Magnum Hunter sets up $150 million facility for Eureka Hunter Pipeline

By Susanna Moon

Chicago, Aug. 17 - Magnum Hunter Resources Corp. said its wholly owned subsidiary Eureka Hunter Pipeline, LLC closed a new $150 million credit facility consisting of a $100 million five-year revolving credit facility and a $50 million seven-year term loan.

Interest on the revolver will be Libor plus 225 basis points to Libor plus 350 bps. Interest on the term loan accrues at 12.50% per year, of which 2.75% is payable in cash or Magnum Hunter restricted common stock, at Magnum Hunter's option.

SunTrust Robinson Humphrey, Inc. is the lead arranger, and SunTrust Bank is the administrative agent for the revolver. PennantPark Investment Corp. is the lender for the term loan.

The revolver is secured by a first lien on the assets of Eureka Hunter Pipeline and has an initial commitment for $25 million. The term loan is secured by a second lien on those assets.

The term loan must be drawn before any of the revolver can be drawn, and $31 million of the term loan was drawn at closing Tuesday.

Proceeds will be used to finance capital expenditures for the construction of the Eureka Hunter Pipeline system located in northern West Virginia and Ohio.

Advances under the term loan will be limited to 60% of the project's total capital, including equity and debt invested. As of Monday, Magnum Hunter has invested about $52 million of equity capital in the Eureka Hunter Pipeline project.

Magnum Hunter also repaid debt with $21 million of proceeds from the term loan.

As of Tuesday, Magnum Hunter had total liquidity including cash and availability under its credit facilities, including the term loan, of about $75 million, of which $55 million is available to fund its upstream capital program focused on the company's high-growth resource plays, according to a company press release.

"The closing of the Eureka Hunter finance facility for the Eureka Hunter midstream assets completes one of our primary financial goals for fiscal year 2011. Eureka Hunter Pipeline now has its own primary source of financing, provided on a non-recourse basis to Magnum Hunter, and the capital necessary to complete construction and expand operations of the pipeline through fiscal year 2012," Ronald D. Ormand, executive vice president and chief financial officer of Magnum Hunter, said in the release.

"In addition, with the return of $21 million in capital from the Eureka Hunter finance facility, Magnum Hunter has further increased its overall financial liquidity to in excess of $75 million.

"The additional liquidity provides Magnum Hunter with the necessary capital to fund the company's capital expenditure plan through the end of fiscal year 2011 and into fiscal year 2012."

Houston-based Magnum Hunter is an oil and gas company.

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