NOTE 12 — LONG TERM DEBT, NET

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	Successor		Predecessor
(in thousands)	December 31, 2018		December 31, 2017
Alta Mesa RBL	$	161,000	$	—
Alta Mesa Predecessor Credit Facility	—		117,065
2024 Notes	500,000		500,000
Unamortized premium on 2024 notes	29,123		—
Unamortized deferred financing costs	—		(9,625		)
Total long-term debt, net	$	690,123	$	607,440

Alta Mesa RBL

In connection with the Business Combination, we entered into the Alta Mesa RBL which features a face amount of $1.0 billion and had an initial $350.0 million borrowing base. In April 2018, the borrowing base was increased to $400.0 million, which was reaffirmed by the lenders during the fourth quarter of 2018. Drawing on the Alta Mesa RBL requires us to be in compliance with the covenants on a current and pro forma basis. As of December 31, 2018, in addition to $161.0 million of borrowings outstanding, we also had $21.9 million of outstanding letters of credit, leaving a total borrowing capacity of $217.1 million available for future use at that time. On April 1, 2019, the borrowing base was reduced to $370.0 million upon completion of the regularly scheduled semiannual redetermination.

The facility matures in February 2023 and is subject to semiannual redeterminations. We may borrow in Eurodollars or at a reference rate. Eurodollar loans bear interest at a rate per annum equal to the applicable LIBOR rate, plus a margin ranging from 2.00% to 3.00%. Reference rate loans bear interest at a rate per annum equal to the greater of (i) the agent bank’s prime rate, (ii) the federal funds effective rate plus 50 basis points or (iii) the rate for one-month Eurodollar loans plus 1.00%, plus a margin ranging from 1.00% to 2.00%.

The amounts outstanding are secured by first priority liens on substantially all of our upstream oil and gas properties and all of the equity of our material guarantor subsidiaries. Additionally, SRII Opco and Alta Mesa GP have pledged their respective partner interests in us as security.

Restrictive covenants may limit our ability to incur additional indebtedness, sell assets, guarantee or make loans to others, make investments, enter into mergers, make certain payments and distributions in excess of specific amounts, enter into or be party to hedge agreements, amend organizational documents, incur liens and engage in certain other transactions without the prior consent of the lenders.

The Alta Mesa RBL has two covenants that are tested quarterly according to the definitions and provisions thereunder:


•	a ratio of our current assets to current liabilities, inclusive of specified adjustments, of not less than 1.0 to 1.0; and


•	a ratio of our consolidated debt to our consolidated EBITDAX of not greater than 4.0 to 1.0. Through December 31, 2018 we were able to annualize cumulative Successor Period results in measuring EBITDAX.

We are currently in default under the Alta Mesa RBL for our failure to provide certain information by May 15, 2019 for the fiscal quarter ended March 31, 2019. The default can be cured by providing the information by June 14, 2019.

Predecessor Credit Facility

As of December 31, 2017, we had $117.1 million of borrowings outstanding, which were paid in full at the time of the Business Combination.

2024 Notes

Our 2024 Notes have a face value of $500.0 million and bear interest at 7.875% per annum. The 2024 Notes were issued at par during the 4th quarter of 2016 in a private placement but were exchanged for substantially identical registered senior notes in November 2017.

The 2024 Notes mature in December 2024 with interest payable semi-annually on June 15 and December 15. Before December 2019, we may redeem up to 35% of the 2024 Notes using proceeds from equity offerings at a redemption price of 107.875% of principal under specified conditions. Before December 2019, we otherwise may redeem the 2024 Notes at their principal amount plus an applicable make-whole premium.

On and after December 15, 2019, we may redeem the 2024 Notes, in whole or in part, at the following redemption prices plus accrued and unpaid interest, if any, to the date of redemption:



	After December 15
	2019		2020		2021		2022
Redemption price as a percentage of principal amount	105.906	%	103.938	%	101.969	%	100	%

The 2024 Notes are guaranteed by each of our subsidiaries and rank equal in right of payment to all of our existing and future senior indebtedness; senior in right of payment to all of our existing and future subordinated indebtedness; effectively subordinated to all of our existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness, including amounts outstanding under the Alta Mesa RBL; and structurally subordinated to all existing and future indebtedness and obligations of any of our subsidiaries that do not guarantee the 2024 Notes.

The 2024 Notes contain certain covenants limiting our ability to prepay subordinated indebtedness, pay distributions, redeem stock or make certain restricted investments; incur indebtedness; create liens on our assets to secure debt; restrict dividends, distributions or other payments; enter into transactions with affiliates; designate subsidiaries as unrestricted subsidiaries; sell or otherwise transfer or dispose of assets, including equity interests of restricted subsidiaries; effect a consolidation or merger; and change our line of business.

Upon certain changes of control, the terms of the notes may require us to redeem them at 101% of the principal amount. The Business Combination did not constitute a change in control for the 2024 Notes.

If an event of default occurs, all outstanding amounts may become due and payable.

Bond Premium

The fair value of the 2024 Notes as of the Business Combination was $533.6 million yielding a bond premium of $33.6 million Amortization of the premium reduced our interest expense by $4.5 million during the Successor Period.

Maturities of Long-Term Debt (Successor)



Fiscal Year	(in thousands)
2019	$	—
2020	—
2021	—
2022	—
2023	161,000
Thereafter	500,000
	$	661,000

Deferred Financing Costs

As of December 31, 2017, we had $11.4 million of deferred financing costs related to both the 2024 Notes and the Predecessor Credit Facility. Pursuant to the Business Combination, the unamortized deferred financing costs were adjusted to a fair value of zero. During the Successor Period, we incurred additional deferred financing costs related to the Alta Mesa RBL of $1.4 million. For the Successor Period, the 2018 Predecessor Period, and the years ended December 31, 2017 and 2016, the amortization of deferred financing costs was $0.2 million, $0.2 million, $2.7 million, and $3.9 million, respectively.