Midstates uses grace period for 10¾% notes, faces loan deficiency

By Marisa Wong

Morgantown, W.Va., April 1 – Midstates Petroleum Co., Inc. is exercising its right to a grace period for the $16 million interest payment due on its 10¾% senior notes due 2020, according to an 8-K filing with the Securities and Exchange Commission.

The interest payment was due Friday. However, the grace period gives the company 30 days to make the interest payment before an event of default occurs.

The company believes it is in the best interests of its stakeholders to actively address its debt and capital structure and is continuing discussions with its creditors, the filing said.

As of March 31, the company had a cash balance of about $301.4 million, which provides liquidity to fund its current operations. The company is continuing to pay suppliers and other trade creditors in the ordinary course.

Also on Friday, the company received notice of a scheduled borrowing base determination. The borrowing base under its revolving credit agreement was reduced to $170 million.

The company currently has about $252 million of outstanding borrowings under the credit agreement, resulting in a borrowing base deficiency of about $82 million, according to the 8-K.

Under the credit agreement, the company is required to cure the borrowing base deficiency within 30 days of receiving notice.

The company can choose to cure the deficiency by one or a combination of the following: paying the entire difference, paying the difference in six equal successive monthly payments or delivering a reserve report covering additional unencumbered assets that when added to the collateral causes the conforming borrowing base to exceed the effective amount.

The company believes the new borrowing base does not attribute appropriate value to its reserves and plans to engage in discussions with the administrative agent and lenders regarding the appropriate borrowing base amount and, if necessary, the relevant cure options, including a repayment schedule.

Midstates Petroleum is a Tulsa, Okla.-based exploration and production company.

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