Miller Energy amends first-, second-lien loan terms; covenants revised

By Susanna Moon

Chicago, Dec. 10 – Miller Energy Resources Inc. amended its credit agreement with KeyBank NA as administrative agent, according to an 8-K filing with the Securities and Exchange Commission.

The first-lien amendment

• Revises leverage and interest covenants;

• Establishes approved plans of development and defines “permitted capital expenditures” and adds requirements for the development of the drilling program within those plans and restricts the ability to engage in capital expenditures;

• Permits the company to issue an additional $25 million of preferred stock;

• Adjusts the percentage by value of the company’s oil and gas properties that must be the subject of mortgages in favor of the first-lien agent for the benefit of the first-lien lenders to 90% from 80%;

• Includes Carl F. Giesler, Jr., the company’s chief executive officer, as one of the officers designated in the definition of “change of control”;

• Eliminates restrictions on the sale of equity interests by Deloy Miller without affecting the “change of control” definition;

• Provides waivers for events of default that arose as a result of Scott M. Boruff’s resignation as the company’s CEO and certain sales of equity interests by Boruff as well as in connection with the scheduled payment of dividends on the company’s preferred stock that occurred while an event of default had occurred;

• Extends the date by which the company must remediate the material weakness in its internal controls over financial reporting to April 30, 2016 from April 30, 2015, but requires an additional borrowing base redetermination, unless waived by the majority of the first-lien lenders, in the event the April 30, 2015 audited financial statements are issued with any qualification as to the effectiveness of the internal controls over financial reporting;

• Makes technical amendments intended to allow the company to close the acquisition of Savant by easing requirements, which would have applied after that acquisition in the absence of this first-lien amendment, related to its subsidiary, Nutaaq Pipeline, LLC;

• Requires that the company limit the aggregate revolving credit exposure of the first-lien lenders to $50 million in the aggregate prior to next redetermination date for the borrowing base, scheduled for Feb. 1, 2015; and

• Requires that the next receipt of tax credits by the company be used as a prepayment of the outstanding loans under the first-lien credit agreement. Providing that the company receive that payment before the next scheduled redeterminaton date of the company’s borrowing base, the company agrees not to permit the aggregate revolving credit exposure of the first-lien lenders to exceed $40 million in the aggregate.

Waiver, amendment via Apollo

In addition, on Wednesday, the company entered into a waiver and amendment No. 4 to the credit agreement and amendment No. 2 to the guarantee and collateral agreement with Apollo Investment Corp. as administrative agent.

The second-lien amendment

• Makes conforming amendments to the leverage and interest covenants, matching those in the first-lien amendment;

• Establishes the plans and defines “permitted capital expenditures” in the same manner as the first-lien amendment, and adds substantially similar requirements in connection with the development of the drilling program within those plans and substantially similar restrictions on the company’s ability to engage in capital expenditures;

• Permits the company to issue an additional $25 million of preferred stock;

• Adjusts the percentage by value of the company’s oil and gas properties that must be the subject of mortgages in favor of the second-lien agent to 90% from 80%;

• Includes Carl F. Giesler, Jr., CEO, as one of the officers designated in the definition of “change of control” under the second-lien credit agreement;

• Eliminates restrictions on the sale of equity interests by Deloy Miller without affecting the “change of control” definition;

• Provides waivers for events of default that arose as a result of Scott M. Boruff’s resignation as the CEO and sales of equity interests by Boruff as well as in connection with a scheduled payment of dividends on the preferred stock that occurred while an event of default had occurred;

• Extends the date by which the company must remediate the material weakness in its internal controls over financial reporting from April 30, 2015 to April 30, 2016;

• Waives the requirement that the proceeds of the sale of (i) miscellaneous oil and gas equipment and office supplies in Tennessee or (ii) interests in the oil and gas properties of Savant be applied to prepay the loans under the second-lien credit agreement, so long as those proceeds are applied to projects specified in the plans;

• Makes technical amendments intended to allow the company to close the acquisition of Savant by easing requirements related to its subsidiary, Nutaaq Pipeline, LLC;

• Increases the interest rate for loans under the second-lien credit agreement by 1% per year, or by 2% per year if the payment is in kind, until the company has raised $20 million of net proceeds from the issue of equity interests, provided that if the company has not raised the amounts within four months, the change in the interest rate becomes permanent; and

• Adds additional events of default.

Miller Energy is a Knoxville, Tenn.-based oil and natural gas exploration and development company.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.