An ad hoc group of lenders to Glass Mountain Pipeline’s $300 million L+450 bps term loan due 2024 organized with Akin Gump as legal advisor with the aim of pre-emptively engaging with the midstream operator’s sponsor BlackRock, according to sources. The midstream operator serves the Anadarko region in Oklahoma, which includes the SCOOP/Stack, Merge and Granite Wash plays. The region suffered production declines, leading lenders to become concerned about potential covenant breaches late last year, according to the sources.
Activity in the Anadarko Basin has tumbled since the Covid-19 pandemic, with 10 rigs operating in January, according to Baker-Hughes data, half the number at the start of 2020. Crude production in February is estimated at 342,000 bbls/day, according to the EIA, a 19,000 bbl/day decline from January. Natural gas production has likewise declined, falling 142 Mcf/day in February.
Despite the lenders’ attempts to communicate with the company, neither the company nor BlackRock saw a need to engage with the lenders and the private equity sponsor indicated it would support the business if needed, including contributing new equity to cure potential covenant breaches, the sources added.
The credit facility includes a debt service coverage ratio as well as a maximum net leverage covenant when a certain amount is drawn on the $25 million revolver due 2022, the sources added.
The term loan was quoted at 48/52 today, according to a trading desk.
The company sits
on the official committee of unsecured creditors in the chapter 11 cases of oil producer Chesapeake Energy. Glass Mountain Pipeline previously sued
Chesapeake, alleging default on a contract.
BlackRock’s Global Energy and Power Infrastructure Fund in partnership with Navigator Energy Services in 2017 acquired
Glass Mountain Pipeline from NGL Energy Partners and SemGroup Corp.
A representative for BlackRock declined to comment. Akin Gump did not respond to a request for comment.
--James Holloway, Harvard Zhang