led an investment group that purchased EP Energy in May 2012 — before oil prices began to plummet in mid-2014 — and quickly recouped a portion of their cash.
Members of the Apollo-led group took more than a half billion dollars in distributions, with regulatory filings indicating they were largely funded with debt. Within two years of the buyout, the Apollo-led group also received around $200 million in fees, filings show. Under their ownership, the oil producer sharply cut its full-time U.S. workforce over the several years leading up to its bankruptcy.
“This process will allow us to pursue a significant reduction of our debt in order to enhance EP Energy’s long-term competitive position,” Russell Parker, EP Energy’s president and chief executive officer, said in an October 3 company statement. “The company has reached an agreement in principle on a comprehensive restructuring with a number of its key creditors, but made the decision that the protection of chapter 11 would help the parties get the deal over the finish line.”
[II Deep Dive: When Buyout Firms Step in, Watch Out]
Apollo, Riverstone Holdings, Access Industries, and Korea National Oil Corp. purchased EP Energy from El Paso Corp., financing the deal with $4.25 billion of debt and $3.3 billion of equity, a regulatory filing shows.
The group extracted a $200 million leveraged dividend in August 2013, before taking the oil and gas developer public in early 2014. EP Energy used part of the proceeds from the initial public offering to repay $350 million of pay-in-kind notes it had issued in December 2012 to fund a distribution to its owners, filings show.
EP Energy shook up its leadership in 2017, naming Parker president and CEO. Parker had previously served as CEO of Phoenix Natural Resources.
Apollo, meanwhile, has recently made changes to the leadership of its private equity and natural resources groups. The firm announced September 26 that Matt Nord and David Sambur were promoted to co-lead private equity, and that Greg Beard, its global head of natural resources, would be transitioning to a role as a senior advisor to Apollo through mid-2020. Beard, who helped build Apollo’s natural resources business over the past ten years, is a member of EP Energy’s board.
A spokesperson for Apollo didn’t immediately provide comment on EP Energy’s bankruptcy.