Centennial Resources ups loan, waives covenants for merger

By Marisa Wong

Los Angeles, July 21 – Centennial Resource Production, LLC, a wholly owned subsidiary of Centennial Resource Development, Inc., entered into an amendment on July 15 to its third amended and restated credit agreement with JPMorgan Chase Bank, NA as administrative agent, according to an 8-K filing with the Securities and Exchange Commission.

The amendment waives compliance with some credit agreement restrictive covenants to enable the merger of Centennial Resource Production with Colgate Energy Partners III, LLC under a combination agreement dated May 19. The lenders also consented to a planned pre-merger reorganization of the company and its subsidiaries in order to enable the merger.

Subject to the completion of the merger, among other conditions, the amendment increases the aggregate elected commitments to $1.5 billion from $750 million, the borrowing base to $2.5 billion from $1.15 billion and the aggregate maximum revolving credit amount to $3 billion from $1.5 million.

The amendment also modifies the credit agreement to allow Centennial Resource Production to elect to release collateral securing the facility upon receiving an investment-grade rating from either Moody’s Investors Service or S&P Global Ratings.

After entering an investment-grade period, if the company subsequently receives ratings from Moody’s and S&P below Ba1 and BB+, respectively, it will be required to provide collateral to secure the facility.

Upon entering an investment-grade period, SOFR loans will bear interest at SOFR plus an applicable margin ranging from 125 basis points to 187.5 bps, depending on ratings. During a non-investment-grade period, SOFR loans bear interest at SOFR plus an applicable margin ranging from 175 bps to 275 bps, depending on the percentage of the aggregate elected commitments utilized.

The company also pays a commitment fee on unused amounts ranging from 15 bps to 27.5 bps, depending on ratings, during an investment-grade period or 37.5 bps to 50 bps, depending on the percentage of the aggregate elected commitments utilized, during a non-investment-grade period,.

During an investment-grade period, the credit agreement also requires the company to maintain compliance with an asset coverage ratio of at least 1.5 to 1.0 unless CRP has an investment-grade rating from at least two of Moody’s, S&P and Fitch Ratings.

The changes are subject to, among other conditions, the closing of the merger, and the amendment is subject to termination if the merger has not occurred prior to Nov. 30.

Centennial Resource is a Denver-based oil and natural gas company.

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