Annual report pursuant to Section 13 and 15(d)

Borrowings

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Borrowings
12 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
Borrowings Borrowings
The Company’s borrowings consisted of the following:
໿
 
 
As of December 31,
 
 
2019
 
2018

 
(In thousands)
Senior Secured Revolving Credit Facility due 2024
 

$1,285,000

 

$200,000

6.25% Senior Notes due 2023 (1)
 
650,000

 

6.125% Senior Notes due 2024
 
600,000

 
600,000

8.25% Senior Notes due 2025 (1)
 
250,000

 

6.375% Senior Notes due 2026
 
400,000

 
400,000

Total principal outstanding
 
3,185,000

 
1,200,000

Unamortized premium for 6.125% Senior Notes
 
5,344

 
6,469

Unamortized premium for 6.25% Senior Notes
 
4,838

 

Unamortized premium for 8.25% Senior Notes
 
5,286

 

Unamortized deferred financing costs for Senior Notes
 
(14,359
)
 
(16,996
)
Total carrying value of borrowings (2)
 

$3,186,109

 

$1,189,473

 
(1)
As a result of the Merger, the Company became successor-in-interest to the indenture governing the 6.25% Senior Notes and 8.25% Senior Notes.
(2)
Excludes unamortized deferred financing costs related to the Company’s senior secured revolving credit facility of $22.2 million and $6.1 million as of December 31, 2019 and 2018, respectively.
Senior Secured Revolving Credit Facility
On May 25, 2017, the Company entered into the Sixth Amended and Restated Credit Agreement to the Credit Facility (the “Prior Credit Facility”) with a syndicate of lenders. The Prior Credit Facility provided for interest-only payments until May 25, 2023, when the Prior Credit Facility would mature and any outstanding borrowings would become due. The maximum credit amount under the Prior Credit Facility was $2.0 billion.
Effective May 1, 2019, the Company entered into the third amendment to the Prior Credit Facility to, among other things: (i) reaffirm the borrowing base at $1.1 billion, excluding the Ranger assets sold; and (ii) amend various covenants and terms to reflect current market trends.
As a result of entering into the Credit Facility, as defined below, the Company terminated the Prior Credit Facility. As a result of terminating the Prior Credit Facility, the Company recorded a loss on extinguishment of debt of $4.9 million, which was comprised solely of the write-off of unamortized deferred financing costs associated with the Prior Credit Facility.
On December 20, 2019, upon consummation of the Merger, the Company entered into the credit agreement with a syndicate of lenders (the “Credit Facility”). The Credit Facility provides for interest-only payments until December 20, 2024 (subject to springing maturity dates of (i) January 14, 2023 if the 6.25% Senior Notes are outstanding at such time and (ii) July 2, 2024 if the 6.125% Senior Notes are outstanding at such time), when the Credit Facility matures and any outstanding borrowings are due. The maximum credit amount under the Credit Facility is $5.0 billion. The borrowing base under the Credit Facility is subject to regular redeterminations in the spring and fall of each year, as well as special redeterminations described in the credit agreement, which in each case may reduce the amount of the borrowing base. The Credit Facility is secured by first preferred mortgages covering the Company’s major producing properties. The capitalized terms which are not defined in this description of the revolving credit facility shall have the meaning given to such terms in the credit agreement.
As of December 31, 2019, the borrowing base under the Credit Facility was $2.5 billion, with an elected commitment amount of $2.0 billion, and borrowings outstanding of $1.3 billion at a weighted average interest rate of 3.56%. The Company also had $17.7 million in letters of credit outstanding under the Credit Facility.
Borrowings outstanding under the credit agreement bear interest at the Company’s option at either (i) a base rate for a base rate loan plus a margin between 0.25% to 1.25%, where the base rate is defined as the greatest of the prime rate, the federal funds rate plus 0.50% and the adjusted LIBO rate plus 1.00%, or (ii) an adjusted LIBO rate for a Eurodollar loan plus a margin between 1.25% to 2.25%. At any time the Leverage Ratio, as defined in the credit agreement, is greater than 3.00 to 1.00, the base rate and Eurodollar loans are increased 0.25%. The Company also incurs commitment fees at rates ranging between 0.375% to 0.500% as set forth in the table below on the unused portion of lender commitments, which are included in “Interest expense, net” in the consolidated statements of operations.
6.375% Senior Notes
On June 7, 2018, the Company issued $400.0 million aggregate principal amount of 6.375% Senior Notes due 2026 (the “6.375% Senior Notes”), which mature on July 1, 2026 and have interest payable semi-annually each January 1 and July 1. The Company used the net proceeds from the offering of approximately $394.0 million, after deducting initial purchasers’ discounts and estimated offering expenses, to fund a portion of the Delaware Asset Acquisition described above. The 6.375% Senior Notes are guaranteed on a senior unsecured basis by the Company’s wholly-owned subsidiary, Callon Petroleum Operating Company, and may be guaranteed by certain future subsidiaries. The subsidiary guarantor is 100% owned, all of the guarantees are full and unconditional and joint and several, the parent company has no independent assets or operations and any subsidiaries of the parent company other than the subsidiary guarantor are minor.
The Company may redeem the 6.375% Senior Notes in accordance with the following terms: (1) prior to July 1, 2021, a redemption of up to 35% of the principal in an amount not greater than the net proceeds from certain equity offerings, and within 180 days of the closing date of such equity offerings, at a redemption price of 106.375% of principal, plus accrued and unpaid interest, if any, to the date of the redemption, if at least 65% of the principal will remain outstanding after such redemption; (2) prior to July 1, 2021, a redemption of all or part of the principal at a price of 100% of principal of the amount redeemed, plus an applicable make-whole premium and accrued and unpaid interest, if any, to the date of the redemption; and (3) a redemption, in whole or in part, at a redemption price, plus accrued and unpaid interest, if any, to the date of the redemption, (i) of 103.188% of principal if the redemption occurs on or after July 1, 2021, but before July 1, 2022, and (ii) of 102.125% of principal if the redemption occurs on or after July 1, 2022, but before July 1, 2023, and (iii) of 101.063% of principal if the redemption occurs on or after July 1, 2023, but before July 1, 2024, and (iv) of 100% of principal if the redemption occurs on or after July 1, 2024.
Following a change of control, each holder of the 6.375% Senior Notes may require the Company to repurchase all or a portion of the 6.375% Senior Notes at a price of 101% of principal of the amount repurchased, plus accrued and unpaid interest, if any, to the date of repurchase.
6.125% Senior Notes
On October 3, 2016, the Company issued $400.0 million aggregate principal amount of 6.125% Senior Notes due 2024 (the “6.125% Senior Notes), which mature on October 1, 2024 and have interest payable semi-annually each April 1 and October 1. The 6.125% Senior Notes are guaranteed on a senior unsecured basis by the Company’s wholly-owned subsidiary, Callon Petroleum Operating Company, and may be guaranteed by certain future subsidiaries. The subsidiary guarantor is 100% owned, all of the guarantees are full and unconditional and joint and several, the parent company has no independent assets or operations and any subsidiaries of the parent company other than the subsidiary guarantor are minor.
On May 19, 2017, the Company issued an additional $200.0 million aggregate principal amount of its 6.125% Senior Notes which with the existing $400.0 million aggregate principal amount of 6.125% Senior Notes are treated as a single class of notes under the indenture. The Company used a portion of the net proceeds from the offering of approximately $206.1 million, including a premium issue price of 104.125% and after deducting initial purchasers’ discounts and estimated offering expenses, to fund the acquisition completed on June 5, 2017 with the remainder for general corporate purposes.
The Company may redeem all or a portion of the 6.125% Senior Notes at redemption prices decreasing from 104.594% to 100% of the principal amount on October 1, 2022, plus accrued and unpaid interest.
Following a change of control, each holder of the 6.125% Senior Notes may require the Company to repurchase all or a portion of the 6.125% Senior Notes at a price of 101% of principal of the amount repurchased, plus accrued and unpaid interest, if any, to the date of repurchase.
Senior Notes Assumed in Merger
On December 20, 2019, upon consummation of the Merger, the Company became successor-in-interest to the indenture governing the 8.25% Senior Notes due 2025 (the “8.25% Senior Notes”) and the 6.25% Senior Notes due 2023 (the “6.25% Senior Notes”). Both the 8.25% Senior Notes and the 6.25% Senior Notes are guaranteed on a senior unsecured basis by the Company’s wholly-owned subsidiary, Callon Petroleum Operating Company, and may be guaranteed by certain future subsidiaries.
8.25% Senior Notes. The 8.25% Senior Notes mature on July 15, 2025 and have interest payable semi-annually each January 15 and July 15. Before July 15, 2020, the Company may, at its option, redeem all or a portion of the 8.25% Senior Notes at 100% of the principal amount plus accrued and unpaid interest and a make-whole premium. Thereafter, the Company may redeem all or a portion of the 8.25% Senior Notes at redemption prices decreasing annually from 106.188% to 100% of the principal amount redeemed plus accrued and unpaid interest.
6.25% Senior Notes. The 6.25% Senior Notes mature on April 15, 2023 and have interest payable semi-annually each April 15 and October 15. The Company may redeem all or a portion of the 6.25% Senior Notes at redemption prices decreasing from 103.125% to 100% of the principal amount on April 15, 2021, plus accrued and unpaid interest.
If a Change of Control (as defined in the indenture governing the 8.25% Senior Notes and the 6.25% Senior Notes) occurs, the Company may be required by holders to repurchase the 8.25% Senior Notes and the 6.25% Senior Notes for cash at a price equal to 101% of the principal amount purchased, plus any accrued and unpaid interest. The indenture governing the 8.25% Senior Notes and the 6.25% Senior Notes contains covenants that, among other things, limit the Company’s ability and the ability of its restricted subsidiaries to: pay distributions on, purchase or redeem the Company’s capital stock or redeem the Company’s subordinated debt; make investments; incur or guarantee additional indebtedness or issue certain types of equity securities; create certain liens; sell assets; consolidate, merge or transfer all or substantially all of the Company’s assets; enter into agreements that restrict distributions or other payments from the Company’s restricted subsidiaries to the Company; engage in transactions with affiliates; and create unrestricted subsidiaries. The indenture governing the 8.25% Senior Notes and the 6.25% Senior Notes also contains customary events of default, including those related to failure to comply with the terms of the 8.25% Senior Notes and the 6.25% Senior Notes, certain cross defaults of other indebtedness and mortgages, and certain failures to pay final judgments.
Restrictive covenants
The Company’s credit facility and the indentures governing its senior notes contain various covenants including restrictions on additional indebtedness, payment of cash dividends and maintenance of certain financial ratios. The Company was in compliance with these covenants at December 31, 2019.