Form 8-K for MERIDIAN RESOURCE CORP
10-Sep-2009
Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement.
Forbearance and Amendment Agreement under Fortis Credit Facility The Meridian Resource Corporation, a Texas corporation (the "Company", "us", "we" or "our"), is party to the Amended and Restated Credit Agreement, dated as of December 23, 2004, as amended by the First Amendment to Credit Agreement dated as of February 25, 2008, and further amended by the Second Amendment to Credit Agreement dated as of December 19, 2008 (as so amended, the "Fortis Credit Facility"), by and among the Company, as borrower, Fortis Capital Corp., as administrative agent, sole lead arranger and bookrunner ("Fortis"), and the other lenders (collectively with Fortis, the "Lenders") and agents party thereto.
Under the Fortis Credit Facility, our most recent scheduled redetermination of our borrowing base was effective April 30, 2009, at which time the borrowing base was reduced to $60 million from $95 million. As of the date of the redetermination, we had fully borrowed under our borrowing base and had outstanding indebtedness of $95 million under the Fortis Credit Facility. The Fortis Credit Facility provides that outstanding borrowings in excess of the borrowing base must be repaid within 90 days after the redetermination. Accordingly, a $35 million payment to the Lenders under the Fortis Credit Facility for the borrowing base deficiency was due July 29, 2009. We did not have sufficient cash on hand on July 29 to repay the shortfall and do not have sufficient cash currently. Consequently, we have failed to pay when due the full amount of such borrowing base deficiency pursuant to the terms of the Fortis Credit Facility, and are in default. In addition to such default for failure to pay the borrowing base deficiency, there are other covenant defaults, including financial covenants, existing under the Fortis Credit Facility.
On September 3, 2009, we and certain of our subsidiaries entered into a Forbearance and Amendment Agreement (the "Fortis Forbearance Agreement") with Fortis and the other Lenders under the Fortis Credit Facility. The Fortis Forbearance Agreement provides that the Lenders will forbear from exercising any right or remedy arising as a result of the existing events of default under the Fortis Credit Facility that are listed in the Fortis Forbearance Agreement until the earlier of: (a) 5:00 p.m. (CST) on the earlier of (1) the date which is 91 days following the date of the Orion Forbearance Agreement (defined below) and (2) December 4, 2009 (subject to extension in certain circumstances with the consent of the Lenders); or (b) the date that any default occurs under the Fortis Forbearance Agreement. Such forbearance does not constitute a waiver by the Lenders of any such events of default.
The Fortis Forbearance Agreement will terminate, however, on September 30, 2009 if, by that date, we have not entered into (a) a merger agreement pursuant to which we will merge with or into or be acquired by or transfer all or substantially all of our assets to another person; (b) a capital infusion agreement pursuant to which one or more persons will contribute subordinated debt or equity capital to us in an amount sufficient to enable us to pay to the Lenders an amount equal to 100% of the borrowing base deficiency; or (c) a purchase and sale agreement pursuant to which we agree to sell one or more oil and gas properties for net proceeds sufficient to enable us to pay to the Lenders an amount equal to 100% of the borrowing base deficiency, plus any incremental borrowing base deficiency resulting from such sales. In each case, the transaction must be consummated by October 30, 2009, unless such date is extended with the consent of Lenders representing 66-2/3% of our borrowings under the Fortis Credit Facility, but shall in no event be later than December 31, 2009.
As required by the Fortis Forbearance Agreement, on September 3, 2009 we paid our Lenders an aggregate of $2.0 million of principal owed under the Fortis Credit Facility. On or before each of September 10, October 9, November 10 and December 10, 2009, we will be required to pay to the Lenders principal amounts of the greater of (a) 100% of our Excess Cash Flow (as defined in the Fortis
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Forbearance Agreement) for the months of August, September, October and November 2009, respectively, and (b) $1 million. We will also be required to pay our Lenders a forbearance fee of approximately $945,000, one-fourth of which, or $236,250, we paid on September 3, 2009, and one-fourth of which is payable on each of October 3, November 3 and at the end of the forbearance period. After the principal payments that were made on September 3, 2009, we owe $92.5 million under the Fortis Credit Facility and the borrowing base deficiency is $32.5 million. In addition, we will make a $1 million principal payment on September 10 in accordance with the Fortis Forbearance Agreement.
The Fortis Forbearance Agreement places other restrictions on us with respect to capital expenditures, sales of assets, and incurrence and prepayments of other indebtedness and amends the Fortis Credit Facility in certain respects.
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