Pengrowth Energy prepays 2018 term notes
Pengrowth Energy Corp. has prepaid all of its outstanding term notes due 2018. The company has also finalized amendents with its lenders for its remaining term notes.
PENGROWTH ENERGY Corp. has prepaid all of its outstanding term notes due in 2018 and has finalized the terms of amending agreements with its lenders under its syndicated bank facility and the holders of its remaining term notes. These agreements amend the existing financial covenants effective for the quarter ended Sept. 30, 2017, through to and including the quarter ending Sept. 30, 2019. The terms of the amending agreements are expected to provide Pengrowth with the financial flexibility and runway to restructure its remaining debt with covenant light debt and to develop a financing strategy for the continuing development of its Lindbergh asset.
The company has been active in the disposition market in 2017, closing on approximately $825-million of disposition proceeds year to date with another $150-million disposition (Swan Hills) scheduled to close in the fourth quarter. This success has allowed the company to materially reduce its outstanding debt while only reducing its reserve base by approximately 23 per cent. The company has deployed its existing cash on hand to prepay all the term notes otherwise scheduled to mature on Aug. 28, 2018.
In addition to the prepayment of the 2018 term notes, the company paid approximately $78-million of principal on its remaining outstanding term notes. With the completion of these payments, the company now has approximately $535-million of term notes outstanding, having repaid approximately $1.1-billion of term notes and convertible debentures since Dec. 31, 2016. The repaid debt carried an annual interest load of approximately $65-million. Pengrowth’s next term note maturity is not until Oct. 18, 2019.
Amended financial covenants
The company has finalized the amendment agreements with the lenders under its syndicated bank facility and the holders of its term notes. The syndicated bank facility and the term notes were previously bound by financial covenants that included a senior-debt-to-EBIT DA
(earnings before interest, taxes, depreciation and amortization) (12 months trailing) ratio of less than 3.5:1; a senior-debt-to-capitalization ratio of less than 55 per cent; and an EBITDA-to-interest-expense ratio of greater than 4.0 times. The bank lending syndicate and holders of the term notes have agreed, for the waiver period, to:
•Eliminate the senior-debt-to-EBITDA ratio covenant;
• Eliminate the debt-to-book-capitalization ratio covenant;
• Reduce the trailing 12-month adjusted-EBITDA-to-adjusted-interest-expense ratio covenant; the adjusted-EBITDA-to-adjusted-interest ratio will vary from quarter to quarter.
In exchange, lenders under the syndicated bank facility and the holders of the term notes were granted security over Pengrowth’s assets, a 2.0-percentage-point increase in interest rates on remaining outstanding term notes (which increases to 3.0 percentage points on Jan. 1, 2020), as well as a one-time 0.5-percentage-point amendment fee payable on all outstanding term notes maturing after 2018. In addition, the total credit limit under the credit facility has been reduced to $400-million and will be reduced to $330-million following the completion of the previously announced disposition of the company’s remaining Swan Hills assets. Currently, approximately $175-million is drawn on the facility.
Derek Evans, president and chief executive officer, said: “We have been committed to reducing our debt and strengthening our financial position in order to build a stronger foundation for growing the company going forward. The agreements with our lenders and noteholders mark a key milestone in our plan and provide us with additional financial runway. We remain focused on restructuring and strengthening the company’s financial position, including finding new sources of capital to replace our existing term notes with less covenant restrictive debt. With success, this financial plan is expected to allow us to execute on our development strategy, including the development of our Lindbergh phase 2, which remains on hold awaiting stronger commodity prices. While we are happy to see the recent strengthening in crude oil prices, a decision to proceed with phase 2 is dependent on a higher long-term crude oil price environment for diluted bitumen sales. Once complete, Lindbergh is expected to ultimately deliver long-term growth in production and cash flow.”
We seek Safe Harbor.
Karen Baxter condensed this news release (email@example.com).
Derek Watson Evans, Wayne Kim Foo, Kelvin B Johnston, James Douglas McFarland, Albert Terence Poole, Jamie Calvin Sokalsky, Donald Michael Godfrey Stewart
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