Daily News: October 26, 2016

GSO Provides Legacy Reserves Term Loan, Downsizes Revolver

Legacy Reserves executed a second lien term loan credit agreement with GSO Capital Partners to provide loans in an aggregate amount up to $300 million.

In connection with the transaction, Legacy entered into an amendment to its revolving credit facility agreement to permit the second lien and included a reduction of the borrowing base from $630 million to $600 million.

Advances under the second lien will be issued with an upfront fee of 2%, bear interest of 12% per annum and mature, subject to certain conditions, on August 31, 2021. Legacy intends to use the initial $60 million of gross loan proceeds to repay outstanding indebtedness and pay associated transaction expenses.

In addition, the second lien and the amendment added a secured debt asset coverage covenant of 1.00 times starting with the fiscal quarter ended June 30, 2017 and a secured debt / EBITDA covenant starting with the fiscal quarter ended December 31, 2018, increased the mortgage requirement to 95% of the value of oil and natural gas properties, required 75% of projected oil and natural gas production from proved developed producing reserves to be hedged through 2018, and amended the interest coverage ratio to 2.00 times.

Jefferies acted as sole financial advisor and Kirkland & Ellis acted as legal advisor to Legacy in this transaction. Latham & Watkins acted as legal advisor to GSO.

Midland, TX-based Legacy Reserves limited partnership focused on the acquisition and development of oil and natural gas properties primarily located in the Permian Basin, Mid-Continent and Rocky Mountain regions of the U.S.