Sundance Energy, a Denver-based oil and gas producer in the Eagle Ford Shale, is working with Latham & Watkins as legal advisor and Miller Buckfire and FTI Consulting as financial advisors to negotiate a restructuring support agreement with lenders to its $500 million revolver due October 2022 and $250 million L+800 bps cash/2% PIK second lien term loan due April 2023 required under a recent credit facility amendment, according to sources. The company warned of the possibility of a chapter 11 filing in its third-quarter
10-Q.
Revolver lenders are working with Haynes & Boone as legal advisor and Opportune as financial advisor, the sources said. As of Sept. 30, the revolver was drawn by $130.6 million and subject to a $168.6 million borrowing base. Sundance Energy said in its 10-Q that it is in discussions with revolver lenders to waive defaults arising from noncompliance with the 3.5x total leverage ratio and the 1x current ratio covenants under the facility.
The company reported $24.3 million of liquidity as of Sept. 30, including $2.6 million of cash and cash equivalents and $21.7 million of availability under the revolver.
An ad hoc group of term loan lenders and term loan administrative agent Morgan Stanley Capital Administrators Inc. are working with Simpson Thacher as legal advisor, according to an Oct. 16
amendment to the credit agreement. The group is working with Houlihan Lokey as financial advisor, according to sources. The term loan was not actively quoted today, according to trading desks.
The company also entered into an
amendment to the term loan credit agreement on Oct. 30. Collectively, the amendments, among other things, extended the delivery date of the July 1 reserve report prepared by a petroleum engineering firm appointed by the term lenders to Nov. 30, from Sept. 30, and require delivery on Nov. 30 of a compliance certificate with respect to the minimum 1.5x asset coverage ratio covenant under the term loan as of Sept. 30.
Under the amendments, the company is also required to negotiate with the term lenders in good faith until Dec. 31 on a potential workout, restructuring or similar negotiation, including any, or a combination, of mutually agreeing to a term sheet that reduces total debt and leverage, exploring additional sources of equity capital and exploring potential transfers of oil and gas properties, through asset sales or otherwise, and to enter into an RSA with revolver and term lenders by Nov. 30.
Sundance reported on Nov. 9 that third-quarter revenue dropped 59% year over year to $20.9 million, due to lower volume and pricing as the Covid-19 pandemic spread globally.
Sundance Energy, Latham & Watkins, Miller Buckfire, FTI Consulting, Haynes & Boone, Opportune and Houlihan Lokey did not immediately respond to requests for comment.
--Andrew Berlin, Harvard Zhang, Ellen Schneider