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Borrowings |
Note 4 — Borrowings
The Company’s borrowings consisted of the following at:
Senior Secured Revolving Credit Facility (the “Credit Facility”)
In January 2010, the Company amended its Credit Facility agreement to include Regions Bank as
the sole arranger and administrative agent. The third amended and restated Credit Facility, which
matures on September 25, 2012, provides for a $100,000 facility. Amounts borrowed under the Credit
Facility may not exceed a borrowing base which is reviewed and re-determined on a semi-annual basis
using second and fourth quarter financial results and reserve information available at the time of
the redetermination. During the second quarter of 2011, the lender completed their borrowing base
redetermination, which resulted in a 50% increase in the borrowing base from $30,000 at December
31, 2010 to $45,000 at September 30, 2011. As of September 30, 2011, the interest rate on the
facility was 3%, defined in the amended agreement as the London Interbank Offered Rate (“LIBOR”),
with a minimum of 0.5%, plus a tiered rate ranging from 2.5% to 3.0%, which is based on the amount
drawn on the facility. In addition, the credit facility carries a commitment fee of 0.5% per annum
on the unused portion of the borrowing base, which is payable quarterly.
13% Senior Notes due 2016 (“Senior Notes”) and Deferred Credit
During the fourth quarter of 2009, the Company exchanged approximately 92% of the principal
amount, or $183,948, of the Company’s 9.75% Senior Notes (“Old Notes”) for $137,961 of Senior
Notes. The exchange resulted in a 25% reduction in the principal amount of the Old Notes, and
included a 3.25% increase in the coupon rate from 9.75% to 13%. In addition, holders of the
tendered notes received an aggregate of 3,794 shares of common stock and 311 shares of Convertible
Preferred Stock which was valued on November 24, 2009 in the amount of $11,527 and recorded as an
increase to stockholders’ equity. On December 31, 2009, each share of the Convertible Preferred
Stock was automatically converted into 10 shares of common stock. The Senior Notes’ 13% interest
coupon is payable on the last day of each quarter. Certain of the Company’s subsidiaries guarantee
the Company’s obligations under the Senior Notes. The subsidiary guarantors are 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 guarantors are minor.
Upon issuing the Senior Notes in 2009, the Company reduced the carrying amount of the Old
Notes by the fair value of the common and preferred stock issued in the amount of $11,527. The
$31,507 difference between the adjusted carrying amount of the Old Notes and the principal of the
Senior Notes was recorded as a deferred credit, which is being amortized as a reduction of interest
expense over the life of the Senior Notes at an 8.5% effective interest rate. The following table
summarizes the Company’s deferred credit balance:
On March 19, 2011, using a portion of the proceeds from the Company’s February 2011
equity offering discussed in Note 7, the Company redeemed an aggregate principal amount of $31,000
of its Senior Notes with a carrying value of $37,004 including $6,004 of the Notes’ deferred
credit, in exchange for $35,062. The amount paid included the $31,000 principal of the notes, the
$4,030 call premium and $32 of redemption expenses, which resulted in a $1,942 net gain on the
early extinguishment of debt.
Restrictive Covenants
Both the indenture governing our Senior Notes and the Company’s Credit Facility contain
various covenants including restrictions on additional indebtedness and payment of cash dividends.
In addition, Callon’s Credit Facility contains covenants for maintenance of certain financial
ratios. The Company was in compliance with these covenants at September 30, 2011.
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