Published on 6/27/2023 in the Prospect News High Yield Daily.
New Issue: Earthstone Energy sells $500 million 9 7/8% eight-year notes at 97.968 to yield 10¼%
By Paul A. Harris
Portland, Ore., June 27 – Earthstone Energy Holdings, LLC priced a $500 million issue of 9 7/8% eight-year senior notes (B3/B+/B+) at 97.968 to yield 10¼% in a Tuesday drive-by, according to market sources.
The yield came at the wide end of the 10% to 10¼% yield talk. That official talk came on top of initial guidance.
The deal underwent covenant changes, with investors focusing on restricted payments covenants, a sellside source said.
A significant number of investors in Tuesday’s deal were existing holders of Earthstone debt looking for a covenant package mirroring that of the company’s 8% senior notes due April 2027, sources said.
With the document changes the company accommodated these investors, the sellsider said.
Wells Fargo Securities LLC was the left active bookrunner. Joint active bookrunners were Truist Securities, Inc. and RBC Capital Markets LLC. Joint bookrunners were BofA Securities, Inc., Capital One Securities, Inc., Citigroup Global Markets Inc., Citizens Capital Markets, Inc., J.P. Morgan Securities LLC, KeyBanc Capital Markets, Inc., Mizuho Securities USA LLC, PNC Capital Markets LLC, U.S. Bancorp Investments, Inc. and Fifth Third Securities, Inc.
The Woodlands, Tex.-based independent oil and gas producer plans to use the proceeds to fund its acquisition of Novo Oil & Gas Holdings, LLC. Pending the close of that acquisition the proceeds may be applied to Earthstone’s revolver debt.
The notes feature a mandatory redemption at par plus accrued interest if the acquisition is not consummated on or prior to Aug. 28, 2023.
| Issuer: | Earthstone Energy Holdings, LLC
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| Amount: | $500 million
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| Issue: | Senior notes
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| Maturity: | July 15, 2031
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| Left active bookrunner: | Wells Fargo Securities, LLC
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| Joint active bookrunners: | Truist Securities, Inc. and RBC Capital Markets LLC
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| Joint bookrunners: | BofA Securities, Inc., Capital One Securities, Inc., Citigroup Global Markets Inc., Citizens Capital Markets, Inc., J.P. Morgan Securities LLC, KeyBanc Capital Markets, Inc., Mizuho Securities USA LLC, PNC Capital Markets LLC, U.S. Bancorp Investments, Inc. and Fifth Third Securities, Inc.
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| Co-managers: | Regions Securities LLC, BOK Financial Securities, Inc., FHN Financial Securities Corp. and Comerica Securities, Inc.
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| Coupon: | 9 7/8%
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| Price: | 97.968
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| Yield: | 10¼%
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| Spread: | 646 bps
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| First call: | July 15, 2026 at 104.938
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| Trade date: | June 27
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| Settlement date: | June 30
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| Ratings: | Moody’s: B3
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| S&P: B+
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| Fitch: B+
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| Distribution: | Rule 144A and Regulation S for life
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| Price talk: | 10% to 10¼%
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| Marketing: | Drive-by
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