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Monday, November 9, 2015

Magnum Hunter Buys Time, But Financial Situation Still Appears Dire

From a Magnum Hunter press release:
Magnum Hunter Resources Corporation (NYSE: MHR) (NYSE MKT: MHR.PRC) (NYSE MKT: MHR.PRD) (NYSE MKT: MHR.PRE) (the "Company" or "Magnum Hunter") announced today that it has refinanced its existing senior secured revolving credit facility with certain banks and obtained additional liquidity through a new senior secured term loan. The refinancing and additional liquidity are being provided, in equal amounts, by holders of more than a majority of the Company's second lien term loan agreement, and holders of more than a majority of the Company's 9.75% Senior Notes due 2020. These new lenders have also agreed to forbear from the exercise of certain rights and remedies with respect to certain events of default (including the failure to pay interest when due under the Company's 9.75% Senior Notes due 2020 and second lien term loan agreement) and work, in good faith, on negotiating the terms of a consensual restructuring with the Company. 
The new term loan credit facility consists of a single tranche term loan in the aggregate principal amount of $60 million, which funded on November 5, 2015. Approximately $44 million of proceeds from the new term loan credit facility were used to refinance existing loans outstanding and cash collateralize letters of credit outstanding under the prior revolving credit facility with certain banks. The remaining approximately $16 million of proceeds will be used for general corporate purposes of the Company and to pay certain transaction fees and expenses related to the new term loan credit facility. Furthermore, the new term loan facility includes an uncommitted incremental credit facility for up to an additional $10 million aggregate principal amount of term loans. The maturity date of the new term loan credit facility is December 30, 2015. 
The new term loan credit facility provides Magnum Hunter with near-term liquidity as the Company continues to work towards a comprehensive strategic alternative to enhance liquidity and address the Company's current capital structure. As previously announced by the Company on October 9, 2015, the Company has hired PJT Partners LP (NYSE: PJT) (the combination of Blackstone's advisory businesses and PJT Capital LP, a global financial advisory firm), as financial advisor, and Kirkland & Ellis LLP, as special legal advisor, to advise the Company's management and Board of Directors. In light of the Company's ongoing discussions regarding its capital structure, the Company will not issue a separate press release to report its third quarter financial and operating results or host a conference call to discuss its third quarter financial and operating results. The Company intends to file its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015 with the Securities and Exchange Commission on or before November 9, 2015.
Read the whole release by clicking here.

The statements about discussing capital structure and not announcing third quarter results are indications that bankruptcy could still be in the company's near future, according to people much smarter than I am in such areas.  Time will tell if that is where Magnum Hunter is heading, but the company's finances have been trending in a bad direction for some time now.

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