Petroquest Defaults on Debt; Stock Plunges

I am sure investors will buy the dip tomorrow.

The co announced that, although it believes that it has current liquidity sufficient to make the approximately $6.8 million semi-annual interest payment due on September 1, 2016 with respect to its outstanding 10% Senior Notes due 2017, it has elected not to do so at this time, pending the outcome of its Exchange Offers and Consent Solicitation described below. Non-payment of this interest would become an event of default under the indenture governing the 2017 Notes if the payment is not made within 30 days.

As of August 31, 2016, the Company has approximately $280.3 million of outstanding senior indebtedness consisting solely of the Old Notes with no amounts outstanding under its senior secured bank credit facility. The Company is continuing to pay suppliers and trade creditors and fund current operations on an ongoing basis.

Upon an event of default under the indenture governing the 2017 Notes, the trustee or holders of not less than 25% in aggregate principal amount of the 2017 Notes then outstanding may declare the principal amount of the 2017 Notes plus accrued and unpaid interest to be immediately due and payable. An acceleration under the 2017 Notes would also result in a cross default under the 2021 Notes. The Company has entered into a forbearance agreement with the lender under the Company’s senior secured bank credit facility with respect to certain cross defaults resulting from the election not to make the semi-annual interest payment with respect to the 2017 Notes. The forbearance will terminate upon earlier to occur of October 1, 2016 or the occurrence of any specified forbearance default, which includes, among other things, the failure to pay interest with respect to the 2017 Notes upon the expiration of the 30 day grace period applicable to such payment of interest.

Investors had no idea this was coming. The stock was up 54% over the past two weeks and was the preferred trading vehicle for degenerates everyone, up until the point when the companies reality caught up with its fictional narrative.