Abraxas Petroleum details planned $300 million revolver for merger with Abraxas Energy

By Sara Rosenberg

New York, July 10 - Abraxas Petroleum Corp. came out with details on the proposed credit facility that it plans to get in connection with its merger with Abraxas Energy Partners LP, including that it will be an up to $300 million senior secured revolving credit facility, according to a PREM14A filed with the Securities and Exchange Commission on Friday.

Société Générale is the administrative agent on the deal and has supplied the company with a non-binding term sheet.

The initial borrowing base under the revolver is expected to be $160 million, based on the company's reserve report dated June 1.

Pricing on the revolver is anticipated to be able to range from Libor plus 250 basis points to 350 bps based on usage. At June 30, the interest rate on the new credit facility would have been 5.5%.

Covenants will include a current ratio as of the last day of each quarter of not less than 1.00 to 1.00, an interest coverage ratio as of the last day of each quarter of not less than 2.50 to 1.00, and a total net debt to EBITDA ratio as of the last day or each quarter of not more than 4.50 to 1.00 for the quarter ending Sept. 30 through the quarter ending March 31, 2010, 4.25 to 1.00 for the quarter ending June 30, 2010 through the quarter ending Dec. 30, 2010, and 4.00 to 1.00 thereafter.

At close, the company expects to borrow about $142 million under the new revolver to refinance and terminate all of its existing credit facilities. An additional roughly $28 million for the refinancing will come from the monetization of existing derivative contracts.

At June 30, Abraxas Energy had outstanding debt of $163.7 million and Abraxas Petroleum had outstanding debt of $5.9 million, for a total of $169.6 million, excluding the mortgage on Abraxas Petroleum's office building.

The non-binding term sheet is subject to the lenders due diligence, internal approval process and execution of definitive agreements.

Under the merger agreement, Abraxas Petroleum will acquire all common units of Abraxas Energy that it does not currently hold for $6.00 per common unit payable in shares of common stock.

The number of shares of Abraxas Petroleum common stock will range from 4.25 to 6.00 per common unit of Abraxas Energy and will amount to 26 million to 36 million shares of Abraxas Petroleum common stock.

Closing of the merger is subject to negotiation of the new credit facility, approval by the holders of a majority Abraxas Petroleum's common stock and approval by the holders of 80% of Abraxas Energy's common units.

Abraxas Petroleum is a San Antonio, Texas-based crude oil and natural gas exploration and production company. Abraxas Energy is a San Antonio, Texas-based upstream master limited partnership.

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