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Item 1.01
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Entry Into a Material Definitive Agreement.
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On February 10, 2017 (the
“Refinancing Date”), SandRidge Energy, Inc. (the “Company”) refinanced its existing reserve-based revolving credit facility into a new $600.0 million credit facility with a $425.0 million borrowing base (the
“Refinancing”). In order to effectuate the Refinancing, the Company entered into an amendment to the existing credit agreement (the “Existing Credit Agreement”, and as amended, the “Refinanced Credit Facility”) to
reflect the following, among other things:
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increased the principal amount of commitments thereunder to $600.0 million from $425.0 million;
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extended the maturity date to March 31, 2020 from February 4, 2020;
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borrowing base determinations now include the Company’s proportionately consolidated share of proved reserves held by SandRidge Mississippian Trust I, SandRidge Mississippian Trust II and SandRidge Permian Trust
(collectively, the “Royalty Trusts”);
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reduced the interest rate from a flat base rate of LIBOR plus 475 basis points to a pricing grid tied to borrowing base utilization of (A) LIBOR plus an applicable margin that varies from 300 to 400 basis points or
(B) the base rate plus an applicable margin that varies from 200 to 300 basis points;
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reduced the LIBOR floor from 1% to 0%;
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eliminated the minimum proved developing producing reserves asset coverage ratio;
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removed the requirement to maintain $50.0 million in a cash collateral account controlled by the Administrative Agent;
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eliminated the holiday from borrowing base determinations and the maximum consolidated total net leverage ratio and the minimum consolidated interest coverage ratio covenants; and
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eliminated certain negative covenants, such as the $20.0 million liquidity requirement and the limitation on capital expenditures.
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The initial conforming borrowing base under the Refinanced Credit Facility is $425.0 million and the next scheduled borrowing base
redetermination is scheduled for October 1, 2017, followed by scheduled semiannual borrowing base redeterminations thereafter. The Refinanced Credit Facility is secured by (i) first-priority mortgages on at least 95% of the
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valuation of all proved reserves included in the most recently delivered reserve report of the Company, (ii) a first-priority perfected pledge of substantially all of the capital stock owned by each credit
party and equity interests in the Royalty Trusts that are owned by a credit party and (iii) a first-priority perfected security interest in substantially all the cash, cash equivalents, deposits, securities and other similar accounts, and other
tangible and intangible assets of the credit parties (including but not limited to
as-extracted
collateral, accounts receivable, inventory, equipment, general intangibles, investment property, intellectual
property, real property and the proceeds of the foregoing). As described above, the Refinanced Credit Facility refinanced and thereby replaced the Existing Credit Agreement.
The Refinanced Credit Facility requires the company to, commencing with the first full quarter ending after the effective date of the
Refinancing, maintain (i) a maximum consolidated total net leverage ratio, measured as of the end of any fiscal quarter, of no greater than 3.50 to 1.00 and (ii) a minimum consolidated interest coverage ratio, measured as of the end of any
fiscal quarter, of no less than 2.25 to 1.00. Such financial covenants are subject to customary cure rights.
The Refinanced Credit
Facility contains customary affirmative and negative covenants, including as to compliance with laws (including environmental laws, ERISA and anti-corruption laws), maintenance of required insurance, delivery of quarterly and annual financial
statements, oil and gas engineering reports, maintenance and operation of property (including oil and gas properties), restrictions on the incurrence of liens, indebtedness, asset dispositions, fundamental changes, restricted payments and other
customary covenants.
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The Refinanced Credit Facility includes events of default relating to customary matters,
including, among other things, nonpayment of principal, interest or other amounts; violation of covenants; incorrectness of representations and warranties in any material respect; cross-payment default and cross acceleration with respect to
indebtedness in an aggregate principal amount of $25.0 million or more; bankruptcy; judgments involving liability of $25.0 million or more that are not paid; and ERISA events. Many events of default are subject to customary notice and cure
periods.
The above description of the material terms and conditions of the Refinanced Credit Facility does not purport to be complete and
is qualified in its entirety by reference to the full text of the Refinanced Credit Facility attached as Exhibit A to the refinancing amendment, which is filed as Exhibit 10.1 hereto.