changes, (i) the Guarantors may be released from their guarantees, (ii) the collateral under the facility will be released, (iii) the facility will no longer be subject to a borrowing base, and (iv) certain title and collateral-related covenants will no longer be applicable. SWN will be required to maintain compliance with the existing Financial Covenants as well as a PV-9 coverage ratio of the net present value, discounted at 9% per annum, of the estimated future net revenues expected in the Proved Reserves to SWN’s total indebtedness as of such date of not less than 1.5 to 1.0 (“PV-9 Coverage Ratio”). If during the Interim Investment Grade Period, SWN receives both (a) an Index Debt rating from Moody’s that is Ba2 or lower and (b) an Index Debt rating from S&P that is BB or lower, the Interim Investment Grade Period will end, and the facility will revert to its characteristics prior to the Interim Investment Grade Period, including being guaranteed by the Guarantors, being secured by collateral and being subject to a borrowing base, as well as limited to compliance with the Financial Covenants but not the PV-9 Coverage Ratio.
Upon receiving two Investment Grade Ratings from S&P, Moody’s, or Fitch (such period following, an “Investment Grade Period”), certain restrictive covenants fall away or become more permissive. During the Investment Grade Period, the Credit Agreement will contain restrictive covenants that limit SWN’s ability to, among other things: (i) incur secured debt or have non-Guarantor subsidiaries incur indebtedness; (ii) enter into mergers; (iii) make or declare dividends when a default exists; (iv) incur liens; and (v) engage in certain transactions with affiliates. Upon the occurence of the Investment Grade Period, the Financial Covenants and PV-9 Coverage Ratio will no longer be effective and SWN will be required to maintain compliance with a total indebtedness to capitalization ratio, which is the ratio of SWN’s total indebtedness to the sum of SWN’s total indebtedness plus stockholders’ equity, not to exceed 65%.
Borrowings under the Credit Agreement may be base rate loans, daily simple SOFR loans or term SOFR loans. Interest is payable quarterly for base rate loans, weekly for daily simple SOFR loans and at the end of the applicable interest period for term SOFR loans. Daily simple SOFR loans bear interest at daily simple SOFR plus an applicable margin ranging from (i) prior to an Interim Investment Grade Period, 175 to 275 basis points, depending on the percentage of the commitments utilized, plus an additional 10 basis point credit spread adjustment and (ii) during an Interim Investment Grade Period or Investment Grade Period, 125 to 187.5 basis points, depending on SWN’s Index Ratings, plus an additional 10 basis point credit spread adjustment. Term SOFR loans bear interest at term SOFR plus an applicable rate ranging from (i) prior to an Interim Investment Grade Period, 175 to 275 basis points, depending on the percentage of the commitments utilized, plus an additional 10 basis point credit spread adjustment and (ii) during an Interim Investment Grade Period or Investment Grade Period, 125 to 187.5 basis points, depending on SWN’s Index Ratings, plus an additional 10 basis point credit spread adjustment. Base rate loans bear interest at a rate per annum equal to the greatest of: (i) the prime rate; (ii) the federal funds effective rate plus 50 basis points; and (iii) the adjusted term SOFR rate for a one-month interest period plus 100 basis points, plus an applicable margin ranging from (A) prior to an Interim Investment Grade Period, 75 to 175 basis points, depending on the percentage of the commitments utilized and (B) during an Interim Investment Grade Period or Investment Grade Period, 25 to 87.5 basis points, depending on SWN’s Index Ratings. SWN also pays a commitment fee on unused commitment amounts under its facility of a range of (i) prior to an Interim Investment Grade Period, 37.5 to 50 basis points, depending on the percentage of the commitments utilized, and (ii) during an Interim Investment Grade Period or Investment Grade Period, 15 to 27.5 basis points, depending on SWN’s Index Ratings. SWN may repay any amounts borrowed prior to the maturity date without any premium or penalty.
The above description of the Credit Agreement is a summary and is not complete. A copy of the Credit Agreement is filed as Exhibit 10.1 to this Current Report on Form 8-K, and the above summary is qualified by reference to the terms of the Credit Agreement set forth therein.
| Item 7.01. |
Regulation FD Disclosure. |
The information contained in this Item 7.01, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of Section 18, and shall not be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Act of 1934, as amended, except as set forth by specific reference in such filing.
On April 12, 2022, the Company issued a press release announcing the entry into the Amended and Restated Credit Agreement, a copy of which is attached hereto as Exhibit 99.1.
| Item 9.01. |
Financial Statements and Exhibits. |
(d) Exhibits.