Annual report pursuant to Section 13 and 15(d)

Borrowings

v2.4.0.6
Borrowings
 12 Months Ended
Dec. 31, 2012
Debt Disclosure [Abstract]  
Borrowings
Borrowings
 
For the year ended December 31,
 
2012
 
2011
Principal components:
 
 
 
     Credit Facility
$
10,000

 
$
—

     13% Senior Notes due 2016, principal
96,961

 
106,961

          Total principal outstanding
$
106,961

 
$
106,961

 
 
 
 
Non-cash components:
 
 
 
     13% Senior Notes due 2016 unamortized deferred credit
13,707

 
18,384

          Total carrying value of borrowings
$
120,668

 
$
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 further 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 Credit Facility.

Following the sale of our interest in the deepwater Habanero field and as of December 31, 2012, the borrowing base was revised to $65,000, representing a 44% increase over the $45,000 borrowing base at December 31, 2011. The $39,410 proceeds from this sale, net of customary purchase price adjustments, were used to reduce outstanding borrowings on the Credit Facility to the $10,000 reflected on the Company's Consolidated Balance Sheet as of December 31, 2012.

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 next redetermination is scheduled for the first quarter of 2013, and will be based upon year-end 2012 proved reserves. The Credit Facility is secured by mortgages covering the Company's major producing fields.

As of December 31, 2012, the balance outstanding on the Credit Facility was $10,000 with an interest rate on the Credit Facility of 2.72%, calculated as the London Interbank Offered Rate ("LIBOR"), plus a tiered rate ranging from 2.5% to 3.0%, which is based on the amount drawn on the Credit 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 March 13, 2013, the balance outstanding on the Credit Facility was $25,000 as the Company drew an additional $15,000 in support of the Company's ongoing capital development program.

13% Senior Notes due 2016 (“Senior Notes”) and Deferred Credit

As of December 31, 2012, the Company had principal outstanding of $96,961 related to its 13% Senior Notes due 2016. The interest coupon is payable on the last day of each quarter.

Upon issuing the Senior Notes during November 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 face value of the Senior Notes was recorded as a deferred credit, which is being amortized as a reduction in 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 at December 31, 2012:
Gross Carrying Amount
 
Accumulated Amortization
 
Carrying Value
 
Amortization Recorded during Current Year (a)
 
Estimated Annual Amortization Expense Expected to be Recognized in 2013 (b)
$31,507
 
$17,800
 
$13,707
 
$4,677
 
$3,300

(a)
Of the amount recorded as amortization during the current year, $3,086 was recorded as a reduction of interest expense and $1,591 (discussed below) was recorded as a component of the gain on early extinguishment of debt.  

(b)
Deferred credit amortization expected to be recorded as a reduction in interest expense during, 2014, 2015 and 2016 is $3,592, $3,910, and $2,905, respectively.

In June 2012, the Company redeemed $10,000 of its Senior Notes, which resulted in a net $1,366 gain on the early extinguishment of debt. The gain represents the difference between the $10,225 paid (inclusive of $225 of redemption expenses) for Notes with a carrying value of $11,591 (inclusive of the $1,591 of accelerated deferred credit amortization).

Following the completion of an equity offering during February 2011, the Company redeemed $31,000 of the Notes. This redemption was completed in March 2011, and resulted in a gain on the early extinguishment of debt of $1,974. The gain represents the difference between the $35,062 paid for $37,004 (including $31,000 principal amount of the notes plus $6,004 of accelerated deferred credit amortization) carrying value of the Notes, offset by the $4,030 charge related to the 13% call premium required by the terms of the call option and $32 of redemption expenses.

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.

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 December 31, 2012.