Ultra Petroleum uses grace period for 2022 notes; bankruptcy eyed

By Wendy Van Sickle

Columbus, Ohio, April 15 – Ultra Petroleum Corp. elected to use a 30-day grace period for the $13.2 million semiannual interest payment due April 15 for its 6 7/8% senior notes due 2022 and 7 1/8% senior notes due 2022, according to an 8-K filing with the Securities and Exchange Commission.

Under the 2017 indenture governing the two sets of unsecured notes as a single class, the company has a 30-day grace period after the interest payment date before an event of default would occur on May 15.

Failure to make the interest payments by that date would constitute an event of default under the company’s credit agreement with Bank of Montreal as administrative agent; its term loan credit agreement with Barclays Bank plc as administrative agent; its 9% cash/2% PIK senior secured second-lien notes due July 2024; and the unsecured notes indenture.

The occurrence of an event of default under the credit agreement or the term loan agreement would allow the respective administrative agents to declare the company’s obligations under the credit agreement and term loan agreement immediately due and payable.

The occurrence of an event of default under the second lien notes or the unsecured notes indenture would give the trustee or the holders of at least 25% of principal amount of the outstanding notes the option to declare all of the notes due and payable immediately.

Additionally, under the company’s credit agreement and term loan agreement, the company is required to deliver audited, consolidated financial statements without a going concern or like qualification or explanation.

The company said its annual report on form 10-K for the year ended Dec. 31, 2019 included a going concern qualification.

“Generally, significant indebtedness and extremely challenging current market conditions raise a substantial doubt about the company’s ability to continue as a going concern,” Ultra said.

The going concern qualification resulted in the company’s default under each of the credit agreement and term loan agreement on Tuesday.

Ultra expects that it will be precluded from making additional draws on its credit agreement unless a waiver is obtained.

If the company does not obtain a waiver or other relief from the lenders under the credit agreement or the term loan agreement before the expiration of a 30-day grace period, an event of default under each agreement will occur, and the lenders could accelerate the loans, which will put Ultra in a cross-default under the indentures governing the second-lien notes and the unsecured notes.

The acceleration of the payments outstanding under the credit or term loan agreement could allow holders of the second-lien notes and unsecured notes to accelerate those notes. Ultra said it does not expect to obtain a waiver from its lenders.

Further, Ultra said it does not have sufficient liquidity to repay its indebtedness and would need additional sources of capital to do so.

The company said it could attempt to obtain additional sources of capital from asset sales, public or private issuances of debt, equity or equity-linked securities, debt for equity swaps, or any combination thereof, but that it may need to seek protection from creditors under Chapter 11 of the U.S. Bankruptcy Code or the Canadian Bankruptcy and Insolvency Act, or an that involuntary petition for bankruptcy may be filed against the company in the U.S. or in Canada.

Ultra Petroleum is a natural gas and oil exploration, development and production company based in Englewood, Colo.

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