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Item 1.01
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Entry Into Material Definitive Agreement
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On November 24, 2021 (the “Closing Date”), Battalion Oil Corporation (the “Company”) and Halcón Holdings, LLC, a wholly owned subsidiary of the Company (the “Borrower”), entered into an Amended and Restated Senior Secured Credit Agreement (the “Term Loan Agreement”) with Macquarie Bank Limited, as administrative agent, and certain other financial institutions party thereto, as lenders. The Term Loan Agreement amends and restates in its entirety the Company’s Senior Secured Revolving Credit Agreement entered into on October 8, 2019, as amended, by and among the Company, Bank of Montreal, as administrative agent, and the lenders party thereto (the “Existing Credit Agreement”). Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Term Loan Agreement.
Pursuant to the Term Loan Agreement, the lenders have agreed to loan the Borrower (i) $200.0 million, which funded on the Closing Date and was partially used to refinance all amounts owed under the Existing Credit Agreement; (ii) up to $20.0 million, available to be drawn up to 18 months from the Closing Date, subject to the satisfaction of certain conditions; and (iii) up to $15.0 million, which amount will be available to be drawn from the date certain wells included in the APOD (defined below) are deemed Producing APOD Wells until up to 18 months after the Closing Date, subject to the satisfaction of certain conditions.
The maturity date of the Term Loan Agreement is November 24, 2025. Until such maturity date, borrowings under the Term Loan Agreement shall bear interest at a rate per annum equal to LIBOR (or another applicable reference rate, as determined pursuant to the provisions of the Term Loan Agreement) plus an applicable margin of 7.00%.
The Borrower may elect, at its option, to prepay any borrowing outstanding under the Term Loan Agreement subject to the following prepayment premiums:
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Period
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Premium
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Months 0 - 12
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Make-whole amount equal to 12 months of interest plus 2.00%
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Months 13 - 24
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2.00%
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Months 25 - 36
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1.00%
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Months 37 - 48
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0.00%
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The Borrower may be required to make mandatory prepayments of the loans under the Term Loan Agreement in connection with the incurrence of non-permitted debt, certain asset sales, and with excess cash on hand in excess of certain maximum levels. The Borrower is required to make scheduled amortization payments in the aggregate amount of $120.0 million from the fiscal quarter ending March 31, 2023 through the fiscal quarter ending September 30, 2025.
Amounts outstanding under the Term Loan Agreement are guaranteed by certain of the Borrower’s direct and indirect subsidiaries and secured by a security interest in substantially all of the assets of the Borrower and such direct and indirect subsidiaries, and of the equity interests of the Borrower held by the Company.
The Term Loan Agreement contains certain customary representations and warranties, as well as certain customary affirmative and negative covenants.
The Term Loan Agreement also contains certain financial covenants, including the maintenance of (i) an Asset Coverage Ratio not to fall below (A) 1.50 to 1.00 as of December 31, 2021 and March 31, 2022, (B) 1.60 to 1.00 as of June 30, 2022, (C) 1.70 to 1.00 as of September 30, 2022, and (D) 1.80 to 1.00 as of December 31, 2022 and each fiscal quarter thereafter, (ii) a Total Net Leverage Ratio not to exceed (A) 3.25 to 1.00 as of December 31, 2021 through and including June 30, 2022, (B) 3.00 to 1.00 as of September 30, 2022 and December 31, 2022, (C) 2.75 to 1.00 as of March 31, 2023, and (D) 2.50 to 1.00 as of each fiscal quarter thereafter, and (iii) a Current Ratio not to fall below 1.00 to 1.00, each determined as of the last day of any fiscal quarter period.
The Term Loan Agreement also contains an approved plan of development (the “APOD”) for the Company’s Monument Draw acreage through the drilling and completion of certain wells. The Term Loan Agreement contains a PDP Production Test and an APOD Economic Test which the Company must maintain compliance with otherwise,