Each one in plain English, with the numbers worked through for a shareholder.
28 May 2014debt financing● NeutralMajor
On May 22, 2014 Legacy amended its April 2014 credit agreement: the borrowing base rises from $800 million to $950 million once the recently announced acquisitions close and conditions are met. The cap on total debt to EBITDA is temporarily loosened from 4.00x to 4.50x through June 30, 2015, then returns to 4.00x, and minimum hedging requirements were adjusted for the larger base. This gives more borrowing room but also more allowed leverage for the acquisition period.
On May 13, 2014 Legacy issued an additional $300 million of its 6.625% Senior Notes due 2021 at 99% of face value, for net proceeds of about $291.5 million, adding to the $250 million issued in May 2013 (so $550 million of these notes in total, by inference). The money is to fund part of the cash price of the Piceance Basin acquisition and general purposes, and meanwhile pays down the revolver; Legacy must offer to swap the notes for registered ones within 365 days. The same filing says the underwriters exercised in full their option for 300,000 more Series A preferred units, about $7.3 million net, closed May 12, and earmarked for the pending Chaves County, New Mexico and Sheridan County, Montana oil-weighted acquisitions.
On May 2, 2014 Legacy agreed to buy a non-operated interest in Piceance Basin gas properties (Garfield County, Colorado) from a WPX Energy subsidiary for $355.0 million in cash plus a new class of incentive distribution units. The properties are 2,730 wells, with a working interest of about 29% rising to about 37% on Jan 1, 2015 and about 41% on Jan 1, 2016, and internally estimated proved reserves of 276 Bcfe (100% proved developed producing; 83% gas). Closing is expected before the end of June 2014 and requires an amended partnership agreement (no unitholder vote needed). The filing also describes a revised distribution policy under which the incentive units get extra cash distributions once payouts to unitholders pass targets set above current levels. This appears to be the larger of the two acquisitions announced March 26, 2014 (inference); the same 8-K carries a results press release (Item 2.02) whose figures are not in the text shown.
On April 10, 2014 Legacy agreed to sell 2,000,000 8% Series A cumulative redeemable perpetual preferred units at $25.00 each, with net proceeds of about $48.1 million, plus a 30-day option for 300,000 more. Closing is scheduled for April 17, 2014. The proceeds are meant to fund part of certain acquisitions (the two pending deals announced March 26, 2014, by inference) and general purposes, and will pay down the revolver in the meantime. The preferred units pay 8% until April 15, 2024, then a floating rate of three-month LIBOR plus 5.24%, and rank as a new class of equity alongside the common units.
On April 1, 2014 Legacy signed a new five-year $1.5 billion secured revolving credit facility with Wells Fargo as agent, maturing April 1, 2019, replacing the March 2011 facility, which was repaid in full with the first borrowings. The borrowing base is $800 million (not conditional on the closing of two acquisitions announced March 26, 2014) with about $360 million drawn and about $440 million available. Key covenants cap total debt at 4.00x EBITDA, and the facility is secured by over 80% of oil and gas property value.
On Dec 19, 2013 Legacy filed a separate S-4 to let holders exchange the $250 million 6.625% Senior Notes due 2021, issued in May 2013, for identical SEC-registered notes. This is the exchange offer promised when those notes were sold, following the same process as the 8% 2020 notes. Terms are identical apart from transfer restrictions and additional interest, and it raises no new money.
