W&T Offshore amends credit agreement to facilitate exchange offer

By Wendy Van Sickle

Columbus, Ohio, Aug. 3 – W&T Offshore, Inc. entered into a fourth amendment to its credit agreement dated Nov. 8, 2013 to permit the exchange offer underway for the company’s 8˝% notes, according to an 8-K filing with the Securities and Exchange Commission.

The company is offering to exchange the $900 million of notes due 2019 for up to 62.1 million common shares, $202.5 million principal amount of its new senior second-lien pay-in-kind toggle notes due 2020 and $180 million principal amount of its new senior PIK toggle notes due 2021. The offer was announced July 25 and expires on Aug. 29.

In addition to permitting that exchange, the credit agreement amendment permits the issuance of a $75 million senior secured 1.5-lien term loan, permits the additional exchange of the remaining 8˝% notes for a consideration up to $35 million if there are no borrowings and no more than $5 million of letters of credit outstanding under the credit agreement, reaffirms the borrowing base at $150 million and pushes the next scheduled redetermination to April 1, 2017.

The amendment is conditioned upon two things occurring by Oct. 31: holders of at least 85% of the 8˝% notes participating in the exchange and the repayment of a portion of outstanding borrowings under the credit agreement with the $75 million 1.5-lien term loan.

On the effective date of the amendment, the interest rate margin will be raised by 75 basis points at all levels to Libor plus 300 bps to 400 bps, depending on total borrowings.

Also, W&T will be required to maintain minimum liquidity of $15 million and will be subject to an anti-cash hoarding provision that will force weekly prepayments of amounts outstanding under the credit agreement if its cash balance exceeds $35 million. The provision will not apply if $5 million or less is drawn on the credit agreement.

Also, financial covenants will be amended, including eliminating the secured debt leverage ratio and increasing the first-lien leverage ratio to 2.5x with a stepdown to 2x for the fiscal quarter ending Sept. 30, 2017. The ratio is currently 1.5x.

Finally, the company will be required to maintain an asset coverage ratio of 1.25x, to be measured Sept. 30 and Dec. 31.

W&T Offshore is a Houston-based oil and natural gas exploration and production company.

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