RAAM seeks waiver of revolver's interest coverage ratio covenant

By Angela McDaniels

Tacoma, Wash., May 14 - RAAM Global Energy Co. said it was not in compliance with the interest coverage ratio covenant for its revolving credit facility as of March 31, which is an event of default.

The company may not use the facility until it is in compliance with the interest coverage ratio unless the covenant is waived by the lenders.

The company said it had no amounts outstanding under the revolver as of March 31, and its current capital expenditure budget does not require it to use the borrowing base, but it is nonetheless working with the lenders to obtain a waiver of this covenant.

The company reported the default in its 10-Q filing for the first quarter, which was filed with the Securities and Exchange Commission on Wednesday.

As of March 31, the borrowing base on the revolver was $50 million.

The covenant requires the company to maintain at least a 2.5 to 1.0 interest coverage ratio for the four immediately preceding consecutive fiscal quarters. For the four fiscal quarters ended March 31, the ratio was 2.2 to 1.0.

The company said it did not meet this covenant due to increased debt balances at a higher average interest rate than during previous periods combined with lower revenues mainly due to decreased oil production and lower oil prices.

RAAM is a Lexington, Ky.-based oil and gas company.

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