Halcon gets commitments for loan borrowing base increase, bridge loan

By Sara Rosenberg

New York, Oct. 22 - Halcon Resources Corp. plans to increase the borrowing base under its senior secured revolving credit facility to $850 million and received a commitment for a $500 million senior unsecured bridge loan to help fund its acquisition of oil and gas assets in the Williston Basin, according to an 8-K filed with the Securities and Exchange Commission on Monday.

Wells Fargo Securities LLC, J.P. Morgan Securities LLC, Barclays and Goldman, Sachs & Co. are the lead banks on the bridge loan and have agreed to backstop the revolver borrowing base change.

Pricing on the bridge loan is Libor plus 750 basis points with a 1.5% Libor floor. The spread will increase by 50 bps after three months and every three months thereafter, subject to an 11% cap that can widen by 100 bps based on Halcon's senior unsecured debt rating and market rates for high-yield debt.

The company revealed in another 8-K filing that it actually intends to sell about $700 million of senior notes due 2021 for the acquisition.

Under the agreement, Halcon is buying the producing and undeveloped oil and gas assets from Petro-Hunt LLC for about $1.45 billion, consisting of $700 million in cash and $750 million in equity.

The equity consideration will initially be issued as preferred stock that will automatically convert into common stock at $7.45 per share following an increase in Halcon's authorized common shares to accommodate conversion and obtaining certain regulatory approvals.

Closing is expected in December.

"This acquisition is immediately accretive on all measures and is consistent with our strategy of building an oil company with a multi-year drilling inventory in several liquids-rich basins," said Floyd C. Wilson, chairman and chief executive officer, in a news release.

"This transaction improves our leverage profile and will effectively increase our estimated proved reserves on a pro forma basis by over 58% to approximately 115 million barrels of oil equivalent, 79% of which is liquids," Wilson added.

Total debt to first half 2012 annualized EBITDA is 4.2 times pro forma for the transaction, versus 4.5 times on a standalone basis, the company said in a presentation.

In addition, Halcon announced that it entered into an agreement under which Canada Pension Plan Investment Board will purchase $300 million of the company's common stock at $7.16 per share, subject to customary conditions and the successful completion of the acquisition of the Williston Basin assets.

The funds from the equity sale to Canada Pension Plan Investment Board will be used for the purchase of the Williston Basin assets.

Halcon is a Houston-based independent energy company.

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