LONG-TERM DEBT

Long-term debt consisted of the following:



	September 30, 2013		December 31, 2012

	(in thousands)
Combined Credit Agreements	$	149,736	$	388,150
Senior Secured Second Lien Credit Agreement, net of unamortized discount	606,593		—
Senior Secured Second Lien Notes due 2019, net of unamortized discount	194,110		—
Senior notes due 2015, net of unamortized discount	10,466		435,851
Senior notes due 2016, net of unamortized discount	8,032		579,795
Senior notes due 2019, net of unamortized discount	293,083		292,622
Senior notes due 2021, net of unamortized discount	308,853		—
Senior subordinated notes due 2016	350,000		350,000
Total debt	1,920,873		2,046,418
Unamortized deferred gain-terminated interest rate swaps	5,294		16,788
Current portion of long-term debt	—		—
Long-term debt	$	1,926,167	$	2,063,206

Combined Credit Facilities

The Combined Credit Agreements’ global borrowing base was $350 million and the global letter of credit capacity was $280 million as of September 30, 2013. At September 30, 2013, we had $157.8 million available under the Combined Credit Agreements.

We amended our Combined Credit Agreements in April and June 2013 for the following:


•	Reduce the global borrowing base to $350 million from $850 million, including the reduction due to the Tokyo Gas Transaction


•	Reduce the minimum required interest coverage ratio to the following:



Period	Interest Coverage Ratio	Period	Interest Coverage Ratio
Q3 2013	1.25	Q1 2015	1.10
Q4 2013	1.25	Q2 2015	1.15
Q1 2014	1.20	Q3 2015	1.15
Q2 2014	1.15	Q4 2015	1.20
Q3 2014	1.10	Q1 2016	1.50
Q4 2014	1.10	Q2 2016	2.00


•	Permit up to $825 million of second lien debt, subject to customary intercreditor terms


•	Permit redemption of junior debt with the proceeds from certain asset sales and permitted second lien debt, provided utilization under the global borrowing base after giving effect to such redemption is less than 75% and compliance with other customary conditions


•	Reduce the maximum senior secured debt leverage ratio to 2.0 and exclude permitted second lien debt from the senior secured debt definition


•	Increase the applicable margin by 0.75% for each type of loan and issued letters of credit


•	Increase the minimum mortgage properties requirement to 87.5% from 80% of proved hydrocarbon interests evaluated in the then most recent reserve report


•	Amend certain definitions which impact the financial covenant calculations.

Debt Refinancing

During the quarter ended June 30, 2013, we executed multiple debt transactions, including payment of $51.4 million of cancellation premiums and discounts and tender premiums, which are more fully described below, to extend our debt maturities and reduce the weighted average interest costs. Deferred issuance costs related to the new debt were $23.4 million, and $4.1 million of incurred costs related to the repurchased debt were recognized as interest expense. Proceeds from the Senior Secured Second Lien Credit Agreement and the issuance of Senior Secured Second Lien Notes due 2019 and Senior Notes due 2021 were used to pay for validly tendered Senior Notes due 2015 and Senior Notes due 2016 and accrued interest thereon and transaction expenses.

Senior Secured Second Lien Credit Agreement

On June 21, 2013, we entered into a $625 million six-year Senior Secured Second Lien Credit Agreement. The loans thereunder were made at 97% of par, which resulted in net proceeds of $606.3 million. The Senior Secured Second Lien Credit Agreement has a margin of 5.75% plus the adjusted LIBOR (as defined in the Senior Secured Second Lien Credit Agreement, which is subject to a floor of 1.25%) or 4.75% plus the Alternate Base Rate (as defined in the Senior Secured Second Lien Credit Agreement, which is subject to a floor of 2.25%).

Senior Secured Second Lien Notes due 2019

On June 21, 2013, we issued $200 million of Senior Secured Second Lien Notes due 2019. The notes were issued at 97% of par, which resulted in net proceeds of $194 million. The Senior Secured Second Lien Notes have a margin of 5.75% plus LIBOR (as defined in the indenture governing the Senior Secured Second Lien Notes due 2019, which is subject to a floor of 1.25%). Interest is payable on the last day of each quarter.

Senior Notes due 2021

On June 21, 2013, we issued $325 million of Senior Notes due 2021, which are unsecured, senior obligations. The notes were issued at 94.928% of par, which resulted in proceeds of $308.5 million. Interest at the rate of 11.00% is payable semiannually on January 1 and July 1.

Senior Notes due 2015

During the quarter ended June 30, 2013, we announced a cash tender offer and consent solicitation for the Senior Notes due 2015 at a price of $1,027.90 plus interest of $32.08 per $1,000 outstanding. On June 21, 2013, we accepted and paid for all validly tendered notes, representing $425.2 million of the then outstanding $438.0 million, which resulted in an aggregate payment of $450.7 million for such repurchase. We also entered into a supplemental indenture to eliminate substantially all of the restrictive covenants and certain events of default with respect to such notes.

During the quarter ended September 30, 2013, we repurchased $2.3 million aggregate principal amount of the Senior Notes due 2015.

Senior Notes Due 2016

During the quarter ended June 30, 2013, we announced a cash tender offer and consent solicitation for the Senior Notes due 2016 at a price of $1,068 plus interest of $55.49 per $1,000 outstanding. On June 21, 2013, we accepted and paid for all validly tendered notes, representing $582.5 million of the then outstanding $590.6 million, which resulted in an aggregate payment of $654.4 million for such repurchase. We also entered into a supplemental indenture to eliminate substantially all of the restrictive covenants and certain events of default with respect to such notes.

Senior Notes Due 2019

During the quarter ended June 30, 2013, we announced a consent solicitation for the Senior Notes due 2019. On June 21, 2013, we entered into supplemental indentures to permit the refinancing of the Senior Subordinated Notes due 2016 by incurring indebtedness that ranks equally in right of payment with the Senior Notes due 2019 provided such indebtedness has maturities longer than the Senior Notes due 2019, which resulted in the payment of an $11.5 million consent fee to the consenting holders of the Senior Notes due 2019.

Indenture Restrictions

We have an incurrence test under our indentures applicable to debt, restricted payments, mergers and consolidations and designation of unrestricted subsidiaries that requires EBITDA to exceed interest expense by 2.25 times. At September 30, 2013, we did not meet this test and, as a result, we are limited in our ability to, among other things, incur additional debt, except for specific baskets. We do retain, however, the ability to utilize the full borrowing capacity under our Combined Credit Agreements and to refinance existing debt. Not meeting this ratio does not represent an event of default under our indentures. We are presently unable to predict when or if we will meet the incurrence test.

We retained a portion of the cash received from our asset sales. Our indentures require us to reinvest or repay debt with net cash proceeds from asset sales within one year.

Summary of All Outstanding Debt

The following table summarizes certain significant aspects of our long-term debt outstanding at September 30, 2013.

Priority on Collateral and Structural Seniority ⁽¹⁾

Highest

priority

Lowest

priority

First Lien

Second Lien

Senior Unsecured

Senior Subordinated

Combined Credit
Agreements

Senior Secured Second Lien Credit Agreement

Senior Secured Second Lien Notes due 2019

2015
Senior Notes

2016
Senior Notes

2019
Senior Notes

2021
Senior Notes

Senior
Subordinated Notes

Principal amount ⁽²⁾

$350 million

$625 million

$200 million

$11 million

$8 million

$298 million

$325 million

$350 million

Scheduled maturity date ⁽³⁾

September 6, 2016

June 21, 2019

August 1, 2015

January 1, 2016

August 15, 2019

July 1, 2021

April 1, 2016

Interest rate on outstanding borrowings at September 30, 2013 ⁽⁴⁾

4.00%

7.00%

8.25%

11.75%

9.125%

11.00%

7.125%

Base interest rate options ^{(5) (6)}

LIBOR, ABR, CDOR

LIBOR floor of 1.25%; ABR floor of 2.25%

LIBOR floor of 1.25%

N/A

Financial covenants ⁽⁷⁾

- Minimum current ratio of 1.0
- Minimum EBITDA to cash interest expense ratio of 1.25
- Maximum senior secured debt leverage ratio of 2.0

N/A

Significant restrictive covenants ⁽⁷⁾

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

- Incurrence of debt
- Incurrence of liens and 1st lien cap
-Payment of dividends
- Equity purchases
- Asset sales
- Affiliate transactions

- Asset sales

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

Optional redemption ⁽⁷⁾

Any time

Any time,
subject to
re-pricing event
June 21,
2014: 102
2015: 101

August 1,
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

July 1,
2019: 102.000
2020: par

April 1,
2013: 101.188
2014: par

Make-whole redemption ⁽⁷⁾

N/A

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

Callable prior to
July 1, 2019 at
make-whole call price of
Treasury +50 bps

N/A

Change of control ⁽⁷⁾

Event of default

Put at 101% of
principal plus
accrued interest

Equity clawback ⁽⁷⁾

N/A

Redeemable until
July 1, 2016
at 111.00%, plus accrued
interest for up to 35%

N/A

Estimated fair value ⁽⁸⁾

$149.7 million

$600 million

$192 million

$10.1 million

$8.3 million

$271.6 million

$307.1 million

$332.9 million

⁽¹⁾

Borrowings under the Amended and Restated U.S. Credit Facility, Senior Secured Second Lien Credit Agreement and Senior Secured Second Lien Notes due 2019 are guaranteed by certain of Quicksilver’s domestic subsidiaries and are secured (on a first priority basis with respect to the Amended and Restated U.S. Credit Facility and on a second priority basis with respect to the Senior Secured Second Lien Credit Agreement and the Senior Secured Second Lien Notes due 2019) by 100% of the equity interests of each of Cowtown Pipeline Management, Inc., Cowtown Pipeline Funding, Inc., Cowtown Gas Processing L.P., Cowtown Pipeline L.P., Barnett Shale Operating LLC, Silver Stream Pipeline Company LLC, QPP Parent LLC and QPP Holdings LLC (collectively, the “Domestic Pledged Equity”), 65% of the equity interests of Quicksilver Resources Canada Inc. (“Quicksilver Canada”) and Quicksilver Production Partners Operating Ltd. (with respect to the Amended and Restated U.S. Credit Facility, on a ratable basis with borrowings under the Amended and Restated Canadian Credit Facility) and the majority of Quicksilver's domestic proved oil and gas properties and related assets, (the “Domestic Pledged Property”). Borrowings under the Amended and Restated Canadian Credit Facility are guaranteed by Quicksilver and certain of its domestic subsidiaries and are secured by the Domestic Pledged Equity, the Domestic Pledged Property, 100% of the equity interests of Quicksilver Canada (65% of which is on a ratable basis with the borrowings under the Amended and Restated U.S. Credit Facility) and any Canadian restricted subsidiaries, under the Amended and Restated Canadian Credit Facility, and 65% of the equity interests of Quicksilver Production Partners Operating Ltd. (which is on a ratable basis with the borrowings under the Amended and Restated U.S. Credit Facility) and the majority of Quicksilver Canada's oil and gas properties and related assets. The other debt presented is based upon structural seniority and priority of payment.


⁽²⁾	The principal amount for the Combined Credit Agreements represents the global borrowing base as of September 30, 2013.

⁽³⁾

The Combined Credit Agreements are required to be repaid 91 days prior to the maturity of the 2015 Senior Notes, the 2016 Senior Notes, the 2016 Senior Subordinated Notes, the Senior Secured Second Lien Credit Agreement or the Senior Secured Second Lien Notes due 2019, if on the applicable date any amount of such debt remains outstanding. The Senior Secured Second Lien Credit Agreement and Senior Secured Second Lien Notes due 2019 are required to be repaid (1) 91 days prior to the maturity of the 2019 Senior Notes if more than $100 million of the 2019 Senior Notes remain outstanding and (2) 91 days prior to the maturity of the 2015 Senior Notes, the 2016 Senior Notes or the 2016 Senior Subordinated Notes if on the applicable date the aggregate amount of all such notes remaining outstanding is greater than $100 million.


⁽⁴⁾	Represents the weighted average borrowing rate payable to lenders.

⁽⁵⁾

Amounts outstanding under the Amended and Restated U.S. Credit Facility bear interest, at our election, at (i) adjusted LIBOR (as defined in the Amended and Restated U.S. Credit Facility) plus an applicable margin between 2.75% and 3.75%, (ii) ABR (as defined in the Amended and Restated U.S. Credit Facility), which is the greatest of (a) the prime rate announced by JPMorgan, (b) the federal funds rate plus 0.50% and (c) adjusted LIBOR for an interest period of one month plus 1.00%, plus, in each case under scenario (ii), an applicable margin between 1.75% and 2.75%. We also pay a per annum fee on the LC Exposure (as defined in the Amended and Restated U.S. Credit Facility) of all letters of credit issued under the Amended and Restated U.S. Credit Facility equal to the applicable margin, with respect to Eurodollar loans, and a commitment fee on the unused availability under the Amended and Restated U.S. Credit Facility of 0.50%.

⁽⁶⁾

Amounts outstanding under the Amended and Restated Canadian Credit Facility bear interest, at our election, at (i) the CDOR Rate (as defined in the Amended and Restated Canadian Credit Facility) plus an applicable margin between 2.75% and 3.75%, (ii) the Canadian Prime Rate (as defined in the Amended and Restated Canadian Credit Facility) plus an applicable margin between 1.75% and 2.75%, (iii) the U.S. Prime Rate (as defined in the Amended and Restated Canadian Credit Facility) plus an applicable margin between 1.75% and 2.75% and (iv) adjusted LIBOR (as defined in the Amended and Restated Canadian Credit Facility) plus an applicable margin between 2.75% and 3.75%. We pay a per annum fee on the LC Exposure (as defined in the Amended and Restated Canadian Credit Facility) of all letters of credit issued under the Amended and Restated Canadian Credit Facility equal to the applicable margin, with respect to Eurodollar loans, and a commitment fee on the unused availability under the Amended and Restated Canadian Credit Facility of 0.50%.


⁽⁷⁾	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.

⁽⁸⁾

The estimated fair value is determined using market quotations based on recent trade activity for fixed rate obligations (“Level 2” inputs). Our Senior Secured Second Lien Credit Agreement and Senior Secured Second Lien Notes due 2019 feature variable interest rates and we estimate their fair value by using market quotations based on recent trade activity (“Level 3” input). We consider our Combined Credit Agreements which have a variable interest rate to have a fair value equal to their carrying value (“Level 1” input).