Key Energy Services might prepay up to $8 million under term loan

By Tali Rackner

Norfolk, Va., May 10 – Key Energy Services, Inc. expects to prepay amounts outstanding under its term loan less than $8 million if the lenders’ appraisal of its assets is used for covenant compliance purposes, according to a press release.

The company and its lenders are discussing an appraisal of its assets procured by some of its term loan lenders that, if used in determining Key Energy's compliance with the asset coverage ratio included in its term loan and asset-based credit facilities, would result in Key Energy's not being in compliance with that covenant as of March 31.

Key Energy had previously procured an appraisal of its assets that, if used for such purpose, results in the company being in compliance with the asset coverage ratio.

If the appraisal is used for covenant compliance purposes, Key Energy will also include additional term loan collateral as permitted under the term loan facility, which it believes would cure this potential default, the release said.

Key Energy is engaged in discussions with some of its lenders and noteholders about alternatives to address its level of debt and liquidity.

Capital expenditures were $2.7 million during the first quarter of 2016.

Key Energy is Houston-based onshore, rig-based well servicing contractor.

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