Sanchez Energy gets $500 million five-year facility; paydown planned

By Susanna Moon

Chicago, June 3 - Sanchez Energy Corp. obtained a $500 million five-year amended credit agreement on Friday with RBC Capital Markets as the bookrunner and lead arranger, according to an 8-K filing with the Securities and Exchange Commission.

The borrowing base is currently $175 million.

As of Friday, the company had about $96 million of debt under the first-lien credit agreement, with an average interest rate of 2.75%, and $79 million was available for additional borrowings under the agreement.

Interest on the loans ranges from Libor plus 200 basis points to Libor plus 275 bps based on borrowing base utilization.

The first-lien credit agreement matures on May 31, 2018, or Nov. 16, 2015 if the company's second-lien term credit agreement dated Nov. 15, 2012 with Macquarie Bank Ltd. as the administrative agent, lead arranger and bookrunner is not repaid by that date, the SEC filing noted.

Royal Bank of Canada is the administrative agent, and Capital One, NA is the syndication agent.

The next redetermination of the borrowing base is set to occur by Oct. 1, with other redeterminations scheduled to occur quarterly through July 1, 2014 and then semiannually after that. The borrowing base is also subject to reduction by 25% of the amount of the increase in the borrowers' net debt resulting from the issuance of certain debt.

The financial covenants require the company to maintain a ratio of current assets to current liabilities of at least 1 to 1 and a ratio of net debt to consolidated EBITDA of no more than 4 to 1.

Technical amendments

In connection with the new terms, the company entered into several conforming and technical amendments to the second-lien credit agreement with Macquarie Bank.

As a result, in the near future Macquarie Bank plans to novate the company's two swaps and one costless collars to a lender under the first-lien credit agreement. If the novation of these three in-the-money contracts is not completed by June 28, then Macquarie Bank has the right to terminate those contracts. At current market prices, the termination would result in an immaterial gain to the company, the SEC filing noted.

Paydown planned

The company said it plans to repay all $96 million of outstanding borrowings under its first-lien revolving credit facility and to retire its second-lien term loan facility after repaying the $50 million of outstanding borrowings.

Funding for the repayment will come from a private offering of $350 million principal amount of senior notes due 2021, according to a company press release.

Proceeds also will be used for general corporate purposes.

Sanchez is a Houston-based oil and natural gas exploration and development company.

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