LONG-TERM DEBT

Long-term debt consisted of the following:



	June 30, 2014		December 31, 2013

	(in thousands)
Combined Credit Agreements	$	34,676	$	211,200
Second Lien Term Loan, net of unamortized discount	608,882		607,572
Second Lien Notes due 2019, net of unamortized discount	194,842		194,423
Senior notes due 2015, net of unamortized discount	—		10,472
Senior notes due 2016, net of unamortized discount	—		8,044
Senior notes due 2019, net of unamortized discount	293,573		293,243
Senior notes due 2021, net of unamortized discount	309,869		309,190
Senior subordinated notes due 2016	350,000		350,000
Total debt	1,791,842		1,984,144
Unamortized deferred gain-terminated interest rate swaps	3,802		4,802
Long-term debt	$	1,795,644	$	1,988,946

Combined Credit Agreements

The Combined Credit Agreements’ global borrowing base was $325 million and the global letter of credit capacity was $280 million as of June 30, 2014. At June 30, 2014, we had $244.4 million available under the Combined Credit Agreements.

In April 2014, the Combined Credit Agreements were amended changing certain definitions that impact the calculation of EBITDAX. Additionally, we permanently reduced the aggregate maximum credit amounts under the Combined Credit Agreements from $1.75 billion to $650 million.

Senior Notes due 2015 and Senior Notes due 2016

In April 2014, we redeemed all remaining outstanding notes under our Senior Notes due 2015 and Senior Notes due 2016. Our Senior Notes due 2015 were redeemed at 101.938% of the principal amount plus accrued and unpaid interest representing a total payment of $10.9 million and our Senior Notes due 2016 were redeemed at 105.875% of the principal amount plus accrued and unpaid interest representing a total payment of $8.9 million.

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 June 30, 2014, 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 debt. We cannot 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 senior 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 June 30, 2014.

Priority on Collateral and Structural Seniority ⁽¹⁾

Highest

priority

Lowest

priority

First Lien

Second Lien

Senior Unsecured

Senior Subordinated

Combined Credit
Agreements

Second Lien Term Loan

Second Lien Notes due 2019

2019
Senior Notes

2021
Senior Notes

Senior
Subordinated Notes

Principal amount ^{(1) (2)}

$325 million

$625 million

$200 million

$298 million

$325 million

$350 million

Scheduled maturity date ⁽³⁾

September 6, 2016

June 21, 2019

August 15, 2019

July 1, 2021

April 1, 2016

Interest rate on outstanding borrowings at June 30, 2014 ⁽⁴⁾

4.20%

7.00%

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) (9)}

- Minimum current ratio of 1.0
- Minimum EBITDA to cash interest expense ratio of 1.10
- Maximum senior secured debt leverage ratio of 2.0

N/A

Significant restrictive covenants ⁽⁸⁾⁽⁹⁾

- 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

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

Optional redemption ⁽⁹⁾

Any time

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

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

July 1,
2019: 102.000
2020: par

Any time

Make-whole redemption ⁽⁹⁾

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 ⁽⁹⁾

Event of default

Put at 101%
of principal
plus accrued
interest

Equity clawback ⁽⁹⁾

N/A

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

N/A

Estimated fair value ⁽¹⁰⁾

$34.7 million

$614.1 million

$196.5 million

$277.9 million

$333.1 million

$309.8 million

⁽¹⁾

Borrowings under the Amended and Restated U.S. Credit Facility, Second Lien Term Loan and 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 Second Lien Term Loan and the 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 June 30, 2014.

⁽³⁾

The Combined Credit Agreements are required to be repaid 91 days prior to the maturity of the Senior Subordinated Notes, the Second Lien Term Loan or the Second Lien Notes due 2019, if on the applicable date any amount of such debt remains outstanding. The Second Lien Term Loan and 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 Senior Subordinated Notes if on the applicable date the amount 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 future minimum required interest coverage ratio for the Combined Credit Agreement is as follows:



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


⁽⁸⁾	Our indentures require us to reinvest or repay senior debt with net cash proceeds from asset sales within one year.


⁽⁹⁾	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.

⁽¹⁰⁾

The estimated fair value is determined using market quotations based on recent trade activity for fixed rate obligations (“Level 2” inputs). Our Second Lien Term Loan and 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).