Mr. Garnet Amundson reports
ESSENTIAL ENERGY SERVICES ANNOUNCES CREDIT FACILITY RENEWAL
Essential Energy Services Ltd. has entered into a renewed credit facility agreement with a syndicate of lenders, including National Bank of Canada, Toronto-Dominion Bank, HSBC Bank Canada and Canadian Western Bank. The credit facility provides Essential an extension of the current revolving secured credit facility to May 31, 2019, revised terms and conditions, and relaxation of financial covenants.
Primary amendments
The primary amendments to the credit facility include, among others, the following:
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A voluntary reduction in the commitment from $100-million to $40-million;
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A voluntary reduction in the accordion feature from $35-million to $20-million;
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Extension of the maturity date to May 31, 2019;
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Revisions to the financial covenants, as detailed in the financial
covenants section;
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Addition of an equity cure provision, as detailed in the equity cure
section;
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Addition of a monthly borrowing base, as detailed in the borrowing base
section below;
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Restrictions on dividends and acquisitions when financed debt to earnings before interest, taxes, depreciation and amortization, and stock-based compensation is greater than 3.00 times or when the covenant is waived.
"This is the first credit facility amendment that Essential has requested in this prolonged downturn," said Garnet Amundson, president and chief executive officer. "We are pleased with the revisions, and thank our lenders for their support and commitment to our business. The reduced facility size provides sufficient liquidity to meet our near-term plans, and offers cost savings in the form of lower amendment and standby fees."
Financial covenants
The financial covenants associated with the credit facility include:
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Financed debt to capitalization cannot exceed 50 per cent, financed debt is net of
cash.
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Distributions cannot exceed distributable cash flow.
- Financed debt to EBITDAS, minimum cumulative EBITDAS and fixed-charge
coverage covenants as shown in the attached table.
Quarter ending Financed debt to Minimum Fixed-charge
EBITDAS (1) cumulative coverage (3)
EBITDAS (2)
June 30, 2016 Less than or equal Greater than or
to 5.25x N/A equal to 1.25x
Sept. 30, 2016 Greater than or
Waived $1-million equal to 2.00x
Dec. 31, 2016 Greater than or
Waived $4-million equal to 2.00x
March 31, 2017 Greater than or
Waived $6-million equal to 2.00x
June 30, 2017 Less than or equal Greater than or
to 5.25x N/A equal to 1.25x
Sept. 30, 2017 Less than or equal Greater than or
to 4.75x N/A equal to 1.25x
Dec. 31, 2017 Less than or equal Greater than or
to 4.25x N/A equal to 1.25x
March 31, 2018 Less than or equal Greater than or
to 3.50x N/A equal to 1.25x
June 30, 2018 Less than or equal Greater than or
to 3.50x N/A equal to 1.25x
Sept. 30, 2018 Less than or equal Greater than or
to 3.25x N/A equal to 1.25x
Dec. 31, 2018 Less than or equal Greater than or
to 3.00x N/A equal to 1.25x
March 31, 2019 Less than or equal Greater than or
to 3.00x N/A equal to 1.25x
(1) Calculated on a trailing 12-month basis, financed debt is net of cash.
(2) Calculated on a cumulative basis as follows: at Sept. 30, 2016:
EBITDAS for the three months ending Sept. 30, 2016; at Dec. 31,
2016: EBITDAS for the six months ending Dec. 31, 2016; at March 31,
2017: EBITDAS for the nine months ending March 31, 2017.
(3) Calculated on a trailing 12-month basis.
The covenant calculation terms are as defined in the credit facility.
Equity cure
The proceeds from equity offerings may be applied to the calculation of EBITDAS in the financed-debt-to-EBITDAS covenant, the minimum cumulative EBITDAS covenant and the fixed-charge coverage covenant.
Borrowing base
During periods that Essential's financed debt to EBITDAS is greater than 2.00 times, advances under the credit facility will be limited by a borrowing base that is based on the aggregate of a percentage of accounts receivable, a percentage of the fixed asset value less priority payables.
Debt outstanding
On June 16, 2016, Essential had $25.6-million of debt outstanding.
We seek Safe Harbor.
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