Source Energy Services completed a refinancing of its credit facilities by entering into a new five-year $135 million term loan with Silver Point Finance and a new $40 million revolving asset-backed loan facility with CIBC. Proceeds from the term loan will be used to redeem the outstanding 10.5% senior secured notes due March 15, 2025 and repay the outstanding amounts drawn on the company’s current asset-backed loan facility.
The refinancing package provides source with:
• a lower cost of borrowing
• increased financial flexibility
• enhanced liquidity, with an undrawn CIBC ABL and approximately $10.0 million of cash on the balance sheet at close
• neutrality to its current leverage position
• maturities out to 2029
“The new credit facilities strengthen our balance sheet and enhance our liquidity, which further positions us to execute on our long-term growth strategies, while continuing to de-lever the business,” Derren Newell, chief financial officer of Source Energy, said. “We are excited to partner with Silver Point and CIBC for the next chapter of our business and we would like to thank both FGI and the noteholders for their past commitments.”
The term loan agreement with Silver Point matures on December 20, 2029 and bears interest at term SOFR plus an applicable margin. The term loan agreement contains covenants and principal amortization typical for this type of facility.
The CIBC ABL facility remains undrawn at close, matures on Dec. 20, 2027, and may be drawn in Canadian or U.S. dollars. Interest rates are determined, using prime, base rate, CORRA or SOFR plus an applicable margin, based on average monthly amounts drawn on the facility. The borrowing base formula is applied to accounts receivable and inventory, and the facility contains covenants that are typical for this type of facility.
Source has delivered a notice of redemption, effective Dec. 19, 2024, for all of its outstanding notes, representing an aggregate principal value of $140.5 million. As set forth in the redemption notice, the redemption date will be Jan. 20, 2024 and the redemption price is 100% of the principal amount of the notes outstanding plus accrued and unpaid interest up to but excluding the redemption date, in accordance with the provisions of the indenture governing the notes.
