Item 1.01 Entry into a Material Definitive Agreement.
Twelfth Amendment to Revolving Credit Agreement
On March 30, 2020, Lilis Energy, Inc. (the “Company”) entered into a Twelfth Amendment and Waiver (the “Twelfth Amendment”) to the Second Amended and Restated Senior Secured Revolving Credit Agreement, dated October 10, 2018 (as amended from time to time, the “Revolving Credit Agreement”), among the Company, certain subsidiaries of the Company, as guarantors, the lenders party thereto, and BMO Harris Bank N.A., as administrative agent.
As previously disclosed, as a result of the January 17, 2020 redetermination of the borrowing base under the Revolving Credit Agreement, a borrowing base deficiency (the “Borrowing Base Deficiency”) currently exists under the Revolving Credit Agreement. The Borrowing Base Deficiency reflects the amount by which the principal amount of borrowings outstanding under the Revolving Credit Agreement exceeds the borrowing base as so redetermined. The Borrowing Base Deficiency was initially in the amount of $25 million, but on February 28, 2020, the Company paid the Borrowing Base Deficiency down by $17.25 million such that the Borrowing Base Deficiency is currently $7.75 million. Prior to the Twelfth Amendment, $1.50 million of the Borrowing Base Deficiency was due to be paid on March 30, 2020, with a final Borrowing Base Deficiency payment of $6.25 million due to be paid on April 14, 2020.
The Twelfth Amendment amended the Revolving Credit Agreement to, among other things extend the due date for the $1.50 million installment of the Borrowing Base Deficiency from March 30, 2020 to April 14, 2020. The due date for the final installment of the Borrowing Base Deficiency remains April 14, 2020.
The Company is currently considering other transactions to fund the repayment of the remaining Borrowing Base Deficiency amount. If the Company is unable to repay all or any portion of the remaining Borrowing Base Deficiency amount as and when required under the Revolving Credit Agreement, an event of default would occur under the Revolving Credit Agreement.
Pursuant to the Twelfth Amendment, the lenders under the Revolving Credit Agreement also waived the requirement under the Revolving Credit Agreement that the Company comply with a leverage ratio and a current ratio, in each case, as of December 31, 2019, and granted certain other waivers, including the requirement to comply with certain hedging obligations set forth in the Revolving Credit Agreement until June 30, 2020. Additionally, the lenders consented to an extension of an additional 45 days for the Company to provide its audited annual financial statements for the fiscal year ended December 31, 2020, and waived the requirement that such financial statements be delivered without a “going concern” or like qualification or exception.
The foregoing description of the terms of the Twelfth Amendment is not complete and is qualified in its entirety by reference to the full copy of the Twelfth Amendment filed as Exhibit 10.1 to this Current Report on Form 8-K.
Forward-Looking Statements:
This Current Report on Form 8-K contains forward-looking statements within the meaning of the federal securities laws. These statements may include, but are not limited to, statements related to the Company’s expectations regarding the potential impact of the COVID-19 coronavirus outbreak and other non-historical statements. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. These risks include, but are not limited to, the Company’s ability to make the required repayments of the Borrowing Base Deficiency; the ability to finance the Company’s continued exploration, drilling operations and working capital needs; all the other uncertainties, costs and risks involved in exploration and development activities; and the other risks identified in the Company’s Annual Report on Form 10-K and its other filings with the Securities and Exchange Commission. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. The forward-looking statements in this Current Report on Form 8-K are made as of the date hereof, and the Company does not undertake any obligation to update the forward-looking statements as a result of new information, future events or otherwise.