Grey Wolf plans $925 million credit facility for merger with Basic Energy

By Sara Rosenberg

New York, April 22 - Grey Wolf Inc. has received a commitment letter for a new $925 million senior secured credit facility in connection with its merger with Basic Energy Services Inc., according to an 8-K filed with the Securities and Exchange Commission Tuesday.

UBS and Goldman Sachs are the joint lead arrangers and joint bookrunners on the deal, with UBS the left lead.

The facility consists of a $600 million term loan and a $325 million revolver.

If the company issues any debt securities to finance the merger, that issuance will reduce dollar for dollar the availability under the term loan, the filing said.

Under the merger agreement, the new combined company will be named Grey Wolf Inc. and will be based in Houston. Grey Wolf shareholders will receive $1.82 in cash and 0.2500 shares of new Grey Wolf for each share they currently own, while Basic Energy Services shareholders will receive $6.70 in cash and 0.9195 shares of new Grey Wolf for each share of Basic Energy Services they currently own.

Based upon closing prices for each company's common stock as of April 18, the estimated enterprise value of the combined company would be $2.9 billion.

Pro forma net debt as of Dec. 31 will be about $960 million, pro forma sales are $1.784 billion and pro forma EBITDA is about $632 million.

The combined company intends to dedicate a substantial amount of its free cash flow to the repayment of the debt while at the same time fully funding and implementing its growth initiatives.

Closing is expected sometime during the third quarter, subject to receipt of financing proceeds, regulatory approval, as well as approval by the stockholders of each company.

Grey Wolf is a Houston-based provider of contract land drilling services. Basic Energy Services is a Midland, Texas-based well servicing rig contractor.

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