Key Energy obtains waiver of information covenants

New York, April 7 - Key Energy Services Inc. said the lenders under its $175 million revolving credit facility have amended the terms to waive non-compliance with covenants requiring delivery of audited financial statements. Related defaults have also been waived.

The Midland, Texas, onshore well service company received similar waivers under $26.2 million of equipment leases and from its primary workers' compensation insurance carrier.

Audited financials for 2003 and unaudited information for the first two quarters of 2004 must now be delivered to the bank lenders by Sept. 30, 2004, Key Energy said.

The waiver allows Key Energy to make more borrowings under the revolver.

Key Energy announced on March 29 that it would not file its annual report for 2003 on time due to a review of assets which is expected to result in write-downs of $78 million to fixed assets and $5 million to goodwill and other intangible assets.

The company's audit committee has also authorized independent investigations into its South Texas Division and the company's disclosure controls and procedures and its internal controls structure and procedures.

The bank lenders will receive unaudited draft internal financial statements for the relevant reporting periods, Key Energy added.

Until the audited statements for 2003 and unaudited information for the first two quarters of 2004 are delivered, Key Energy is prohibited from making acquisitions with a few exceptions, from paying dividends or repurchasing stock and from making optional payments or prepayments on its senior notes, subordinated debt and certain other unsecured debt.

It will be able to repay the remaining $18.7 million principal amount of 5% subordinated convertible notes at their maturity if it has at least $50 million in availability on the revolver after making the payment.

Also, the interest on the loan will be a minimum of Libor plus 175 basis points with a 37.5 basis points commitment fee until the audited statements for 2003 and unaudited information for the first two quarters of 2004 are delivered. Rates may rise higher under the terms of the facility.

Key Energy paid $437,500 in waiver fees to the lenders.

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