Legacy Reserves (LGCY) Officially Files Bankruptcy

Legacy Reserves LGCY Stock News

Beleaguered oil and gas producer, Legacy Reserves Inc (NASDAQ: LGCY) is feeling some pain in the market this morning. The company has been reaching forbearance agreement after forbearance agreement and late last night, announced the official bankruptcy filing that is expected to protect it through its restructuring.

Shares are down more than 14% as we near mid-day today as it works its way up from a low of $0.92 per share thus far. Here’s what’s going on:

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LGCY Stock Tumbles As Company Oficially Files Bankruptcy

Late Tuesday, June 18, 2019, Legacy Reserves issued a press release announcing that it had officially begun the chapter 11 bankruptcy process. The voluntary cases were filed in the United States Bankruptcy Court for the Southern District of Texas.

The bankruptcy filing follows an agreement reached between LGCY and various lenders. These are the same lenders that took part in multiple forbearance agreements leading up to the bankruptcy.

As stated in the agreement, the company plans on operating business as usual through the course of the chapter 11 process. As part of the bankruptcy, Legacy Reserves asked the Court for the ability to continue paying employee wages and honoring existing employee benefit programs.

Moreover, the company has asked the court to continue its ability to pay vendor and other operating expenses, joint interest billings for non-operated properties, and royalties to mineral interest owners under terms of applicable agreements.

With court approval, LGCY hopes to have access to $350 million in debtor-in-posession financing. These funds should hold the company up through the process, giving it the ability to continue paying the parties mentioned above and operating as usual.

Interestingly, among a wide range of other actions to be taken, the Restructuring Agreement says that unsecured notes will be extinguished with substantially impaired class treatment and all common stock of LGCY will be etinguished with no associated recovery. This plan is epected to be filed within 45 days.

Why Investors Are Sending The Stock Tumbling

At the end of the day, now is the time to back away and run. The company said in its press release that its common stock will be extinguished with no recovery for equity holders. Not to mention, LGCY will no longer be in compliance with Nadaq listing requirements.

Unfortunately this all adds up to potentially significant losses. Think about it. Once the stock is delisted from the Nasdaq, equity holders will be holding paper that can only be sold on the OTC market. At the same time, the company will be going through or just finished bankruptcy, making the paper worthless. So, savvy investors are cutting their losses and abandoning ship.

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The Bottom Line

The bottom line here is that while there may be a dim light at the end of the tunnel, it’s not worth making the journey in the beginnning to get to it. Be very careful if you plan on investing here as the weakness is likely to continue through delisting, when the stock becomes nearly worthless.

What Do You Think?

What are your thoughts on the LGCY bankruptcy? Join the discussion in the comments below!

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