Essential Energy Services amended and restated its revolving secured credit facility agreement with a syndicate of lenders, including National Bank of Canada, ATB Financial and Canadian Western Bank.
The primary amendments include, among others:
- An increase in the commitment from $40 million to $50 million
- A decrease of the accordion from $25 million to $20 million
- An extension of the maturity date to June 30, 2021
- Revision of certain financial covenants, as detailed in the Financial Covenants section below
- Revision of the equity cure provision, as detailed in the Equity Cure section below
- Removal of the borrowing base requirement
“With $19 million of debt outstanding on June 26, 2018, Essential is in a very strong financial position,” said Garnet Amundson, Essential president and CEO. “The revised credit facility continues to provide Essential with financial flexibility to support our strengthening operations. We thank our lenders for their support and commitment to our business.”
The financial covenants associated with the facility include:
- Funded debt to capitalization cannot exceed 50%
- Funded debt to EBITDA cannot exceed 3.5x
- Fixed charge coverage ratio must not be less than 1.25x
- Distributions, which include dividends and share buybacks, cannot exceed distributable cash flow
The covenant calculation terms are defined in the facility agreement.
The proceeds from an equity offering may be applied to the calculation of EBITDA in the funded debt to EBITDA covenant and the fixed charge coverage covenant. An equity cure cannot be used more than two times over the term of the credit facility and cannot be used in consecutive quarters.