Energy XXI Gulf Coast amends credit facility to allow acquisition

By Angela McDaniels

Tacoma, Wash., June 4 - Energy XXI (Bermuda) Ltd. subsidiary Energy XXI Gulf Coast, Inc. amended its first-lien credit agreement, according to an 8-K filing with the Securities and Exchange Commission.

The company entered into the amendment on May 23, and it received written confirmation from the administrative agent on Tuesday that it had satisfied the conditions for effectiveness of the amendment.

The amendment contained provisions that facilitated Energy XXI Gulf Coast's acquisition of EPL Oil & Gas, Inc., including providing some of the financing for it.

Under the amendment, the borrowing base for Energy XXI Gulf Coast was increased to $1.5 billion from $1.2 billion until the next redetermination. This includes a subfacility for EPL with a $475 million borrowing base.

EPL immediately borrowed the entire $475 million to refinance the outstanding debt it had under an existing credit agreement.

Under the amended first-lien credit agreement, Energy XXI Gulf Coast and its subsidiaries, other than EPL and its subsidiaries, have guaranteed and secured the debt of EPL and its subsidiaries, but EPL and its subsidiaries have not commensurately guaranteed the obligations of Energy XXI Gulf Coast and its other subsidiaries.

However, immediately upon EPL's retirement of its 8¼% notes due 2018, EPL and its subsidiaries must guarantee and secure the obligations generally of Energy XXI Gulf Coast and its subsidiaries. In addition, the EPL subfacility will terminate and the entire borrowing base amount will become available to Energy XXI Gulf Coast.

Under the amendment, the maturity date of the credit agreement will be accelerated to Aug. 15, 2017 if EPL's 8¼% notes are not prepaid, redeemed or refinanced by that date.

Other changes

The amendment also incorporates a few additional changes that include the incorporation of the concept of Energy XXI Gulf Coast's 6 7/8% senior notes due 2024 as senior unsecured debt generally permitted under the terms of the credit agreement (so that provisions under the credit agreement for those notes are commensurate with the provisions already existing for Energy XXI Gulf Coast's 9¼% senior notes due 2017, 7¾% senior notes due 2019 and 7½% senior notes due 2021.

With the amendment, Energy XXI Gulf Coast retains the ability to further incur $1 billion of permitted unsecured debt, provided that it is restricted from borrowing 25% of the amount until the credit facility lenders otherwise provide or waive this limitation.

Furthermore, the amendment removed the prohibition on the prepayment, redemption or other refinancing of Energy XXI Gulf Coast's outstanding 9¼% notes, 7¾% notes, 7½% notes and 6 7/8% notes and any other permitted unsecured debt incurred by Energy XXI Gulf Coast. Instead, it established some quantitative liquidity conditions to making any such prepayment, redemption or other refinancing.

Under the amendment, Energy XXI Gulf Coast is permitted to use proceeds from the issuance of further permitted unsecured debt to prepay, redeem or refinance these notes.

Energy XXI Gulf Coast and EPL are both Houston-based oil and natural gas exploration and production companies.

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