Item 1.01 – Entry into a Material Definitive Agreement.
Indenture and Notes
On December 4,
2017, Continental Resources, Inc. (the “Company”), Banner Pipeline Company, L.L.C. (“Banner”), CLR Asset Holdings, LLC (“CLR Asset Holdings”) and The Mineral Resources Company (“TMRC,” collectively, TMRC, CLR
Asset Holdings and Banner are referred to herein as the “Initial Guarantors”) entered into a Purchase Agreement (the “Purchase Agreement”) with Merrill Lynch, Pierce, Fenner & Smith Incorporated as the representative of
several initial purchasers (collectively, the “Initial Purchasers”), relating to the issuance and sale of $1 billion in aggregate principal amount of the Company’s 4
3
/
8
% senior unsecured notes due 2028 (the “Notes”). The Notes were offered and sold in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the
“Securities Act”). The Notes were resold by the Initial Purchasers in reliance on Rule 144A and Regulation S of the Securities Act.
The Notes were issued pursuant to an indenture, dated December 8, 2017 (the “Indenture”), among the Company, the Initial
Guarantors and Wilmington Trust, National Association, as trustee (the “Trustee”). Capitalized terms used in this section “Indenture and Notes” in this Form
8-K,
but not otherwise defined
have the meanings assigned to them under the Indenture.
The Notes will be general unsecured senior obligations of the Company. The Notes
will rank equally in right of payment with all of the Company’s existing and future Senior Indebtedness and senior in right of payment to any of the Company’s future Subordinated Indebtedness. The Notes will effectively be junior in right
of payment to all of the Company’s future secured Indebtedness and other obligations, to the extent of the value of the assets securing such Indebtedness and other obligations. The Notes will be fully and unconditionally guaranteed on a senior
basis by the Initial Guarantors, which are three of the Company’s five subsidiaries and by certain future subsidiaries, if any, of the Company. The Notes will be structurally subordinated to all obligations of each of our existing and future
subsidiaries, if any, that do not guarantee the Notes.
Interest and Maturity
The Notes will mature on January 15, 2028, and interest is payable on the Notes on January 15 and July 15 of each year,
commencing July 15, 2018.
Optional Redemption
The Company has the option to redeem the Notes, in whole or in part, at any time prior to October 15, 2027 at a Make-Whole Redemption
Price, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, any time on or after October 15, 2027, the Company may redeem the Notes, in whole or in part, at a redemption price equal to 100% of the
principal amount of the Notes being redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. The Company is not required to make mandatory redemption or sinking fund payments with respect to the 2028 Notes.
Certain Covenants
The Indenture contains
certain covenants that, among other things, restrict:
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the Company’s ability and the ability of its Restricted Subsidiaries and future Restricted Subsidiaries, if any, to:
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create, incur or assume any Funded Debt secured by any Liens (other than Permitted Liens) upon any of the properties of the Company or any Restricted Subsidiary or upon any Capital Stock of any Restricted Subsidiary or
any Capital Stock of any Subsidiary that owns, directly or indirectly through ownership in another Subsidiary, the Capital Stock of any Restricted Subsidiary (provided the Company and any Subsidiary may create, incur or assume Funded Debt secured by
Liens up to an aggregate amount equal to 15% of the Company’s Adjusted Consolidated Net Tangible Assets); and
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enter into any Sale/Leaseback Transaction; and
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the Company’s ability to consolidate or merge with or into, or sell, convey, lease or otherwise dispose of all or substantially all of its assets to, another Person; and
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each Guarantor’s ability to consolidate or merge with or into another Person.
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These covenants are subject to a number of important exceptions and qualifications.
Events of Default
The Indenture provides
that each of the following is an Event of Default with respect to the Notes: (i) default by the Company or any Guarantor in the payment of principal of or any premium on the Notes when due and payable at Maturity; (ii) default by the
Company or any Guarantor in the payment of interest on the Notes when due and the continuation of such default for 30 days; (iii) default on any other Indebtedness of the Company or any Guarantor if either (a) such default results in the
acceleration of the maturity of any such Indebtedness having a principal amount of $25.0 million or more individually or, taken together with the principal amount of any other such Indebtedness the maturity of which has been so accelerated, in
the aggregate, or (b) such default results from the failure to pay when due principal of any such Indebtedness, after giving effect to any applicable grace period, having a principal amount of $25.0 million or more individually or, taken
together with the principal amount of any other Indebtedness under which there has been a Payment Default, in the aggregate; (iv) failure by the Company to comply with certain covenants relating to merger, consolidation or sale of assets or to
make or consummate a Net Proceeds Offer or a Change of Control Offer; (v) failure by the Company or any Guarantor to remedy for 60 days after notice any breach or default in the performance of the other covenants or agreements in the Indenture
provided the Company has 90 days to remedy or receive a waiver if the Company is attempting to remedy such breach or default as promptly as reasonably practicable; (vi) any Guarantee ceases to be in full force and effect, other than in
accordance with the terms of the Indenture, or a Guarantor of the Notes denies or disaffirms its obligations under its Guarantee; and (vii) certain events of bankruptcy or insolvency described in the Indenture with respect to the Company or any
Guarantor. In the case of an Event of Default arising from certain events of bankruptcy or insolvency with respect to the Company, all outstanding Notes will become due and payable immediately without further action or notice. If any other Event of
Default occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of the then outstanding Notes may declare the Notes to be due and payable immediately.
A copy of the Indenture is filed as Exhibit 4.1 to this Current Report on Form
8-K
(“Form
8-K”)
and is incorporated herein by reference. The description of the Indenture in this report is a summary and is qualified in its entirety by the terms of the Indenture.
Registration Rights Agreement
In
connection with the issuance and sale of the Notes, the Company and the Initial Guarantors entered into a registration rights agreement (the “Registration Rights Agreement”) with Merrill Lynch, Pierce, Fenner & Smith Incorporated
as the representative of the Initial Purchasers, dated December 8, 2017. Capitalized terms used in this section “Registration Rights Agreement” in this Form
8-K,
but not otherwise defined have
the meanings assigned to them under the Registration Rights Agreement.
Pursuant to the Registration Rights Agreement, the Company and the
Initial Guarantors have agreed to file a Registration Statement with the Securities and Exchange Commission so that holders of the Notes can exchange the Notes for registered Notes that have substantially identical terms as the Notes. In addition,
the Company and the Initial Guarantors have agreed to exchange the Guarantees related to the Notes for registered Guarantees having substantially the same terms as the original Guarantees. The Company and the Initial Guarantors will use commercially
reasonable efforts to cause the exchange to be completed within 400 days after December 8, 2017. The Company and the Initial Guarantors are required to pay Additional Interest if they fail to comply with their obligations to register the Notes
within the specified time period.
A copy of the Registration Rights Agreement is filed as Exhibit 4.2 to this Form
8-K
and is incorporated herein by reference. The description of the Registration Rights Agreement in this report is a summary and is qualified in its entirety by the terms of the Registration Rights Agreement.
Relationships
The Initial Purchasers and
certain of their affiliates have provided and may in the future provide financial advisory, investment banking, commodity trading and commercial banking services in the ordinary course of business to the Company and the Initial Guarantors, for which
they receive customary fees and expense reimbursement. Affiliates of certain of the Initial Purchasers are lenders under the Company’s revolving credit facility and were lenders under the $500 million term loan that was repaid and
terminated as a result of the application of the net proceeds of the offering. The Company used the net proceeds of the offering of the Notes to repay in full and terminate the term loan and to repay a portion of the borrowings outstanding under its
current revolving credit facility. Therefore, affiliates of certain of the Initial Purchasers were repaid with a portion of the net proceeds of the offering of the Notes.