Quarterly report pursuant to Section 13 or 15(d)

Long-Term Debt

v3.21.2
Long-Term Debt
9 Months Ended
Sep. 30, 2021
Debt Disclosure [Abstract]  
Long-Term Debt Long-Term Debt
The following table summarizes our debt obligations as of the dates presented:
September 30, 2021 December 31, 2020
Credit Facility $ 212,900  $ 314,400 
Second Lien Facility 143,110  200,000 
9.25% Senior Notes due 2026 400,000  — 
Total 756,010  514,400 
Less: Unamortized discount 1
(4,855) (1,604)
Less: Unamortized deferred issuance costs 1, 2
(4,327) (3,299)
Total, net $ 746,828  $ 509,497 
Less: Current portion (7,500) — 
Long-term debt $ 739,328  $ 509,497 
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1     Discount and issuance costs of the Second Lien Facility are being amortized over the term of the underlying loan using the effective-interest method. The discount and issuance costs of the 9.25% Senior Notes due 2026 will be amortized over its respective term beginning in the fourth quarter of 2021 concurrent with the related proceeds being released from escrow and closing of the Lonestar acquisition.
2     Excludes issuance costs of the Credit Facility, which represent costs attributable to the access to credit over its contractual term, that have been presented as a component of Other assets (see Note 9) and are being amortized over the term of the Credit Facility using the straight-line method.
Credit Facility
As of September 30, 2021, the Credit Facility had a $1.0 billion revolving commitment and a $375 million borrowing base, including a $25 million sublimit for the issuance of letters of credit. Availability under the Credit Facility may not exceed the lesser of the aggregate commitments or the borrowing base; however, outstanding borrowings under the Credit Facility were limited to a maximum of $350 million as of September 30, 2021. The borrowing base under the Credit Facility is redetermined semi-annually, generally in the Spring and Fall of each year. Additionally, we and the Credit Facility lenders generally may, upon request, initiate a redetermination at any time during the six-month period between scheduled redeterminations. The Credit Facility is available to us for general corporate purposes, including working capital. Prior to the Eleventh Amendment (as defined below), the Credit Facility was scheduled to mature in May 2024. We had $0.4 million in letters of credit outstanding as of September 30, 2021 and December 31, 2020. During the nine months ended September 30, 2021, we incurred and capitalized approximately $0.7 million of issue costs associated with amendments to the Credit Facility. During the nine months ended September 30, 2020, we incurred and capitalized approximately $0.1 million of issue costs and wrote-off $0.9 million of previously capitalized issue costs due to a reduction of the borrowing base during the first half of 2020.
The Credit Facility is guaranteed by all of the subsidiaries of the borrower (the “Guarantor Subsidiaries”), except for Boland Building, LLC, effective upon the Eleventh Amendment, which holds real estate assets that are associated with Lonestar’s legacy mortgage obligations. The guarantees under the Credit Facility are full and unconditional and joint and several. Substantially all of our consolidated assets are held by the Guarantor Subsidiaries. The obligations under the Credit Facility are secured by a first priority lien on substantially all of our subsidiaries’ assets.
The outstanding borrowings under the Credit Facility bear interest at a rate equal to, at our option, either (a) a customary reference rate plus an applicable margin ranging from 1.50% to 2.50%, determined based on the utilization level under the Credit Facility or (b) a Eurodollar rate, including LIBOR through 2021, plus an applicable margin ranging from 2.50% to 3.50%, determined based on the utilization level under the Credit Facility. Interest on reference rate borrowings is payable quarterly in arrears and is computed on the basis of a year of 365/366 days, and interest on Eurodollar borrowings is payable every one, three or six months, at the election of the borrower, and is computed on the basis of a year of 360 days. As of September 30, 2021, the actual weighted-average interest rate on the outstanding borrowings under the Credit Facility was 3.09%. Unused commitment fees are charged at a rate of 0.50%.
As of September 30, 2021, the Credit Facility required us to maintain (1) a minimum current ratio (as defined in the Credit Facility, which considers the unused portion of the total commitment as a current asset), measured as of the last day of each fiscal quarter of 1.00 to 1.00, (2) a maximum leverage ratio (consolidated indebtedness to adjusted earnings before interest, taxes, depreciation, depletion, amortization and exploration expenses, both as defined in the Credit Facility), measured as of the last day of each fiscal quarter of 3.50 to 1.00 and (3) a maximum first lien leverage ratio (consolidated secured indebtedness to adjusted earnings before interest, taxes, depreciation, depletion, amortization and exploration expenses, both as defined in the Credit Facility), measured as of the last day of each fiscal quarter, of 2.50 to 1.00.
The Credit Facility also contains customary affirmative and negative covenants, including as to compliance with laws (including environmental laws, ERISA and anti-corruption laws), maintenance of required insurance, delivery of quarterly and annual financial statements, oil and gas engineering reports and budgets, maintenance and operation of property (including oil and gas properties), restrictions on the incurrence of liens and indebtedness, merger, consolidation or sale of assets, payment of dividends, and transactions with affiliates and other customary covenants. In addition, as of September 30, 2021, the Credit Facility contained certain anti-cash hoarding provisions.
The Credit Facility contains events of default and remedies. If we do not comply with the financial and other covenants in the Credit Facility, the lenders may, subject to customary cure rights, require immediate payment of all amounts outstanding under the Credit Facility.
As of September 30, 2021, we were in compliance with all of the covenants under the Credit Facility in effect at such time.
In August 2021, we entered into the Master Assignment, Agreement and Amendment No. 11 to Credit Agreement (the “Eleventh Amendment”). The Eleventh Amendment, in addition to other changes described therein, amended the Credit Facility to, effective on the closing of the Merger and satisfaction of other conditions set forth therein, (1) increase the borrowing base to $600 million, with aggregate elected commitments of $400 million, (2) remove certain availability restrictions, (3) remove minimum hedging requirements, (4) remove the first lien leverage ratio covenant, (5) remove the Partnership and PV Energy Holdings GP, LLC as guarantors, and (6) extend the maturity date to the date that is the four year anniversary of the date such amendment became effective, or October 6, 2025.
Second Lien Facility
We entered into the $200 million Second Lien Facility in September 2017 to fund a significant acquisition as well as related fees and expenses. In January 2021, the amendment dated November 2, 2020 (the “Second Lien Amendment”) became effective at which time we made a $50.0 million prepayment as well as a $1.3 million principal payment to a single participant
lender to liquidate their interest in the Second Lien Facility. The Second Lien Amendment provided for (i) the extension of the maturity date of the Second Lien Facility to September 29, 2024, (ii) an increase to the margin applicable to advances under the Second Lien Facility, (iii) the imposition of certain limitations on capital expenditures, acquisitions and investments if the Asset Coverage Ratio (as defined therein) at the end of any fiscal quarter is less than 1.25 to 1.00, (iv) the requirement for maximum and, in certain circumstances as described therein, minimum hedging arrangements, (v) beginning in 2021, a requirement to make quarterly amortization payments equal to $1.875 million and (vi) a provision for the replacement of the LIBOR interest rate upon its expiration. During the nine months ended September 30, 2021, we incurred and capitalized $1.4 million of issue costs in connection with the Second Lien Amendment and wrote off $1.2 million of previously capitalized issue costs and original issue discount allocable to the aforementioned prepayments as a loss on the extinguishment of debt.
The outstanding borrowings under the Second Lien Facility bore interest at a rate equal to, at our option, either (a) a customary reference rate plus an applicable margin of 7.25% or (b) a Eurodollar rate, including LIBOR through 2021, with a floor of 1.00%, plus an applicable margin of 8.25%; provided that the applicable margin would increase to 8.25% and 9.25%, respectively, during any quarter in which the quarterly amortization payment was not made. As of September 30, 2021, the actual interest rate of outstanding borrowings under the Second Lien Facility was 9.25%. Interest on reference rate borrowings was payable quarterly in arrears and computed on the basis of a year of 365/366 days, and interest on Eurodollar borrowings was payable every one or three months (including in three month intervals if we select a six-month interest period), at our election and computed on the basis of a 360-day year.
The Second Lien Facility was collateralized by substantially all of our operating subsidiaries’ assets with lien priority subordinated to the liens securing the Credit Facility. The obligations under the Second Lien Facility were guaranteed by all of Holdings’ subsidiaries.
The Second Lien Facility had no financial covenants, but contained affirmative and negative covenants, including as to compliance with laws (including environmental laws, ERISA and anti-corruption laws), maintenance of required insurance, delivery of quarterly and annual financial statements, oil and gas engineering reports and budgets, maintenance and operation of property (including oil and gas properties), limitations on capital expenditures, investments, the incurrence of liens and indebtedness, merger, consolidation or sale of assets, payment of dividends and transactions with affiliates and other customary covenants.
As of September 30, 2021, we were in compliance with all of the covenants under the Second Lien Facility.
On October 5, 2021, Holdings repaid all of its outstanding obligations under the Second Lien Facility, and terminated the Second Lien Facility. In accordance with the Second Lien Facility, we incurred a prepayment premium of 102% as a result of repayment.
9.25% Senior Notes due 2026
On August 10, 2021, our indirect, wholly-owned subsidiary Penn Virginia Escrow LLC (the “Escrow Issuer”) completed an offering of $400 million aggregate principal amount of senior unsecured notes due 2026 (the “9.25% Senior Notes due 2026”) that bear interest at 9.25% and were sold at 99.018% of par. The proceeds of the offering, net of discount, and other funds were initially deposited in an escrow account pending satisfaction of certain conditions, including the consummation of the Merger on or prior to November 26, 2021. As of September 30, 2021, these funds remained in escrow.
Of the $446.8 million total cash, cash equivalents and restricted cash presented on the condensed consolidated statement of cash flows as of September 30, 2021, $396.1 million is classified as Restricted cash - non-current within long-term assets based on the long-term nature of the 9.25% Senior Notes due 2026. The remaining $15.4 million is classified as Restricted cash - current as this portion represents accrued interest and an amount equivalent to the original issue discount. The net proceeds from the offering, along with cash on hand, were used to repay all outstanding amounts under the Second Lien Facility plus certain long-term debt of Lonestar upon consummation of the Merger. See Note 14 for additional information.