May 10, 2016 04:41 PM

Former banker/media exec’s role remains unclear amid speculation a private equity firm is set to become the majority owner of the local oilfield services firm.

Amid mounting speculation that a private equity firm has stepped in to purchase Knight Oil Tools’ massive debt at a discount comes confirmation from sources close to the situation that Lafayette businessman Wayne Elmore has stepped into a prominent role at the troubled oilfield services firm.

The former banker/media executive did not return ABiz messages left on his voicemail at the company’s Lafayette office. ABiz’s February phone call to the company about its financial problems was transferred to Jeff Elmore, Wayne’s son who is a local attorney. It’s unclear what role either Elmore is playing at the company, though sources say the Elmore connection is likely tied to their relationship with Kelley Knight Sobiesk, one of the three sibling owners of Knight Oil Tools, along with their mother, Ann Knight.
Wayne Elmore

Wayne Elmore, who has no known experience in the oil services sector, spent most of his career as a top executive of Communications Corporation of America (or Comcorp), which was once a small-market radio and television station group co-owned by Tom Galloway. After emerging from bankruptcy in 2007, Comcorp sold all of its assets a couple of years ago.

Close observers of the Knight saga and others with limited knowledge of the goings-on there believe that Wayne Elmore, whose business practices — especially those related to the local school system's group health plan — have been called into question by this publication, was brought in as a consultant because of his background in banking. He is the former president of Commerce and Energy Bank, which was founded in 1981 and purchased in 1989 by MidSouth Bank after it was taken over by the Federal Deposit Insurance Corporation during the savings and loan crisis of the 1980s.

From a management perspective, the company has been in shambles since late 2014 and underwent another major management shakeup over the past several months, dismissing President and CEO Earl Blackwell and other top officials.

Once a thriving global entity oilfield sources believe may have been worth $1 billion only a few years ago, Knight Oil Tools has been on a steep decline due to internal strife among its family member owners and falling oil prices that left the company buckling under its massive debt. On the family side, former President and CEO Mark Knight (whom Blackwell had replaced in late 2014) stands accused of masterminding a scheme to plant illegal drugs on the vehicle of his brother, Bryan, and conspiring with others to have Bryan arrested so that he could be forced out to the lucrative family business. All have pleaded not guilty in the alleged plot.

Some of the company’s debt problems first came to light in court documents filed in December by Bryan Knight in his federal lawsuit against Mark and his alleged co-conspirators: “Most recently, after it became apparent that new capital would be required to be infused into Knight Oil because of Mark’s lavish spending, mismanagement and theft of corporate assets, Mark Knight refused to allow investors to conduct their due diligence unless [Bryan Knight] dismissed his suit against him.”

A rental and fishing tool company that once fiercely guarded its privacy, Knight has more than 50 domestic and international locations, according to its website.

Jeff Elmore
ABiz has been unable to confirm speculation in some financial circles that Clearlake Capital Group, a California-based private investment firm, has negotiated a deal to buy Knight’s debt from its lenders — debt estimated at upwards of $200 million — and assume a majority ownership position in the company. Sources say Knight began exploring strategic alternatives, including a sale of the company, at some point last year, but was not able to find a buyer largely due to its negative cash flow. The company did manage to unload some assets, a source confirms, but the situation worsened to the point that it contemplated bankruptcy.

Social media, of all places, appeared to confirm the severity of the company's financial situation.

ABiz readers might recall this Dec. 31 Facebook post from Mark Knight’s daughter, which read, in part: My father was targeted, defaced, set-up, and criminalized as a result of this plot. Now, his brother and sister have had control of the company for an entire year and have brought it from a very profitable company, a pillar of the community, and the “largest privately held rental and fishing tool company in the world” to a company on the verge of bankruptcy. Knight Oil Tools no longer employs any of the Knight family and can no longer be considered a “family company.”

Clearlake Capital officials declined comment for this story, as did Wells Fargo, which sources tell ABiz holds a large portion of the debt. A local source with knowledge of Clearlake’s operations says the firm has been in Lafayette, but it’s not clear whether its presence here is tied to Knight or other opportunities that are surely presenting themselves in this down oilfield cycle.

Clearlake, which has more than $3.5 billion of assets under management, did announce a similar deal with a Texas-based oilfield service company in March, confirming that it had led the successful recapitalization of Globe Energy Services in partnership with the company’s management team and other stakeholders. Terms of that transaction were not disclosed in Clearlake’s press release.

Nothing between Clearlake Capital and Knight’s loan holders has been recorded in the Lafayette Parish Clerk of Court’s office to indicate that the transaction was finalized, but one source tells ABiz the absence of a filing in itself does not necessarily mean that the transaction has not been finalized. “This would be a complex transaction, and depending on the form that it took, there might not be a new filing,” says a source who at one time had a close relationship with Knight officials. “For instance, if the paperwork is set up in such a way that Clearlake assumed the position of the bank, then Clearlake might also assume the Uniform Commercial Code filing status of Wells Fargo. Again, this is a complex situation, and it is hard to draw inferences from the fact that nothing has been filed in the clerk’s office.”

And there is no reason to expect that Clearlake, even if it has already finalized the transaction, will issue a press release like it did for the Globe Energy Services deal. It’s a private firm and as such can handle publicity surrounding each investment as it wishes.

Should the deal with Clearlake or another entity willing to buy the debt at what is likely a deep discount materialize, one thing is almost certain: The company, with its substantially unburdened balance sheet, is much better positioned to survive the downturn, but there will be little to nothing left of this once-massive entity for the Knight family members.

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