7. Debt

At March 31, 2014 and 2013 the Company's debt consisted of the following:

	As at March 31

	2014			2013
8.875% Senior Notes due 2018	$	—		$	643,790
6.50% Senior Notes due 2019		575,000			—
Revolving credit facilities		119,500			65,000


		694,500			708,790
Less: portion classified as current		(119,500	)		(65,000	)


	$	575,000		$	643,790

Senior Notes due 2019

On March 17, 2014, Niska Partners completed the private placement of senior unsecured notes due 2019 (the "6.50% Senior Notes"). The 6.50% Senior Notes were issued through Niska Gas Storage Finance Corp. and Niska Gas Storage Canada ULC (together, the "Issuers"). Net proceeds from the offering of approximately $563.3 million, after deducting underwriters' discounts and fees, along with borrowings under our asset-based revolving credit facility, were used to redeem the $643.8 million outstanding principal amount of the Company's 8.875% Senior Notes due 2018. Including a call premium of approximately $28.6 million and the write-off of unamortized deferred financing costs of $8.1 million, the Company recognized a loss of $36.7 million, which was recorded as a loss on extinguishment of debt. These losses were measured based on the amount paid as well as on the carrying value of the redeemed 8.875% Senior Notes, which included unamortized debt issue costs on the dates of redemption. The related accrued interest paid were recorded in interest expense. Costs directly related to the issuance of the new Notes were capitalized as deferred charges and are amortized to interest expense over the term of the debt.

During the year ended March 31, 2012, Niska Partners paid $158.0 million to repurchase 8.875% Senior Notes with a principal amount of $156.2 million on which the Company recognized losses of $4.9 million.

The 6.50% Senior Notes are senior unsecured obligations which are: (1) effectively junior to Niska Partners' secured obligations to the extent of the value of the collateral securing such debt; (2) equal in right of payment with all existing and future senior unsecured indebtedness of the Company; and (3) senior in right of payment to any future subordinated indebtedness of Niska Partners. The 6.50% Senior Notes are fully and unconditionally guaranteed by Niska Partners and its direct and indirect subsidiaries on a senior unsecured basis, and are: (1) effectively junior to each guarantor's secured obligations; (2) equal in right of payment with all existing and future senior unsecured indebtedness of each guarantor and (3) senior in right of payment to any future subordinated indebtedness of each guarantor.

Interest on the 6.50% Senior Notes is payable semi-annually on October 1 and April 1, commencing on October 1, 2014, and will mature on April 1, 2019. As of March 31, 2014, the estimated fair market value of the Notes was $570.7 million.

Prior to October 1, 2016, the Company has the option to redeem up to 35% of the aggregate principal amount of the 6.50% Senior Notes using net cash proceeds from certain equity offerings at a price of 106.5% plus accrued and unpaid interest. The Company may also redeem all or a part of the 6.50% Senior Notes at redemption prices (expressed as percentages of principal amount) equal to 103.25% during the twelve-month period beginning on October 1, 2016, 101.625% during the twelve-month period beginning on October 1, 2018 and at any time thereafter, plus accrued and unpaid interest, if any, to the applicable redemption date on the notes. The Company is not required to make mandatory redemptions or sinking fund payments with respect to the 6.50% Senior Notes.

The indenture governing the 6.50% Senior Notes limits Niska Partners' ability to pay distributions in respect of, repurchasing or paying dividends on its membership interests (or other capital stock) or making other restricted payments. The limitation changes depending on a fixed charge coverage ratio, which is defined as the ratio of consolidated cash flow to fixed charges, each as defined in the indenture governing the 6.50% Senior Notes, and measured for the preceding four quarters.

If the fixed charge coverage ratio is not less than 1.75 to 1.0, Niska Partners is permitted to make restricted payments if the aggregate restricted payments since the date of closing of our IPO, excluding certain types of permitted payments, are less than the sum of a number of items including, most importantly:

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operating surplus (defined similarly to the definition in our Operating Agreement) calculated as of the end of our preceding fiscal quarter; and

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the aggregate net cash proceeds received as a capital contribution or from the issuance of equity interests.

If the fixed charge coverage ratio is less than 1.75 to 1.0, Niska Partners is permitted to make restricted payments if the aggregate restricted payments since the date of closing of its IPO, excluding certain types of permitted payments, are less than the sum of a number of items including, most importantly:

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$75.0 million; and

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the aggregate net cash proceeds received as a capital contribution or from the issuance of equity interests.

As of March 31, 2014, the fixed charge coverage ratio was 2.8 to 1.0 and the indenture governing the Notes would have permitted the Company to distribute approximately $207.1 million. The fixed charge coverage ratio was calculated on a pro-forma basis, taking into account the redemption of the 8.875% Senior Notes due 2018 as if the redemption had occurred on April 1, 2013. The indenture does not prohibit certain types or amounts of restricted payments, including a general basket of $75.0 million of restricted payments.

The indenture governing the Notes contains certain other covenants that, among other things, limit Niska Partners and certain of its subsidiaries' ability to:

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incur additional debt or issue certain capital stock;

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pay dividends on, repurchase or make distributions in respect of our capital stock or repurchase or retire subordinated indebtedness;

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make certain investments;

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sell assets;

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create liens;

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consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;

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enter into certain transactions with our affiliates; and

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permit restrictions on the ability of our subsidiaries to make distributions.

The occurrence of events involving the Company or certain of its subsidiaries may constitute an event of default under the indenture. Such events include failure to pay interest, principal, or the premium on the notes when due; failure to comply with the merger, asset sale or change of control covenants; certain defaults on other indebtedness; and certain insolvency proceedings. In the case of an event of default, the holders of the notes are entitled to remedies, including the acceleration of payment of the notes by request of the holders of at least 25% in aggregate principal amount of the notes, and any action by the trustee to collect payment of principal, interest or premium in arrears.

Upon the occurrence of a change of control together with a decrease in the ratings of the 6.50% Senior Notes by either Moody's or S&P by one or more gradations within 90 days of the change of control event, Niska Partners must offer to repurchase the Notes at 101% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any, to the date of repurchase.

The Niska Partners' ability to repurchase the 6.50% Senior Notes upon a change of control will be limited by the terms of its debt agreements, including its asset-based revolving credit facility. In addition, the Company cannot assure that it will have the financial resources to repurchase the Notes upon a change of control.

Revolving credit facilities

On June 29, 2012, Niska Partners, through its subsidiaries, Niska Gas Storage US, LLC and AECO Gas Storage Partnership, completed an amendment and restatement of its $400.0 million Credit Agreement (the "Credit Facilities"). These Credit Facilities provide for revolving loans and letters of credit in an aggregate principal amount of up to $200.0 million for each of a U.S. revolving credit facility and a Canadian revolving credit facility. Subject to certain conditions, each of the U.S. revolving credit facility and the Canadian revolving credit facility may be expanded up to a total of $100.0 million in additional commitments, and the commitments in each facility may be reallocated on terms and according to procedures to be determined. Loans under the U.S. revolving facility will be denominated in U.S. dollars and loans under the Canadian revolving facility may be denominated, at Niska Partners' option, in either U.S. or Canadian dollars. The revolving credit facilities mature on June 29, 2016. During the year ended March 31, 2013, a loss related to the amendment and restatement amounted to $0.6 million representing a portion of the deferred financing costs associated with the original agreement were written off.

Borrowings under the Credit Facilities are limited to a borrowing base calculated as the sum of specified percentages of eligible cash and cash equivalents, eligible accounts receivable, the net liquidating value of hedge positions in broker accounts, eligible inventory, issued but unused letters of credit, and certain fixed assets minus the amount of any reserves and other priority claims. Borrowings will bear interest at prevailing market rates, which (1) in the case of U.S. dollar loans can be either fixed rate plus an applicable margin or, at the Company's option, a base rate plus an applicable margin, and (2) in the case of Canadian dollar loans can be either the bankers' acceptance rate plus an applicable margin or, at the Company's option, a prime rate plus an applicable margin. The credit agreement provides that Niska Partners may borrow only up to the lesser of the level of the then current borrowing base or the committed maximum borrowing capacity, which is currently $400.0 million. As of March 31, 2014, the borrowing base collateral totaled $396.4 million.

Obligations under the $400.0 million Credit Agreement are guaranteed by the Niska Partners' and all of the Company's direct and indirect wholly owned subsidiaries (subject to certain exceptions) and secured by a lien on substantially all of the Company's and its direct and indirect subsidiaries' current and fixed assets (subject to certain exceptions). Certain fixed assets will only be required to be part of the collateral to the extent such fixed assets are included in the borrowing base under the Credit Facility. The aggregate borrowing base under the Credit Facilities includes $150.0 million (the "PP&E Amount") due to a first-priority lien on fixed assets granted to the lenders. The PP&E Amount will be reduced on a dollar-for-dollar basis upon the release of fixed assets having a value in excess of $50.0 million from such liens.

The $400 million Credit Agreement contains limitations on Niska Partners' ability to incur additional debt or to pay distributions in respect of, repurchase or pay dividends on its membership interests (or other capital stock) or make other restricted payments. These limitations are similar to those contained in the indenture governing the 6.50% Senior Notes, but contain certain substantive differences. As a result of these differences, the limitations on restricted payments contained in the Credit Agreement should be less restrictive than the limitations contained in the indenture. As of March 31, 2014, Niska Partners was in compliance with all covenant requirements under the 6.50% Senior Notes and the $400 million Credit Agreement.

The following fees are applicable under each revolving credit facility: (1) an unused line fee based on the unused portion of the respective revolving credit facility; (2) a letter of credit participation fee on the aggregate stated amount of each letter of credit equal to the applicable margin for LIBOR loans or bankers' acceptance loans, as applicable; and (3) certain other customary fees and expenses of the lenders and agents. The Company is required to make prepayments under the revolving credit facilities at any time when, and to the extent that, the aggregate amount of the outstanding loans and letters of credit under such revolving credit facility exceeds the lesser of the aggregate amount of commitments in respect of such revolving credit facility and the applicable borrowing base.

The $400.0 million Credit Agreement contains customary covenants, including, but not limited to, restrictions on the Company's and its subsidiaries' ability to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets subject to security interests under the credit agreement, make acquisitions, loans, advances or investments, pay distributions, sell or otherwise transfer assets, optionally prepay or modify terms of any subordinated indebtedness or enter into transactions with affiliates. The Credit Facilities require the maintenance of a fixed charge coverage ratio of 1.1 to 1.0 at the end of each fiscal quarter when excess availability under both the U.S. revolving credit facility and the Canadian revolving credit facility is less than 15% of the aggregate amount of availability under both revolving credit facilities. Such fixed charge coverage ratio will be tested at the end of each quarter until such time as average excess availability exceeds 15% for thirty consecutive days.

The $400.0 million Credit Agreement provides that, upon the occurrence of certain events of default, the Company's obligations thereunder may be accelerated and the lending commitments terminated. Such events of default include payment defaults to the lenders, material inaccuracies of representations and warranties, covenant defaults, cross-defaults to other material indebtedness, including the notes, voluntary and involuntary bankruptcy proceedings, material money judgments, material events relating to pension plans, certain change of control events and other customary events of default.

As of March 31, 2014, $119.5 million (March 31, 2013—$65.0 million) in borrowings, with a weighted average interest rate of 3.56% (March 31, 2013—3.69%), were outstanding under the Credit Facilities. Issued letters of credit amounted to $4.8 million and $3.3 million as of March 31, 2014 and 2013, respectively.

Restrictions

Niska Partners has no independent assets or operations other than its investments in its subsidiaries. Both the 6.50% Senior Notes and the $400.0 million Credit Agreement have been jointly and severally guaranteed by Niska Partners and substantially all of its subsidiaries. Niska Partners' subsidiaries have no significant restrictions on their ability to pay distributions or make loans to Niska Partners, which are prepared and measured on a consolidated basis, and have no restricted assets as of March 31, 2014.

The Company's principal debt covenant is the fixed charge coverage ratio, which is included in both the Credit Facility and in the Indenture. When the fixed charge coverage ratio is less than 2.0 times, Niska Partners is restricted in its ability to issue new debt. When the fixed charge coverage ratio is below 1.75 to 1.0, the Company is restricted in its ability to pay distributions. At March 31, 2014, the fixed charge coverage ratio was 2.8 to 1.0.