Summary
Diamondback Energy, Inc. (FANG) filed an 8-K on December 20, 2016, reporting the issuance of $500 million in aggregate principal amount of 5.375% Senior Notes due 2025. The primary purpose of this debt issuance was to finance the cash consideration for its previously announced acquisition of certain oil and natural gas assets from Brigham Resources Operating, LLC and Brigham Resources Midstream, LLC. The Notes are senior unsecured obligations of Diamondback and are guaranteed by its restricted subsidiaries, ranking equally with other senior indebtedness but effectively subordinated to secured debt. The issuance was conducted under Rule 144A for qualified institutional buyers and Regulation S for certain non-U.S. persons. The filing also details covenants within the Indenture that impose restrictions on Diamondback's ability to incur additional debt, make investments, pay dividends, sell assets, and engage in various other corporate actions, subject to certain exceptions. The company has also entered into a Registration Rights Agreement, committing to file a registration statement for an exchange offer of these Notes for registered securities and to keep the offer open for a specified period, with potential for additional interest payments if these obligations are not met. A significant condition for the Notes is their mandatory redemption if the Brigham Resources acquisition is not consummated by April 28, 2017, or if the acquisition agreement is terminated, or if Diamondback reasonably determines the acquisition is unlikely to occur.
Key Highlights
- 1Issuance of $500 million in aggregate principal amount of 5.375% Senior Notes due May 31, 2025.
- 2Proceeds are intended to fund the acquisition of Brigham Resources' oil and gas assets.
- 3The Notes are senior unsecured obligations, guaranteed by Diamondback's restricted subsidiaries.
- 4Effectively subordinated to secured debt and structurally subordinated to liabilities of unrestricted subsidiaries.
- 5Indenture includes covenants limiting additional indebtedness, investments, dividends, and asset sales.
- 6Mandatory redemption of Notes if the Brigham Resources acquisition is not completed by April 28, 2017, or if the acquisition is otherwise terminated/unlikely.
- 7Registration Rights Agreement obligates Diamondback to register the Notes for exchange, with potential penalties for non-compliance.