MEG Energy to refinance revolver, term loan, second-lien notes

By Marisa Wong

Morgantown, W.Va., Jan. 11 – MEG Energy Corp. announced some comprehensive refinancing transactions that include extensions of its credit facilities and notes.

MEG’s comprehensive refinancing plan is comprised of four transactions, one of which is a C$357 million equity financing. The other three are debt refinancing transactions:

• An extension of the maturity date on substantially all of the commitments under the company’s covenant-lite revolving credit facility, which will be extended two years to Nov. 5, 2021. Once the refinancing is effective, the commitment amount of the facility will be reduced to $1.4 billion;

• A refinancing of the company’s $1.2 billion term loan to extend its maturity; and

• A refinancing and extension of the company’s $750 million of notes due 2021 through new second-lien debt.

In addition to the maturity date extension, the revolver will also be amended to give the company more tools to de-lever in the future. This includes the ability to issue second-lien debt; the ability to sell its interest in a pipeline without lender consent, provided 70% of the net proceeds are used to repay first-lien term debt; and the ability to sell an additional $550 million of encumbered assets, in addition to the $200 million already permitted, without lender consent, provided that 70% of the net proceeds from any such sale are used to repay first-lien term debt.

The term loan will also be amended to align terms with those under the refinanced revolver.

Closings of the various components of the transactions are all expected to be mutually conditional. MEG said it expects to close all elements of the comprehensive refinancing plan by mid-February.

The refinancing transactions are expected to support a strengthened balance sheet, as well as increased production and reduced costs through an expansion of the company’s growth program, according to a Wednesday press release.

“This comprehensive refinancing provides us with a five-year window to grow the business and to pursue additional deleveraging alternatives. The amended covenant-lite credit facility, which at closing remains undrawn, is sufficient to meet our foreseeable liquidity needs,” chief financial officer Eric Toews said in the release.

Refinancings will not result in the addition of financial covenants, the company said.

MEG is focused on sustainable in situ oil sands development and production in the southern Athabasca oil sands region of Alberta, Canada. The company is based in Calgary, Alta.

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