Each one in plain English, with the numbers worked through for a shareholder.
2 July 2021business combination● NeutralMajor
On July 2, 2021, Southwestern filed a preliminary proxy statement for a special shareholder meeting on the Indigo deal. Shareholders will vote on issuing the 339,270,568 shares (about 50% of voting power as of June 1, 2021), on raising authorized shares from 1.25 billion to 2.5 billion, and on adjourning if needed. The board unanimously recommends voting for all three; the meeting date was still blank. The share issuance is large relative to the existing share count, so existing holders would own a smaller share of the company if it closes (an inference from the 50% figure).
On July 2, 2021, Southwestern filed Indigo's audited 2020 and unaudited Q1 2021 financial statements plus pro forma combined statements, as required for the pending Indigo deal. The filing restates the terms: $400 million cash, 339,270,568 Southwestern shares, and assumption of $700 million of Indigo's 5.375% senior notes due 2029. The assumed notes are a new detail not in earlier context. Indigo's 2020 balance sheet shows total assets of $3.04 billion and long-term debt of $779 million.
On June 9, 2021, Southwestern signed Amendment No. 10 to its bank credit agreement with JPMorgan as agent. It waives the requirement that Indigo and its subsidiaries guarantee the facility and pledge collateral for it. This supports the pending Indigo acquisition and adds no new borrowing in this filing.
On June 1, 2021, Southwestern agreed to acquire Indigo Natural Resources LLC for $400 million in cash plus 339,270,568 new Southwestern shares (valued at $1.6 billion on a 30-day average price to May 28, 2021). Closing needs a majority vote of Southwestern shareholders on the share issuance and expiry of the antitrust waiting period. Either side can terminate if it has not closed within 180 days, and Southwestern owes $81 million in certain circumstances such as a change of board recommendation. Indigo's holders get registration rights and lock-ups. For existing shareholders, the share issuance is large and would dilute them if completed (an inference from the share count; the filing gives no total share figure).
On June 2, 2021, Southwestern announced by press release a merger agreement to buy Indigo Natural Resources LLC, and furnished an investor presentation and an employee email. This filing carries only the announcement and legal notices; the terms are in the companion 8-K filed the same day. It starts a new acquisition thread that needs a vote of Southwestern shareholders.
13 Nov 2020asset acquisition disposition▲ GoodMajor
Southwestern completed its acquisition of Montage on Nov 13, 2020, by merging Montage into itself. Each Montage share became 1.8656 Southwestern shares, with cash for fractions. This resolves the main open thread from August, and Southwestern's shareholders keep their shares but are now diluted by the new issuance (the S-4 estimated about 90%/10% ownership). Montage's financial statements and pro forma figures are to be filed later by amendment.
Southwestern and Montage added extra disclosures to the merger proxy statement/prospectus after six lawsuits were filed by purported Montage stockholders; two of the six also name Southwestern. Both companies call the suits meritless and say the added details (on the sale process, Barclays' analyses and fees) are meant only to avoid the cost of litigation. The filing states the S-4 was declared effective Oct 6, 2020, and the Montage vote is still ahead. The filing does not change the merger terms.
On Oct 8, 2020, Southwestern amended its bank credit agreement again (Amendment No. 8). The borrowing base and lender commitments stay at $1.8 billion, cash is capped at $200 million while loans are outstanding, and the interest rate on loans rises by 0.25 percentage points. Once the Montage merger closes, the borrowing base and commitments rise to $2.0 billion, and Montage's letters of credit move under this facility. This continues the merger financing and the credit facility terms are tighter on cost and cash.
Southwestern filed Amendment No. 1 to its merger registration statement, now setting the Montage shareholder vote for Nov 12, 2020, with a record date of Oct 5, 2020. Approval needs a majority of Montage's outstanding shares, and the 90%/10% ownership split and 1.8656 exchange ratio are unchanged. This moves the merger forward; the S-4 is still not declared effective in this filing.
Southwestern filed the registration statement (Form S-4) for the shares it will issue in the Montage merger, up to 70,885,662 shares at 1.8656 per Montage share. It estimates Southwestern holders will own about 90% and Montage holders about 10% of the combined company on a fully diluted basis, and existing holders keep their shares. Montage holders must approve the deal at a special meeting; the date was left blank in this draft. This continues the merger process begun in August.
Southwestern closed its $350 million offering of 8.375% senior notes due Sept 15, 2028 on Aug 27, 2020, raising about $345 million net. The money is meant, with the share sale proceeds and credit facility borrowings, to redeem Montage's notes Southwestern will assume at the merger close. The notes must be redeemed at par plus accrued interest if the merger does not close by Feb 12, 2021 or Southwestern decides it cannot or is unlikely to close. Interest is 8.375%, paid March 15 and September 15, starting March 15, 2021. This completes the notes sale announced on Aug 18.
Southwestern agreed on Aug 18, 2020 to sell $350 million of 8.375% senior notes due 2028 (about $345 million net, expected to close Aug 27), and amended its bank credit agreement (Amendment No. 7). The notes money, the $152 million share sale and credit-facility borrowings are meant to pay off Montage's senior notes that Southwestern will take on when the merger closes. The credit amendment lets Southwestern assume and redeem those notes, and adds an early maturity trigger 91 days before Montage's notes come due (currently July 15, 2023) unless at least $450 million of them have been redeemed, refinanced or extended. This resolves the open need for a credit agreement amendment, and adds new debt.
Southwestern closed a public sale of 63,250,000 new common shares at $2.50 each (including the underwriters' full extra allotment of 8,250,000), raising about $152 million net. It plans to use the money to partly pay off Montage's senior notes that it will take on when the Montage merger closes; if the merger fails, the money goes to general corporate purposes including debt repayment. The new shares add to the share count, which dilutes existing holders (an inference).
This amendment to the Aug 12, 2020 Montage filing only adds the full Merger Agreement as an exhibit. It makes no other changes and adds no new terms or figures.
Southwestern agreed to acquire Montage Resources Corporation in an all-stock merger, giving 1.8656 Southwestern shares for each Montage share; the implied value is $213 million based on the Aug 11, 2020 closing share price. Closing needs approval from a majority of Montage holders, antitrust clearance and an effective S-4 registration, and either side can end the deal if it is not complete by Feb 12, 2021. EnCap, which holds about 39% of Montage, agreed to vote in favour. Existing Southwestern shareholders would be issued new shares to Montage holders (an inference: this dilutes their percentage ownership).
Southwestern and its lenders, with JPMorgan as agent, amended the April 26, 2018 credit agreement to push its maturity from April 26, 2023 to April 26, 2024 and reconfirm the borrowing base for fall 2019. Total lender commitments stay at $2.0 billion. A press release the same week also covered recent senior note repurchases and hedging positions, but no figures for those appear in the filing.
The filing says the company issued a press release giving its 2019 guidance along with some 2018 production and capital investment information. The filing text itself contains no figures; the numbers are only in the attached press release, which was not provided here.
4 Dec 2018asset acquisition disposition● NeutralMajor
On December 3, 2018 Southwestern completed the sale of 100% of its Fayetteville Shale production and gathering subsidiaries to Flywheel Energy Operating for $1.865 billion, subject to customary adjustments, plus the buyer's assumption of various obligations. Separately, Senior VP Jack Bergeron will retire January 2, 2019 with a $1,227,366 cash payment.
Southwestern announced early results of cash tender offers (upsized to $900 million of principal) for its 2020, 2022, 2025, 2026 and 2027 notes, to be funded from the Fayetteville sale to Flywheel and conditioned on it closing. It plans to buy all tendered 2022 notes ($787.2 million) and 2020 notes ($40.0 million), $72.8 million of the 2025 notes, and none of the 2026 or 2027 notes. Holders of the 2022 notes consented to remove the liens and sale-and-leaseback restrictions; other series did not give enough consents. This continues the debt reduction tied to the Fayetteville sale.
On August 30, 2018 Southwestern agreed to sell its Fayetteville Shale production and gathering subsidiaries to Flywheel Energy Operating for $1.865 billion, with an economic effective date of July 1, 2018. The buyer takes on about $564 million of future commitments, though Southwestern remains responsible for up to about $126 million of unused pipeline capacity costs through 2020. Closing depends on conditions, including antitrust and FERC steps, and must happen by December 31, 2018; the buyer paid a $150 million deposit.
On April 26, 2018 Southwestern signed a new secured credit agreement with JPMorgan as agent: $2.0 billion of commitments, a $3.2 billion initial borrowing base, maturing April 26, 2023 (or Dec 14, 2021 if at least $700 million of the 2022 notes has not been refinanced or redeemed by then). It ended its two earlier credit agreements and repaid the $1,191 million term loan using cash and $360 million of initial borrowings. Subsidiaries that guarantee the new facility also became guarantors of the 2022, 2025, 2026 and 2027 notes.
Holders of a majority of the 4.10% 2022 notes and 4.95% 2025 notes consented to change the limits on liens in those notes' indentures, to match those on the 2025, 2026 and 2027 notes. The company was to pay holders who consented $5.00 per $1,000 of notes. This continues the September debt clean-up of the notes.
Southwestern closed its sale of $650 million of 7.500% notes due 2026 and $500 million of 7.750% notes due 2027, raising about $1,133 million net. The proceeds repaid and ended the term loan (the loan the Sept 11 credit amendment depended on), and the rest, with cash on hand, funds the tender offers announced earlier. It also amended the liens covenant on its 4.050% 2020 notes after receiving enough holder consents, and announced early tender results (figures not shown in the visible text).
On September 11, 2017 Southwestern agreed to sell $650 million of 7.500% senior notes due 2026 and $500 million of 7.750% senior notes due 2027, expected to close September 25, 2017, with net proceeds of about $1,133 million. About $327 million is to repay and end the 2015 term loan, which is what triggers the credit amendment filed the same day. The rest, with cash on hand, funds tender offers for all its 4.05% 2020 notes and up to $100 million each of its 4.10% 2022 and 4.95% 2025 notes.
On September 11, 2017 Southwestern amended its June 2016 secured term loan and revolver, raising the minimum interest coverage ratio to 2.00x, giving the option of a maximum leverage test in place of minimum liquidity, and letting it keep the first $500 million of asset-sale proceeds. The amendment only takes effect once the 2015 term loan is repaid in full; $327 million remained outstanding on June 30, 2017.
Southwestern sold 98,900,000 new common shares at $13.00 each (closed July 5, 2016), raising about $1,247 million after costs. This is the first equity issuance in the record and dilutes existing shareholders. The company says it will repay $375 million of the 2015 term loan, which extends that loan's maturity to December 14, 2020, and use the remainder for tender offers for up to $750 million of its 3.30% 2018, 7.50% 2018 and 4.05% 2020 notes, and for general corporate purposes.
On June 27, 2016 Southwestern restructured its bank debt: a new $1.934 billion credit agreement (a $1.191 billion secured term loan, fully drawn, and a $743 million revolver, both due December 14, 2020), an amended $750 million unsecured term loan, and the old revolver cut to $66 million. The new term loan is secured by substantially all assets owned directly by the company, and the facilities add minimum interest coverage and collateral coverage tests. The press release says the extension of the $750 million term loan to December 2020 depends on paying at least $375 million by June 30, 2017. This replaces the $2.0 billion revolver arrangement from the earlier context.
On March 30, 2016 Southwestern borrowed about $1.55 billion under its existing revolving credit agreement and repaid it in full on April 1, 2016, years before the December 14, 2018 maturity. The filing says holding that cash at quarter-end raised by about $232 million the secured or subsidiary debt it could incur in Q2 2016, in case it chooses to retire, rearrange or extend existing debt.
