Key Energy revolver lenders grant forbearance; commitments terminated

By Caroline Salls

Pittsburgh, Aug. 25 – Key Energy Services, Inc. entered into a limited consent and amendment to the loan and forbearance agreements related to its revolving credit facility in connection with the company’s entrance into a pre-packaged plan support agreement, according to an 8-K filed Thursday with the Securities and Exchange Commission.

Under the amendment, the lenders consented to the term loan payment to be provided under the plan and agreed not to exercise any default-related remedies before the plan is implemented.

Specifically, the amendment covers defaults related to the minimum liquidity covenant contained in the loan agreement.

Additionally, the amendment terminated the lenders’ commitments to make any further extensions of credit, although letters of credit outstanding under the facility will remain outstanding and may be extended.

As a result, Key Energy said it will no longer have access to the liquidity provided by the revolver.

As previously reported, the company and some of its subsidiaries entered into a plan support agreement with the holders of more than 89% of its 6¾% senior notes due 2021, including Platinum Equity, and the holders of more than 87% of the principal amount of its term loan.

Under the proposed pre-packaged plan, the existing $100 million asset-based revolver will be replaced with a new ABL facility.

In addition, Key’s board of directors adopted an amendment to the company’s bylaws to impose restrictions on transfers of shares of Key’s common stock in order to preserve its ability to use its net operating losses (NOLs).

The company said the benefits of its NOLs would be reduced, and its use of the NOLs could be compromised if it undergoes an “ownership change.” As a result, the amendment is designed to prevent transfers of shares of Key’s common stock that could result in an ownership change.

The transfer restrictions set in the amendment generally prohibit any direct or indirect transfer of Key’s common stock if that transfer would increase the direct or indirect ownership of any person from less than 4.9% to 4.9% or more of Key’s common stock, or increase the ownership percentage of a person owning 4.9% or more of Key’s common stock.

According to the 8-K, Key has decided to postpone the annual stockholders meeting that was scheduled for Nov. 17 in light of its expected financial reorganization.

The company said it expects to begin the pre-packaged Chapter 11 bankruptcy proceeding in Delaware by Nov. 8.

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

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