Warren swaps $63.1 million notes for loans, borrows $11 million more

By Wendy Van Sickle

Columbus, Ohio, Oct. 22 – Warren Resources, Inc. exchanged $63.1 million of its 9% senior notes due 2022 for about $40.1 million of a 12% five-year second lien loan and 4 million shares of common stock, according to a press release.

After the exchange, about $167 million of the notes remain outstanding, the company said.

The $51.1 million term loan also provided Warren an additional $11 million of new money, the release said.

Cortland Capital Market Services, LLC is administrative agent for the second lien loan.

Up to 6% of the interest on the new loan may be paid in kind for the first three semi-annual payments. For the next three payments, up to 1.5% may be paid in kind, according to an 8-K filing with the Securities and Exchange Commission.

The loan has a make-whole call until May 22, 2016 and is then callable at 104, declining to 102 after one year, 101 after two years and par after three years.

In connection with closing of the second lien loan transaction, Warren is making a $10 million draw down, under its first lien loan, which will leave the company with about $20 million of incremental liquidity.

“Today we are extremely pleased to announce a new strategic refinancing that reduces the outstanding principal amount of our debt, provides us with additional liquidity and gives us an opportunity to reduce our cash interest expense going forward.” Lance Peterson, interim chief executive officer of Warren, said in the release.

The second lien loan must be prepaid with proceeds from asset sales and Warren Resources also amended its first lien loan to make asset sales in excess of $1 million and the reinvestment of proceeds at the discretion of the first lien lenders.

In addition, compliance with the consolidated leverage ratio in the first lien loan will now be measured starting on June 30, 2016 instead of Dec. 31, 2016.

Warren said it is “evaluating various strategic options in order to position itself for compliance with such covenants as they come into effect in the event that commodity pricing does not improve in the intervening period.”

Jefferies LLC was financial adviser for the transactions.

The energy company is based in New York.

© 2015 Prospect News.
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