Callon upsizes debt exchange to $217 million new 2025 notes

By Marisa Wong

Los Angeles, Nov. 9 – Callon Petroleum Co. said it will now exchange a total of $389 million of its existing senior notes from four series for $217 million of new 9% second-lien senior secured notes due 2025.

The counterparties to the privately negotiated debt exchange announced on Nov. 2 agreed to exercise substantially all of the remaining capacity under the agreement, according to a Monday press release.

Originally, Callon agreed to exchange $286 million of its existing notes for up to $158.5 million of the new 9% notes due 2025. Within five days of the start of the offer, holders had the option to exchange up to an additional $104 million of existing senior notes.

Callon entered into the exchange agreement with holders of its 6¼% senior notes due 2023 (Cusip: 144577AH6), 6 1/8% senior notes due 2024 (Cusip: 13123XAT9, 13123XAU6, AN7061566), 8¼% senior notes due 2025 (Cusip: 144577AJ2) and 6 3/8% senior notes due 2026 (Cusip: 13123XAZ5).

Callon will exchange the existing notes for the new notes at exchange ratios of $650, $575, $480 and $460 per $1,000 principal amount of 2023 notes, 2024 notes, 2025 notes and 2026 notes, respectively.

The company will also issue to the holders about 1.76 million warrants exercisable for shares of common stock at a strike price of $5.60. Originally, the company agreed to issue about 1.16 million warrants.

Over 63% of the existing senior notes to be exchanged are due 2023 and 2024, the company noted in Monday’s release.

Upon completion of the exchange, Callon’s total net debt will be reduced by about $172 million and total cash interest expense by roughly $6 million. The total amount outstanding under the second-lien notes will be $517 million ($617 million assuming the exercise of the debt exchange option held by the majority owner of the second-lien notes which will be reserved until Sept. 30, 2021) relative to a total permitted principal amount of $700 million.

The debt exchange is scheduled to close on Nov. 17.

Callon said it currently expects the borrowing base under its credit facility to remain unchanged at $1.6 billion and its next scheduled redetermination to take place in May 2021.

Callon is a Houston-based oil and natural gas company focused on the acquisition, exploration and development of assets in the oil plays of South and West Texas.

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