Southwestern Energy amends covenants, to repay term loan via notes

By Sarah Lizee and Tali Rackner

Minneapolis, Sept. 11 – Southwestern Energy Co. entered into the first amendment to its $1,191,000,000 secured term loan facility and $743 million unsecured revolving facility on Monday to revise financial covenants, according to an 8-K filing with the Securities and Exchange Commission.

The company also said in a news release that it plans to use the proceeds from an offering of $1.15 billion senior notes to pay off its 2015 amended and restated term loan and to fund its concurrently announced tender offers.

Specifically, the amendment

• Increases the minimum interest coverage ratio to 2 times beginning with the fiscal quarter ended June 30 and continued over the life of the credit agreement;

• Modifies the minimum liquidity covenant so that either (a) if leverage is less than 4 times or if the revolver has been terminated, there is no minimum liquidity covenant, or (b) the company can elect to replace the minimum liquidity covenant with a maximum leverage ratio of 6 times for the fiscal quarter ended June 30, stepping down to 5.5 times for the fiscal quarters ending Sept. 30 and Dec. 31, to 5 times for the fiscal quarters ending March 31, 2018 and June 30, 2018 and to 4.5 times thereafter;

• Modifies the mandatory prepayment and commitment reduction provisions in order to allow Southwestern Energy to retain the first $500 million of net cash proceeds from asset sales that would have otherwise been required to prepay amounts outstanding under the revolver and/or reduce commitments under the revolver; and

• Provides the company with up to one year to apply the proceeds from the first senior notes offering consummated after the entry into the amendment to the repayment of certain debt of the company.

JPMorgan Chase Bank, NA is the administrative agent.

The effectiveness of the amendment is contingent on Southwestern Energy’s amended and restated term loan credit agreement with agent Bank of America, NA being repaid in full. As of June 30, there was $327 million outstanding under that facility.

The company plans to use $327 million of the net proceeds from the new notes to pay off this term loan, with remaining proceeds, together with cash on hand, to fund the concurrent tender offers to purchase all its 4.05% senior notes due 2020 and up to $100 million of each of the 4.1% senior notes due 2022 and 4.95% senior notes due 2025.

If the tender offers are not completed or the amount of securities tendered and accepted for payment is less than the proceeds of the offering, proceeds may be used for other debt repayment.

Southwestern Energy is a Houston-based natural gas and oil company.

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