Quarterly report pursuant to Section 13 or 15(d)

Borrowings

v2.3.0.15
Borrowings
9 Months Ended
Sep. 30, 2011
Borrowings [Abstract]  
Borrowings
Note 4 — Borrowings
The Company’s borrowings consisted of the following at:
                 
    September 30, 2011     December 31, 2010  
Principal components:
               
Credit Facility
  $     $  
13% Senior Notes due 2016, principal
    106,961       137,961  
 
           
Total principal outstanding
    106,961       137,961  
 
               
Non-cash components:
               
13% Senior Notes due 2016 unamortized deferred credit
    19,178       27,543  
 
           
Total carrying value
  $ 126,139     $ 165,504  
 
           
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:
                 
    Accumulated       Amortization Recorded   Estimated Amortization
    Amortization at       during 2011 as a   Expected to be
Gross Carrying   September 30,   Carrying Value at   Reduction of Interest   Recorded during the
Amount   2011(1)   September 30, 2011   Expense(1)   Remainder of 2011
$
31,507
 
$
12,329
 
$
19,178
 
$
2,361
 
$
794
 
(1)    Amortization recorded during 2011 excludes $6,004 of accelerated amortization related to the March 2011 early redemption of $31,000 principal of notes discussed below, which is recorded in the Statement of Operations as a component of the “Gain on early extinguishment of debt.” Accumulated Amortization at September 30, 2011 includes the $6,004 of accelerated amortization.
     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.