Cano Petroleum, Inc has entered into a $25 million Subordinated Term Credit Facility with UnionBanCal Equities, Inc. (UBE). Cano will immediately draw $15 million which will be used to pay down funded debt under its Senior Secured Facility. After the payment, the Senior borrowing will be $34.5 million which is 58% of the $60 million borrowing base.
Significant terms of the agreement includes a maturity of 3 years with two 1-year extensions at UBE's sole discretion. So long as the Debt Coverage Ratio is less than or equal to 4:00 to 1:00, LIBOR +5.75%; otherwise, LIBOR +6.00% -- payable in cash quarterly in arrears. LIBOR tranche maturity to be 90 days.
As collateral, there is a second lien on the same assets securing the Senior Secured Facility.
The agreement includes normal representations and warranties, customary and appropriate affirmative and negative covenants along with typical ratios on EBITDA coverage to debt and interest as well as minimum asset coverage.
The Subordinated Debt Facility will provide additional funding to maintain the capital programs that are currently in place.
Jeff Johnson, Cano Chairman and CEO commented, "Securing this additional financing gives us additional financial flexibility and allows us to continue the execution momentum we have gained throughout this fiscal year." Johnson adds, "Based upon our current information, we project that we are within 45-60 days of seeing meaningful response at our Panhandle Field waterflood and all of our major projects are progressing according to plan."
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