Superior Well Services has entered into an amendment (the "First Amendment") to the credit agreement (the "Credit Agreement") evidencing its credit facility (the "Credit Facility").The following changes were made to the Credit Agreement as a result of the First Amendment:
- the total capacity under the Credit Facility was reduced from $250.0 million to $175.0 million, which amount will be further reduced to $125.0 million on January 1, 2010; provided that in any case the amounts outstanding under the Credit Facility cannot exceed the lesser of the total capacity and the "borrowing base" (as that term is defined in the First Amendment) that currently consists of (i) 80% of eligible accounts receivable, (ii) 50% of eligible inventory and (iii) 30% (which amount will be reduced to 20% on January 1, 2010) of the net book value of property, plant and equipment;
- an affirmative covenant was added that obligates the Company to raise a minimum of $50.0 million on or before December 31, 2009 through either permitted assets sales (including up to $75.0 million of total permitted sales through December 31, 2009) or the issuance of equity, or a combination of both, and the net proceeds of any such sale or issuance must be used to pay down amounts outstanding under the Credit Facility;
- the financial covenants in the Credit Agreement were revised to include the following:
- a required minimum quarterly EBITDA of: $1.0 million for the third quarter of 2009, $5.0 million for the fourth quarter of 2009, $5.0 million for the first quarter of 2010, $6.0 million for the second quarter of 2010, $7.5 million for the third quarter of 2010 and $10.0 million for the fourth quarter of 2010;
- a capital expenditures cap of $6.0 million per quarter through March 31, 2011;
- beginning on March 31, 2011, a maximum senior debt to EBITDA ratio of 3.00 to 1.00 calculated as of the end of each applicable fiscal quarter;
- from March 31, 2011 to December 31, 2011, a maximum total debt to EBITDA ratio of 5.00 to 1.00, and thereafter a maximum total debt to EBITDA ratio of 4.00 to 1.00, in each case calculated as of the end of the applicable fiscal quarter; and
- beginning on March 31, 2011, a minimum fixed charge coverage ratio of 1.75 to 1.00 calculated as of the end of each applicable fiscal quarter; and
- with respect to the interest rates that the Company has the option to select from that are applicable to amounts outstanding under the revolving portion of the Credit Facility, (a) until the second quarter of 2011, the spread over LIBOR will be 4.0% and the spread over the prime lending rate will be 2.0% and (b) thereafter, those spreads may be reduced depending on the ratio of the Company's total debt to EBITDA.
All other material terms remain the same.
Dave Wallace, Chief Executive Officer, said, "While we are currently in compliance with all our debt agreements, we have revised our Credit Agreement to eliminate the risk that we would breach the financial covenants in the Credit Agreement in the near future. We believe the revisions to the Credit Agreement will help us manage through this cyclical downturn and will provide us with additional financial flexibility. At August 31, 2009, we had $86.6 million in working capital, $145.3 million outstanding under the Credit Facility and $6.5 million in outstanding letters of credit. We would like to thank our bank group for their continued support and confidence in our organization."