Item 1.01. Entry into a Material Definitive Agreement.
Amendment to Credit Agreement
On November 12, 2021, SilverBow Resources, Inc. (“SilverBow Resources” or the “Company”), as borrower, the guarantors party thereto (the “Guarantors”), JPMorgan Chase Bank, N.A., as administrative agent (the “First Lien Agent”), and the other lenders party thereto entered into the Eighth Amendment to First Amended and Restated Senior Secured Credit Agreement (the “Eighth Amendment”). The Eighth Amendment amends the First Amended and Restated Senior Secured Credit Agreement, dated as of April 19, 2017 (as previously amended and as further amended by the Eighth Amendment, the “Credit Agreement”), by and among the Company, the Administrative Agent, JPMorgan Chase Bank, N.A., as sole lead arranger and sole bookrunner, Bank of America, N.A., Canadian Imperial Bank of Commerce, New York Branch, Fifth Third Bank, National Association, KeyBank National Association and Truist Bank, as syndication agents, Capital One, National Association, and BOKF, N.A. dba Bank of Texas, as documentation agents, and the other lenders party thereto.
Among other things, the Eighth Amendment (i) redetermined the Borrowing Base (as defined in the Credit Agreement) from $300 million to $460 million as part of the regularly scheduled semi-annual redetermination, which Borrowing Base is subject to a limitation on availability pending the consummation of an acquisition previously disclosed to the lenders; (ii) increased the maximum credit amounts from $600 million to $1 billion; (iii) consented to a $50 million redemption of the second lien notes so long as it occurs on or prior to February 15, 2022 and (iv) modified certain other terms of the Credit Agreement, including as set forth immediately below.
The Eighth Amendment includes revisions to effectuate the replacement of LIBOR with either an adjusted term secured overnight financing rate (“Term SOFR”) or an adjusted daily simple SOFR (“Daily Simple SOFR”), such that interest is payable at a variable rate based on Term SOFR, Daily Simple SOFR or the prime rate, determined at SilverBow Resources’ election at the time of the borrowing, plus an applicable margin rate.
The foregoing is qualified in its entirety by reference to the Eighth Amendment, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Amendment to Note Purchase Agreement
On November 12, 2021, the Company entered into the Second Amendment to the Note Purchase Agreement (the “Second Amendment”) among the Company, as issuer, U.S. Bank National Association, as agent and collateral agent (the “Second Lien Agent”), the guarantors party thereto and certain holders that are a party thereto. Upon the satisfaction of certain conditions to effectiveness, including the $50 million redemption of the second lien notes on or prior to February 15, 2022, the Second Amendment will amend the Note Purchase Agreement, dated as of December 15, 2017 (as previously amended and as further amended by the Second Amendment, the “Note Purchase Agreement”).
Upon effectiveness, the Second Amendment will among other things modify the terms of the Note Purchase Agreement, including to (i) extend the maturity date from December 15, 2024 to December 15, 2026; (ii) reduce the permitted ratio of Total Net Indebtedness to EBITDA (each as defined in the Note Purchase Agreement) from 4.50 to 1.00 to (A) 3.50 to 1.00 for the fiscal quarters ending on or before December 31, 2021 and (B) 3.25 to 1.00 commencing with the fiscal quarter ending March 31, 2022 and for any fiscal quarter thereafter; (iii) implement a Minimum Asset Coverage Ratio of 1.25 to 1.00 tested on a quarterly basis; (iv) extend the call protection schedule by twelve months and (v) increase the mortgage coverage and title requirements from 85% to 90%, which is consistent with the Credit Agreement.
The foregoing is qualified in its entirety by reference to the Second Amendment, a copy of which is filed as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated herein by reference.