Summary
Diamondback Energy, Inc. (FANG) has filed an 8-K report detailing the eleventh amendment to its Second Amended and Restated Credit Agreement. This amendment introduces significant changes to the company's revolving credit facility, primarily focused on the conditions and terms that will apply once Diamondback achieves investment grade status for its unsecured debt. The changes are designed to provide increased financial flexibility and a more streamlined borrowing process upon reaching this crucial credit milestone.
Key Highlights
- 1The company's borrowing base under the credit facility has been increased from $2.65 billion to $3.4 billion prior to achieving investment grade.
- 2Upon achieving an investment grade rating from two agencies, the credit facility will transition to an unsecured status, and all associated liens will be released.
- 3Post-investment grade, the borrowing availability will shift from being based on a borrowing base to being solely determined by lender commitments.
- 4Financial covenants will be relaxed post-investment grade, moving from a Net Total Debt to EBITDAX ratio of 4.0x to a Total Net Debt to Capitalization Ratio not exceeding 65%.
- 5Many restrictive covenants concerning equity repurchases, dividends, investments, asset dispositions, and affiliate transactions will be removed or significantly eased after the investment grade changeover.
- 6The amendment allows for greater flexibility in incurring debt, with specific provisions for non-guarantor restricted subsidiaries.
- 7As of the amendment's effective time, the company had approximately $1.64 billion in outstanding borrowings under the facility.