Key Energy Services extends forbearance agreements with lenders

By Sarah Lizee

Olympia, Wash., Dec. 9 – Key Energy Services, Inc. entered into an extension of its forbearance agreements with its term loan and asset-based loan lenders until the earlier of Jan. 10 or the occurrence of specified early termination events, according to a press release.

As previously reported, the company elected not to make a scheduled interest payment due Oct. 18 under its term loan and security agreement dated as of Dec. 15, 2016 with Cortland Products Corp. as agent.

The company’s failure to make the October interest payment resulted in a default under the term loan agreement and a cross default under the loan and security agreement dated as of April 5, 2019 with Bank of America, NA as administrative agent.

The company entered into forbearance agreements with term loan lenders collectively holding over 99.5% of the principal amount of the outstanding term loans and all of the ABL lenders.

Under the forbearance agreements, the lenders previously agreed that until the earlier of Dec. 6 or the occurrence of specified early termination events, those lenders will forbear from exercising any default-related rights and remedies related to the specified defaults.

The company must comply with covenants during the forbearance period, including a requirement to maintain aggregate bank and book cash balances of at least $10 million as measured on a weekly basis.

The failure to comply with those covenants, among other things, would result in the early termination of the forbearance period.

The company said it is in active discussions with the lenders regarding its capital structure and the potential to reduce its debt level in light of challenging market conditions.

The company said it engaged Moelis & Co. LLC as its financial adviser and Sullivan & Cromwell LLP as its legal adviser to assist it in “analyzing various strategic alternatives to address its capital structure and to position the company for future success.”

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

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