Today, Cypress Environmental Partners, L.P. (NYSE: CELP)
(“Cypress” or the “Company”) announced the next step in its
previously announced plan to pursue a court-supervised
restructuring. On May 8, 2022, Cypress entered into a Restructuring
Support Agreement (the “RSA”) with Argonaut Private Equity
(“Argonaut”), a Tulsa-based private equity firm and the sole senior
secured lender of the Company, pursuant to which Argonaut agreed to
vote in favor of a joint pre-packaged plan of reorganization of the
Company and its subsidiaries (the “Plan”) under Chapter 11 of the
U.S. Bankruptcy Code (“Chapter 11”). The Plan was filed with the
U.S. Bankruptcy Court for the Southern District of Texas (the
“Bankruptcy Court”) on May 8, 2022. The RSA and the Plan
contemplate a debt-to-equity recapitalization transaction, whereby
Argonaut will receive 100% of the new equity interests of the
reorganized company (“Reorganized Company”) in exchange for
extinguishing the obligations to Argonaut remaining under the
Company’s credit agreement (the “Reorganization Transaction”). In
addition, the Plan provides for the payment in full of priority and
trade claims and an equity commitment from Argonaut to provide
working capital to the Reorganized Company upon emergence. Argonaut
will also provide a Debtor-In-Possession loan (the “DIP Facility”)
to Cypress to fund operations, if necessary.
The Reorganization Transaction will provide the Reorganized
Company with a fresh start, deleveraging its balance sheet,
providing a stable platform for the Reorganized Company to grow
post-emergence, and preserving over 350 high-paying jobs for the
Company’s employees. Cypress expects to operate in the ordinary
course of business during these proceedings with minimal
disruption.
Given the amount of Cypress’ outstanding senior secured debt,
which currently totals $58.1 million, Cypress continues to expect
that the Reorganization Transaction will result in its outstanding
common units (“Common Units”) and Series A preferred units
(including accrued and unpaid distributions) having no value. As a
result, Cypress anticipates that the New York Stock Exchange (the
“NYSE”) will announce its intention to delist Cypress’ common units
(the “Common Units”), which are currently listed on the NYSE under
the symbol “CELP.” Upon delisting of the Common Units, the Company
intends to file a Form 15 with the U.S. Securities and Exchange
Commission (the “SEC”) to voluntarily deregister its Common Units
and suspend its reporting obligations under the Securities Exchange
Act of 1934, as amended. Bankruptcy Court approval is required to
engage or retain professional services firms including independent
registered public accounting firms, and consequently, Cypress will
be unable to file its Quarterly Report on Form 10-Q for the three
months ended March 31, 2022 prior to the SEC filing deadline on May
16, 2022.
CEO PERSPECTIVES
“We are proceeding to the next step of our previously announced
restructuring and proud of our employees who never missed a beat
serving our great customers. Cypress will emerge as a strong,
reorganized company with no debt that is focused on serving our
customers and growing its business. Argonaut is a highly respected
Tulsa, Oklahoma-based private equity firm. Our board of directors
is pleased that Argonaut is interested in recapitalizing Cypress
and growing its business, and that Argonaut is committed to our
valuable employees and the Tulsa community. We remain disappointed
that our minority unitholders, insiders, and our management team
will have lost their entire equity investment as a result of this
Plan,” said Peter C. Boylan III, Chairman, President, and CEO.
“We are pleased that we have been able to help recapitalize
Cypress to position it for growth. Pete, the leadership team, and
Cypress’ valuable employees have built a great company, and they
worked tirelessly battling through numerous challenging issues over
the last several years. As the new senior secured lender, we look
forward to emerging from this reorganization as the new owner with
a platform for growth. We remain committed to serving Cypress’
customers with excellent service, working with the talented
management and employees, and diversifying the company into
exciting new inspection opportunities” said Steve Mitchell, CEO and
Managing Director of Argonaut Private Equity.
Forward-Looking Statements
This press release contains “forward-looking statements” related
to future events. Forward-looking statements contain words such as
“expect,” “anticipate,” “could,” “should,” “intend,” “plan,”
“believe,” “seek,” “see,” “may,” “will,” “would,” or “target.”
Forward-looking statements are based on management’s current
expectations, beliefs, assumptions and estimates and may include,
for example, statements regarding the company’s proceedings under
Chapter 11 (the “Chapter 11 Cases”), the Company’s ability to
complete the Reorganization Transaction and its ability to continue
operating in the ordinary course while the Chapter 11 Cases are
pending. These statements are subject to significant risks,
uncertainties, and assumptions that are difficult to predict and
could cause actual results to differ materially and adversely from
those expressed or implied in the forward-looking statements,
including risks and uncertainties regarding the Company’s ability
to successfully complete a restructuring under Chapter 11,
including: consummation of the Reorganization Transaction or an
alternative restructuring; potential adverse effects of the Chapter
11 Cases on the Company’s liquidity and results of operations; the
Company’s ability to obtain timely approval by the Bankruptcy Court
with respect to the motions filed in the Chapter 11 Cases;
objections to the recapitalization process or other pleadings filed
that could protract the Chapter 11 Cases; employee attrition and
the Company’s ability to retain senior management and other key
personnel due to the distractions and uncertainties imposed in part
by the Chapter 11 Cases; the Company’s ability to comply with
financing arrangements, including the DIP Facility; the Company’s
ability to maintain relationships with its tenants, suppliers,
customers, employees, sponsors, and other third parties and
regulatory authorities as a result of the Chapter 11 Cases; the
effects of the Chapter 11 Cases on the Company and on the interests
of various constituents, including holders of the Company’s common
stock and other equity securities; the Bankruptcy Court’s rulings
in the Chapter 11 Cases, including the approvals of the terms and
conditions of the Reorganization Transaction and the outcome of the
Chapter 11 Cases generally; the length of time that the Company
will operate under Chapter 11 protection and the continued
availability of operating capital during the pendency of the
Chapter 11 Cases; risks associated with third party motions in the
Chapter 11 Cases, which may interfere with the Company’s ability to
consummate the Reorganization Transaction or an alternative
restructuring; increased administrative and legal costs related to
the Chapter 11 process; potential delays in the Chapter 11 process
due to the effects of the COVID-19 virus; and other litigation and
inherent risks involved in a bankruptcy process. Forward-looking
statements are also subject to the risk factors and cautionary
language described from time to time in the reports the Company
files with the U.S. Securities and Exchange Commission, including
those in the Company’s most recent Annual Report on Form 10-K and
any updates thereto in the Company’s Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K. These risks and uncertainties may
cause actual future results to be materially different than those
expressed in such forward-looking statements. The Company has no
obligation to update or revise these forward-looking statements and
does not undertake to do so.
The Company cautions that trading in the Company’s securities
during the pendency of the Chapter 11 Cases is highly speculative
and poses substantial risks. Trading prices for the Company’s
securities may bear little or no relationship to the actual
recovery, if any, by holders of the Company’s securities in the
Chapter 11 Cases. Holders of shares of the Company’s common stock
and other equity securities could experience a complete loss on
their investment, depending on the outcome of the Chapter 11
Cases.
ABOUT CYPRESS ENVIRONMENTAL PARTNERS, L.P.
Cypress Environmental Partners, L.P. is a master limited
partnership that provides essential environmental services to the
utility and energy industries, including pipeline &
infrastructure inspection, NDE testing, and in-line integrity
support services throughout the United States. Cypress also
provides environmental services to upstream and midstream energy
companies and their vendors in North Dakota, including water
treatment, hydrocarbon recovery, and disposal into EPA Class II
injection wells to protect our groundwater. Cypress works closely
with its customers to help them protect people, property, and the
environment, and to assist their compliance with increasingly
complex and strict rules and regulations. Cypress is headquartered
in Tulsa, Oklahoma.
About Argonaut Private Equity
Founded in 2002, Argonaut Private Equity is a Tulsa-based
private equity firm with more than $2 billion of capital deployed
in direct investments across the manufacturing and industrials
sectors. Argonaut partners with companies to develop a strategy for
accelerating growth and enhancing operations. In January, Argonaut
held the first close for Argonaut Private Equity Fund V, continuing
its history of generating attractive investment returns through a
disciplined approach and aligning interests with those of its
investors and business partners.
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version on businesswire.com: https://www.businesswire.com/news/home/20220506005525/en/
Investors: Cypress Environmental Partners, L.P. - Jeff Herbers –
Vice President & Chief Financial Officer
jeff.herbers@cypressenvironmental.biz or 918-947-5730
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