Callon Petroleum to repay second-lien term loan with note proceeds

By Angela McDaniels

Tacoma, Wash., Sept. 12 – Callon Petroleum Co. plans to use the proceeds of a new issue of notes to repay amounts borrowed under its $300 million senior secured second-lien term loan, according to an 8-K filing with the Securities and Exchange Commission.

The company plans to offer $350 million of senior notes due 2024. J.P. Morgan Securities LLC is leading the Rule 144A and Regulation S offering.

Proceeds will also be used for general corporate purposes, including for a potential increase in drilling activity.

In addition, the company amended its $500 million senior secured revolving credit facility on Friday to permit it to issue the new notes, provided that its pro forma leverage ratio does not exceed 2.5 times. The amendment requires the company to use the proceeds to repay the second-lien term loan.

The amendment also changed the automatic reduction of the revolver’s borrowing base so that no reduction will apply for the first $400 million of senior debt issued on or after the amendment.

Finally, the amendment allows the company to repurchase or redeem its preferred stock, provided that, after giving pro forma effect to the redemption or repurchase, the sum of the amount that could then be borrowed under the revolver plus any unrestricted cash and cash equivalents of the company and its subsidiaries will be greater than $100 million and the leverage ratio will not be greater than 3 times.

Callon is an oil and gas company based in Natchez, Miss.

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