01—Abstract
Summary
Summary of the 8-K filed January 30, 2024. Cited figures are marked; the original filing is the authoritative source.
APA Corporation entered into a Credit Agreement on January 30, 2024, with JPMorgan Chase Bank, N.A. as administrative agent, committing an aggregate $2.0 billiona in senior unsecured delayed-draw term loans.
The proceeds, subject to limited conditions, may be used to refinance certain indebtedness of Callon Petroleum Company upon or after the closing of APA's pending acquisition of Callon under the Merger Agreement dated January 3, 2024. The loans are available only on the Closing Date and consist of $1.5 billionb in 3-Year Tranche Loans maturing three years after closing and $500 million in 364-Day Tranche Loans maturing 364 days after closing. The Credit Agreement carries a ticking fee of 0.225% per annum on undrawn commitments, beginning 90 days after January 3, 2024.
Borrowings bear interest at either a base rate or adjusted SOFR plus margins based on APA's Long-Term Debt Rating, which is currently determined by Apache's rating. Current margins are 0.625% (Base Rate) and 1.625% (SOFR) for 364-Day Tranche Loans, and 0.75% (Base Rate) and 1.75% (SOFR) for 3-Year Tranche Loans. Covenants include a maximum adjusted debt-to-capital ratio of 60% at each fiscal quarter end, and the agreement replaces up to $2.0 billionc of commitments under a bridge loan commitment letter dated January 3, 2024.
Funding is conditioned on closing of the Callon acquisition, repayment of Callon's credit agreement and 2026 Notes, and other customary conditions. Apache Corporation guarantees the obligations until its senior notes and debentures fall below $1.0 billiond, and Callon must guarantee the obligations if at least $400 million of its 2028 and 2030 Notes remain outstanding 120 days after closing.
02—Key points
Key Highlights
- Committed financing: $2.0 billion in senior unsecured delayed-draw term loans from lenders led by JPMorgan Chase Bank, N.A. as administrative agent.
- Tranche structure: $1.5 billion in 3-Year Tranche Loans and $500 million in 364-Day Tranche Loans, both available only on the Closing Date of the Callon acquisition.
- Intended use: Refinancing of Callon indebtedness, including its existing credit agreement and senior notes due 2026, 2028 and 2030, plus related fees and expenses.
- Pricing: Current margins of 0.625% (Base Rate) and 1.625% (SOFR) for 364-Day Tranche Loans, and 0.75% and 1.75% for 3-Year Tranche Loans; ticking fee of 0.225% per annum on undrawn commitments.
- Financial covenant: Adjusted debt-to-capital ratio not greater than 60% at the end of any fiscal quarter.
- Guarantees: Apache Corporation guarantees until its senior notes and debentures fall below $1.0 billion; Callon may be required to guarantee if $400 million or more of its 2028 and 2030 Notes remain outstanding 120 days after closing.
- Bridge replacement: The Credit Agreement effectively replaces up to $2.0 billion of commitments under the January 3, 2024 Bridge Loan Commitment Letter.
03—Questions
Frequently Asked Questions
How much financing has APA secured for the Callon acquisition?
APA secured aggregate commitments of $2.0 billion in senior unsecured delayed-draw term loans. These loans are available only on the Closing Date and only if certain conditions are satisfied, and they effectively replace up to $2.0 billion under the prior bridge loan commitment letter.
What will the loan proceeds be used for?
Proceeds may only be used to refinance Callon's existing indebtedness, which includes its Amended and Restated Credit Agreement dated October 19, 2022, and its 6.375% Senior Notes due 2026, 8.00% Senior Notes due 2028 and 7.500% Senior Notes due 2030, along with related fees and expenses. Any borrowings not so used within 120 days after the Closing Date must be prepaid.
What are the key conditions for funding?
Conditions include completion of the Merger Agreement without materially adverse unconsented changes, accuracy of specified representations, no payment, insolvency or bankruptcy default, no Company Material Adverse Effect since the Merger Agreement date, APA's solvency certification, know-your-customer compliance, delivery of specified financial statements, payment of fees, and repayment of Callon's credit agreement and 2026 Notes.
How is the interest rate determined?
Borrowings may bear interest at a base rate or adjusted SOFR rate, plus a margin based on APA's Long-Term Debt Rating (or Apache's rating if APA's debt is unrated and the Apache guaranty is in effect). Apache's rating currently applies. Current margins are 0.625% (Base Rate) and 1.625% (SOFR) for 364-Day Tranche Loans, and 0.75% and 1.75% for 3-Year Tranche Loans.
What are the main covenants and default triggers?
APA must keep its adjusted debt-to-capital ratio at or below 60% at each fiscal quarter end. The agreement also restricts liens on hydrocarbon-related assets, limits mergers and certain guarantees, and permits acceleration for nonpayment, other material debt defaults, unpaid judgments, specified pension liabilities, or a change in control. The agreement does not allow acceleration based on unspecified material adverse changes or require prepayment upon a credit rating downgrade.
04—Continue