Chaparral to amend and extend or replace revolver with merger

By Sara Rosenberg

New York, Oct. 13 - Chaparral Energy Inc. needs to modify and extend, or replace its existing revolving credit facility as a condition to its merger with United Refining Energy Corp., according to a PREM14A filed with the Securities and Exchange Commission on Tuesday.

JPMorgan is the lead bank on the existing revolver that is sized at $513 million and is due on Oct. 31, 2010.

The proposed replacement facility is expected to have an initial borrowing base of $513 million and financial covenant requirements, the filing said.

Security for the replacement facility will be substantially all of the company's assets.

Under the merger agreement, Chaparral shareholders will exchange their entire equity stake for 58 million shares in the combined company, which will retain the Chaparral name. They will also be entitled to 20 million additional contingent shares, 5 million of which will be issued but subject to forfeiture.

At closing, the United Refining sponsor's shares will be restructured into 5.6 million shares in the combined company and 5.6 million contingent shares subject to forfeiture.

Assuming 24% of the United Refining public shareholders elect to redeem their shares for cash and 50% of the United Refining warrants are redeemed for cash at $0.50 per warrant, upon closing of the proposed transaction, Chaparral will receive roughly $300 million in cash.

The cash will be used to reduce the amount outstanding under Chaparral's revolver, as well as for working capital and general corporate purposes.

Pro forma for the proposed transaction, Chaparral will have total debt to projected 2010 EBITDA ratio of 2.6 times and total debt to proved reserves ratio of $6.02 per barrel of oil equivalent.

Closing is expected no later than Dec. 11.

Chaparral is an Oklahoma City-based oil and natural gas exploitation and production company. United Refining is a New York-based special purpose acquisition company.

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