EP Energy launches new term loan for B-2 and B-3 debt exchange

By Sara Rosenberg

New York, Aug. 11 – EP Energy LLC held a lender call at noon ET on Thursday to launch a new covenant-light term loan due June 30, 2021 that will be granted in exchange for existing term loan B-2 due April 2019 and term loan B-3 due May 2018 debt, according to a market source.

Citigroup Global Markets Inc. is the lead bank on the deal.

Price talk on the term loan is Libor plus 875 basis points with a 1% Libor floor, the company disclosed in an 8-K filed with the Securities and Exchange Commission.

Lenders are being offered a 300 bps extension fee.

The term loan has hard call protection of 103 in year one and 101 in year two.

Included in the term loan is a springing maturity 91 days inside the company’s 9 3/8% senior notes due 2020 in the event that the aggregate principal amount of the notes exceeds $325 million.

Security is a perfected lien on substantially all tangible and intangible assets and capital stock of the borrower and guarantors pledged to the RBL lenders, ranking junior to the RBL facility and senior to the term loan B-2 and term loan B-3.

In connection with the exchange, lenders are being asked to approve an amendment to the existing term loan agreement to remove the covenants restricting the incurrence of debt and issuance of disqualified stock and preferred stock, and the incurrence and existence of liens.

Lenders that do not consent to the exchange will retain their respective B-2 term loans and B-3 term loans.

Consents are due on Aug. 18.

Closing is targeted for Aug. 23.

As of June 30, there was $142 million outstanding under the term loan B-2 and $469 million outstanding under the term loan B-3.

The term loan B-2 is priced at Libor plus 350 bps with a 1% Libor floor and the term loan B-3 is priced at Libor plus 275 bps with a 0.75% Libor floor.

EP Energy is a Houston-based oil and natural gas exploration and production company.

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