Item 1.01 Entry into a Material Definitive Agreement
As previously disclosed, on
In connection with the Bankruptcy Petitions, the Debtors filed a motion seeking,
among other things, interim and final approval of debtor-in-possession financing
on terms and conditions set forth in a proposed Senior Secured
Debtor-in-Possession Term Loan Credit Agreement (as amended from time to time,
the "Original DIP Facility") among the Company, as borrower, the financial
institutions or other entities from time to time parties thereto as lenders (the
"Initial DIP Lenders") and
The DIP Facility, as approved by the
· a senior secured priming superpriority debtor-in-possession term loan facility
in an aggregate principal amount of up to$200 million , consisting of (i) a new money, multiple draw term loan facility in the principal amount of$150 million (the "New Money DIP Loans"),$50 million of which was borrowed by the Debtors in the Initial Borrowing; and (ii) a refinancing term loan in the principal amount of$50 million (the "Roll-Up Loans" and, together with the New Money DIP Loans, the "DIP Loans") offered, in exchange for a portion of their 7.25% Senior Secured Notes, pro rata to all Secured Noteholders providing New Money DIP Loans;
· borrowings under the (i) New Money DIP Loans bear interest at a rate per annum
equal to adjusted LIBOR (subject to a 2% floor) plus 8.00%, and (ii) Roll-Up Loans bear interest at the non-default rate of the 7.25% Senior Secured Notes of 7.25% per annum;
· the Company is required to pay the DIP Lenders (i) a 1.00% fee on the New Money
DIP Loans payable upon the Debtors' emergence from the Chapter 11 Cases and (ii) a 0.5% per annum commitment fee on undrawn New Money DIP Loans payable monthly;
· the maturity of the DIP Facility is
automatic extensions toJune 1, 2020 andJune 30, 2020 , in each case as set forth in the DIP Facility;
· the proceeds of the New Money DIP Loans may be used for: (i) transaction costs,
fees and expenses; (ii) working capital and general corporate purposes; (iii) bankruptcy-related costs and expenses (including restructuring fees and adequate protection payments); (iv) refinancing all amounts existing under the Company's prepetition first-out senior secured working capital and letter of credit facility (the "Prepetition Credit Agreement"); and (v) paying all amounts required in connection with the unwinding, novation or termination of hedging obligations;
· the Company is required to use a portion of the proceeds from the DIP Facility
to take the following actions: (i) to pay off all$7.9 million of borrowings and an additional$17.1 million in reimbursement obligations with respect to a letter of credit, issued prior to the Petition Date, under the Prepetition Credit Agreement, which was drawn by the beneficiary thereof after the Petition Date, in each case plus accrued and unpaid interest; and (ii) to pay, as adequate protection, the approximately$18.1 million in interest that would have been due onAugust 15, 2019 under the indenture for the 7.25% Senior Secured Notes, and the Company is required, as adequate protection, to continue to make the semi-annual interest payments as they come due under the indenture for the 7.25% Senior Secured Notes during the Chapter 11 Cases;
· the obligations of the Company under the DIP Facility, including the payment in
full of all borrowed amounts and observance and performance of all covenants, are guaranteed by the Company's subsidiary Debtors (the "Guarantors") pursuant to the Amended and Restated Guaranty, dated as ofJanuary 28, 2020 , among the DIP Agent and the Guarantors;
· the Debtors' Chapter 11 Cases are subject to certain milestones, including (i)
the filing of a plan of reorganization providing for payment in full in cash of the DIP Loans and the related disclosure statement no later thanMarch 9, 2020 and (ii) the entry of an order approving the disclosure statement no later thanApril 13, 2020 ; and
· the DIP Facility provides for certain customary covenants applicable to the
Company, including covenants requiring (i) minimum liquidity in an amount of$15 million , subject to certain exclusions; (ii) compliance with an approved operating debtor-in-possession budget (the "DIP Budget"), subject to permitted variance of 15%, tested on a rolling 4-week basis on aggregate operating disbursements excluding certain professional fees, DIP Facility interest and fees and adequate protection payments; and (iii) delivery of a rolling 13-week operating cash flow forecast updated every four weeks and a weekly DIP Budget variance report.
With the closing of the DIP Facility, the Company is able to access the
remaining
The foregoing description of the DIP Facility does not purport to be complete and is qualified in its entirety by reference to the final, executed DIP Facility, as approved by the Final DIP Order, each of which may be accessed at no charge at https://cases.primeclerk.com/sanchezenergy/.
Item 1.02 Termination of a Material Definitive Agreement
The information included in Item 1.01 of this Form 8-K regarding the Prepetition Credit Agreement is incorporated in this Item 1.02 by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant
The information included in Item 1.01 of this Form 8-K regarding the DIP Facility is incorporated in this Item 2.03 by reference.
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