Long-Term Debt

9 Months Ended

Sep. 30, 2011

6. LONG-TERM DEBT

Long-term debt consisted of the following:


	September 30,			December 31,
	2011			2010
	(In thousands)
U.S. Credit Facility	$	137,000		$	-
Canadian Credit Facility		117,342			-
Senior Secured Credit Facility		-			21,114
Senior notes due 2015, net of unamortized discount		434,812			470,866
Senior notes due 2016, net of unamortized discount		576,334			583,605
Senior notes due 2019, net of unamortized discount		291,922			293,496
Senior subordinated notes due 2016		350,000			350,000
Convertible debentures, net of unamortized discount		149,331			143,478

Total debt		2,056,741			1,862,559
Unamortized deferred gain —terminated interest rate swaps		23,119			27,635
Current portion of long-term debt		(149,331	)		(143,478	)

Long-term debt	$	1,930,529		$	1,746,716

Credit Facilities

In September 2011, we terminated and replaced our $1.0 billion global Senior Secured Credit Facility with new separate five-year syndicated senior secured revolving credit facilities for our U.S. and Canadian operations. The $1.25 billion U.S. Credit Facility had a borrowing base and commitments of $850 million, including a letter of credit capacity of $75 million, as of September 30, 2011. The C$500 million Canadian Credit Facility had a borrowing base and commitments of C$225 million, including a letter of credit capacity of C$100 million, as of September 30, 2011. Both facilities will be re-determined semi-annually based upon engineering reports and such other information deemed appropriate by the applicable administrative agent, in a manner consistent with its normal oil and gas lending criteria as it exists at the time of such redetermination.

The U.S. and Canadian Credit Facilities provide for revolving credit loans and letters of credit from time to time. The U.S. Credit Facility also provides for the extension of swingline loans to Quicksilver. Borrowings under the U.S. Credit Facility bear interest at a variable annual rate based on adjusted LIBOR or ABR plus, in each case, an applicable margin, provided that each swingline loan shall be comprised entirely of ABR loans. Borrowings under the Canadian Credit Facility may be made in U.S. dollars or Canadian dollars and will be comprised entirely of Canadian prime loans, Canadian Deposit Offer Rate ("CDOR") loans, U.S. prime loans or U.S. eurodollar loans, in each case, plus an applicable margin. The applicable margin adjusts as the utilization of the borrowing base changes.

Convertible Debentures

The convertible debentures due November 1, 2024 are contingently convertible into shares of our common stock. The debentures bear interest at an annual rate of 1.875% payable semi-annually on May 1 and November 1. Additionally, holders of the debentures can require us to repurchase all or a portion of their debentures on November 1, 2011, 2014 and 2019 at a price equal to the principal amount thereof plus accrued and unpaid interest. The debentures are convertible into shares of our common stock at a rate of 65.4418 shares for each $1,000 debenture, subject to adjustment. Generally, except upon the occurrence of specified events including certain changes of control, holders of the debentures are not entitled to exercise their conversion rights unless the closing price of our stock is at least $18.34 (120% of the conversion price per share) for at least 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter. Upon conversion, we have the option to deliver any combination of our common stock and cash. Should all debentures be converted to our common stock, an additional 9,816,270 shares, subject to adjustment, would become outstanding; however, as of October 1, 2011, the debentures were not convertible based on share prices for the quarter ended September 30, 2011. We have reported these obligations as current obligations in our September 30, 2011 and December 31, 2010 balance sheets.

On November 1, 2011, we repurchased substantially all of the debentures for $150.0 million, after they were presented to us for repurchase by debenture holders. The repurchase transaction was completed utilizing borrowings from the U.S. Credit Facility. During the fourth quarter of 2011, we expect to repurchase or redeem the debentures that were not presented to us for repurchase.

At September 30, 2011 and December 31, 2010, the remaining unamortized discount on the debentures was $0.7 million and $6.5 million, respectively, resulting in a carrying value of $149.3 million and $143.5 million, respectively. The remaining discount will be accreted to face value through October 2011. For the nine months ended September 30, 2011 and 2010, interest expense on our convertible debentures, recognized at an effective interest rate of 6.75%, was $8.0 million and $7.6 million, respectively, including contractual interest of $2.1 million for each period.

Senior Notes

During 2011, we repurchased the following senior notes in open market transactions:


	Repurchase		Face		Premium on
Instrument	Price		Value		Repurchase
			(In thousands)
Senior notes due 2015	$	38,134	$	37,000	$	1,134
Senior notes due 2016		10,646		9,380		1,266
Senior notes due 2019		2,160		2,000		160

	$	50,940	$	48,380	$	2,560

Summary of All Outstanding Debt

The following table summarizes significant aspects of our long-term debt at September 30, 2011:

Priority on Collateral and Structural Seniority⁽¹⁾

Highest priority

Lowest priority

Equal Priority

Equal priority

U.S.

Canadian

2015

2016

2019

Senior

Convertible

Credit Facility

Senior Notes

Subordinated Notes

Debentures⁽²⁾

Principal amount

$850.0 million ⁽³⁾

C$225.0 million ⁽⁴⁾

$438 million

$591 million

$298 million

$350 million

$150 million

Scheduled maturity date

September 6, 2016

August 1, 2015

January 1, 2016

August 15, 2019

April 1, 2016

November 1, 2024

Interest rate on outstanding
borrowings at
September 30, 2011 ^{(5) (6) (7)}

1.75%

3.547%

8.25%

11.75%

9.125%

7.125%

1.875%

Base interest rate options

LIBOR, ABR ⁽⁶⁾

CDOR, Canadian
prime, U.S.
prime or LIBOR ⁽⁷⁾

N/A

Financial covenants ⁽⁸⁾

- Minimum current ratio of 1.0
- Minimum EBITDA to cash interest expense ratio of 2.5

- Minimum current ratio of 1.0
- Maximum net debt to EBITDA ratio of 4.5

N/A

Significant restrictive

covenants ⁽⁸⁾

- Incurrence of debt
- Incurrence of liens
- Payment of dividends
- Equity purchases
- Asset sales
- Affiliate transactions
- Limitations on derivatives

- Incurrence of debt
- Incurrence of liens
- Payment of dividends
- Equity purchases
- Asset sales
- Affiliate transactions

N/A

Optional redemption ⁽⁸⁾

Any time

August 1,
2012: 103.875
2013: 101.938
2014: par

July 1,
2013: 105.875
2014: 102.938
2015: par

August 15,
2014: 104.563
2015: 103.042
2016: 101.521
2017: par

April 1,
2012: 102.375
2013: 101.188
2014: par

November 8, 2011
and thereafter

Make-whole redemption ⁽⁸⁾

N/A

Callable prior to
August 1, 2012 at
make-whole
call price of
Treasury + 50 bps

Callable prior to
July 1, 2013 at
make-whole
call price of
Treasury + 50 bps

Callable prior to
August 15, 2014 at
make-whole
call price of
Treasury + 50 bps

N/A

Change of control ⁽⁸⁾

Event of default

Put at 101% of
principal plus
accrued interest

Put at 100% of
principal plus
accrued interest

Equity clawback⁽⁸⁾

N/A

Redeemable until
July 1, 2012 at
111.75%, plus
accrued interest
for up to 35%

Redeemable until
August 15, 2012 at
109.125%, plus
accrued interest
for up to 35%

N/A

Subsidiary guarantors⁽⁸⁾

Cowtown Pipeline
Funding, Inc.
Cowtown Pipeline
Management, Inc.
Cowtown
Pipeline L.P.
Cowtown Gas
Processing L.P.

N/A

Cowtown Pipeline
Funding, Inc.
Cowtown Pipeline
Management, Inc.
Cowtown
Pipeline L.P.
Cowtown Gas
Processing L.P.

N/A

Estimated fair value ⁽⁹⁾

$137.0.million

$117.3 million

$442.4 million

$649.7 million

$302.5 million

$325.5 million

$149.9 million


⁽¹⁾		Borrowings under the U.S. Credit Facility are guaranteed by certain of Quicksilver's domestic subsidiaries and are secured by 100% of the equity interests of each of Cowtown Pipeline Management, Inc., Cowtown Pipeline Funding, Inc., Cowtown Gas Processing L.P. and Cowtown Pipeline L.P., and certain oil and gas properties and related assets of Quicksilver. Currently, there are no guarantors under the Canadian Credit Facility, and borrowings under the Canadian Credit Facility are secured by 100% of the equity interests of Quicksilver Resources Canada Inc. and its oil and gas properties and related assets. The other debt presented is based upon structural seniority and priority of payment.

⁽²⁾		Beginning on November 8, 2011, we have the ability to redeem the convertible debentures.

⁽³⁾		The principal amount for the U.S. Credit Facility represents the borrowing base and commitments as of September 30, 2011.


⁽⁴⁾		The principal amount for the Canadian Credit Facility represents the borrowing base and commitments as of September 30, 2011.

⁽⁵⁾		Represents the weighted average borrowing rate payable to lenders and excludes effects of interest rate derivatives.

⁽⁶⁾		Amounts outstanding under the U.S. Credit Facility bear interest, at our election, at (i) adjusted LIBOR (as defined in the credit agreement) plus an applicable margin between 1.50% to 2.50%, (ii) ABR (as defined in the credit agreement), which is the greatest of (a) the prime rate announced by JPMorgan, (b) the federal funds rate plus 0.50% and (c) adjusted LIBOR (as defined in the credit agreement) plus 1.0%, plus, in each case under scenario (ii), an applicable margin between 0.50% to 1.50%. We also pay a per annum fee on all letters of credit issued under the U.S. Credit Facility equal to the applicable margin and a commitment fee on the unused availability of 0.375% to 0.50%, in each case, based on borrowing base usage.

⁽⁷⁾		Amounts outstanding under the Canadian Credit Facility bear interest, at our election, at (i) the CDOR Rate (as defined in the credit agreement) plus an applicable margin between 1.75% and 2.75%, (ii) the Canadian Prime Rate (as defined in the credit agreement) plus an applicable margin between 0.75% and 1.75%, (iii) the U.S. Prime Rate (as defined in the credit agreement) plus an applicable margin between 0.75% and 1.75% and (iv) U.S. eurodollar loans (as defined in the credit agreement) plus an applicable margin between 1.75% to 2.75% We pay a per annum fee on all letters of credit issued under the Canadian Credit Facility equal to the applicable margin and a commitment fee on the unused availability of 0.50% per annum, in each case, based on borrowing base usage.

⁽⁸⁾		The information presented in this table is qualified in all respects by reference to the full text of the covenants, provisions and related definitions contained in the documents governing the various components of our debt.

⁽⁹⁾		The estimated fair value is determined based on market quotations on the balance sheet date for fixed rate obligations. We consider debt with variable interest rates to have a fair value equal to its carrying value.

Note 11 to the consolidated financial statements in our 2010 Annual Report on Form 10-K contains a more complete description of our long-term debt.