Petroflow Enters into Forebearance Agreement
Petroflow has entered into a forbearance agreement with its banking syndicate in connection with certain events of defaults under its amended and restated credit agreement, as amended (the "Credit Facility"). Under terms of the forbearance agreement the Company has agreed to increase the interest rate on its Tranche A and Tranche C loans to 7.5% per annum. The forbearance agreement also requires that the Company start making monthly principal reductions payments in the amount of $1 million per month commencing immediately. In connection with the forbearance agreement, the Company entered into additional security agreements related to additional collateral required by the lenders. The Company currently has $106 million outstanding under its Credit Facility with a borrowing base deficiency of $31 million.
The forbearance period expires on March 7, 2010, provided that if the Company has entered into a purchase and sale agreement to sell its Oklahoma oil and gas properties by March 7th, then the forbearance period is extended until May 1, 2010. The forbearance period will automatically terminate, and the lenders may accelerate all amounts under the Credit Facility upon the occurrence of any further defaults under the forbearance agreement or the Credit Facility. There can be no assurance that the Company will be able to negotiate an amendment to the Credit Facility or additional forbearances, that such amendment or forbearances will be on terms acceptable to the Company, or that the Company will be able to complete any of the strategic alternatives on satisfactory terms, or at all. The failure of the Company to remedy existing defaults under the Credit Facility may impair the Company's operations and future prospects.