APA sets up $2 billion of delayed-draw loans for Callon refinancing

Chicago, Jan. 30 – APA Corp. entered a credit agreement with JPMorgan Chase Bank, NA as administrative agent on Jan. 30 to support its acquisition of Callon Petroleum Co., according to an 8-K filing with the Securities and Exchange Commission.

The lenders have committed to provide $2 billion in delayed-draw term loans to APA to refinance Callon’s debt in conjunction with the merger.

The loans will be available on the date the merger closes.

Of the $2 billion, $1.5 billion of the loans will have a three-year term and $500 million will have a 364-day term.

The three-year loans will have interest at SOFR plus 125 basis points to 200 bps with a step-up in year two in the grid to 162.5 bps to 237.5 bps. The 364-day loans will have interest at SOFR plus 137.5 bps to 212.5 bps. All of the rates are ratings-based.

The initial margins are 175 bps for the three-year loans and 162.5 bps for the 364-day loans.

There is a ticking fee at an annual rate of 22.5 bps starting Jan. 3.

Callon debt to be refinanced includes a credit agreement from Oct. 19, 2022. 6 3/8% notes due 2026, 8% senior notes due 2028 and 7½% senior notes due 2030.

If the loans have not been used within 120 days, the loans must be prepaid.

Apache Corp, a wholly owned subsidiary of APA, has guaranteed the credit agreement until the amount of debt under senior notes and debentures outstanding under Apache’s existing indentures first is less than $1 billion.

If $400 million or more of Callon’s 2028 notes and 2030 notes are still outstanding 120 days after closing, then Callon must guarantee APA’s obligations under the credit agreement until the amount outstanding under the two notes is reduced to under $400 million.

In terms of covenants, APA is required to maintain an adjusted debt-to-capital ratio of not greater than 60% at the end of any fiscal quarter.

The commitments replace the $2 billion under the bridge loan commitment letter from Jan. 3.

JPMorgan Chase Bank, NA, Citibank, NA and BofA Securities, Inc. are the co-lead arrangers and joint bookrunners.

Citibank, NA and Wells Fargo Bank, NA are the co-syndication agents.

Bank of America, NA, Goldman Sachs Bank USA, HSBC Bank USA, NA, Mizuho Bank, Ltd., MUFG Bank, Ltd., TD Bank, New York Branch and Truist Bank are the co-documentation agents.

Houston-based APA and Houston-based Callon are oil and natural gas companies.

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