Quarterly report pursuant to Section 13 or 15(d)

Borrowings

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Borrowings
9 Months Ended
Sep. 30, 2012
Debt Disclosure [Abstract]  
Borrowings
Borrowings

The Company’s borrowings consisted of the following at:
 
 
September 30, 2012
 
December 31, 2011
Principal components:
 
 
 
 
Credit Facility
 
$
40,000

 
$

13% Senior Notes due 2016, principal
 
96,961

 
106,961

Total principal outstanding
 
136,961

 
106,961

Non-cash components:
 
 

 
 

13% Senior Notes due 2016 unamortized deferred credit
 
14,489

 
18,384

Total carrying value of borrowings
 
$
151,450

 
$
125,345



Senior Secured Revolving Credit Facility (the “Credit Facility”)

On June 20, 2012, Regions Bank increased the Company's Credit Facility to $200,000 with an associated borrowing base under the Credit Facility of $60,000 and a maturity of July 31, 2014. In October 2012, the Credit Facility was amended to increase the borrowing base to $80,000, extend the maturity to March 15, 2016 and add Citibank, NA, IberiaBank, Whitney Bank and OneWest Bank, FSB as participating lenders. Regions Bank continues to serve as Administrative Agent for the facility. Amounts borrowed under the Credit Facility may not exceed a borrowing base, which is generally reviewed on a semi-annual basis and is then eligible for re-determination.  The borrowing base and scheduled maturity at year-end 2011 were $45,000 and September 25, 2012, respectively. The Credit Facility is secured by mortgages covering the Company's major producing fields.

As of September 30, 2012, the balance outstanding on the Credit Facility was $40,000 with an interest rate on the facility of 2.97%, calculated as the London Interbank Offered Rate (“LIBOR”) plus a tiered rate ranging from 2.5% to 3.0%, which is based on utilization of 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. As of November 7, 2012, the balance outstanding on the Credit Facility was $44,000 as the Company drew an additional $4,000 in support of the Company's ongoing capital development program.
13% Senior Notes due 2016 (“Senior Notes”) and Deferred Credit

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 unsecured 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 November 2009, the Company recorded as a deferred credit the $31,507 difference between the adjusted carrying amount of the Senior Notes that were exchanged and the principal of the Senior Notes. This deferred credit 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:
Gross Carrying
 
Accumulated Amortization at
 
Carrying Value at
 
Amortization Recorded during Current Year as a Reduction of
 
Estimated Amortization to be Recorded during the Remainder of the
 Amount
 
9/30/2012
 
9/30/2012
 
Interest Expense
 
 Current Year
$31,507
 
$17,018
 
$14,489
 
$2,304
 
$782


In June 2012, the Company redeemed $10,000 of its Senior Notes, which resulted in a $1,366 net gain on the early extinguishment of debt. The Notes had a carrying value of $11,591, including $1,591 of the Notes’ deferred credit. To redeem the Notes, the Company paid $10,225, comprised of the $10,000 principal of the notes and $225 of redemption expenses. The accumulated amortization reflected in the table above at September 30, 2012 includes the previously mentioned $1,591 deferred credit component, which recorded as a component of the gain on early extinguishment of debt is excluded from the amount reflected above as amortization recorded during the current year as a reduction of interest expense.

Restrictive Covenants

The indenture governing our Senior Notes and the Company’s Credit Facility contains 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, 2012.