(5) Debt

Bankruptcy Filing. The Chapter 11 filing of the Company and the Chapter 11 Subsidiaries constituted an event of default with respect to our existing debt obligations. As a result, the Company's pre-petition unsecured senior notes and secured debt under the Existing First Lien Credit Agreement became immediately due and payable, but any efforts to enforce such payment obligations were automatically stayed as a result of the Chapter 11 filing. On April 22, 2016, upon the Company's emergence from bankruptcy, the senior notes and the DIP Credit Agreement (along with certain unsecured claims) were exchanged for 88.5% of the common stock of the reorganized entity. Additional information regarding the bankruptcy proceedings is included in Note 1A of these condensed consolidated financial statements.

Our debt balances as of March 31, 2016 and December 31, 2015, were as follows (in thousands):



	March 31, 2016			December 31, 2015
7.125% senior notes due 2017 ⁽¹⁾	$	—		$	—
8.875% senior notes due 2020 ⁽¹⁾	—			—
7.875% senior notes due 2022 ⁽¹⁾	—			—
Bank Borrowings	339,900			324,900
Total Debt	$	339,900		$	324,900
Less: Current portion of long-term debt ⁽²⁾	$	(339,900	)	$	(324,900	)
Long-Term Debt	$	—		$	—
(1) Classified as Liabilities subject to compromise as of March 31, 2016 and December 31, 2015.
(2) As a result of our Chapter 11 filing, we have classified our Existing First Lien Credit Agreement borrowings and DIP Credit Agreement borrowings as current as of March 31, 2016 and December 31, 2015.

Reclassification of Senior Notes Liabilities. Senior Notes due in 2017 of $250.0 million, Senior Notes due in 2020 of $225.0 million and Senior Notes due in 2022 of $400.0 million are included in Liabilities subject to compromise in the condensed consolidated balance sheets as of March 31, 2016 and December 31, 2015.

Reclassification of Existing First Lien Credit Agreement Liabilities. Amounts outstanding under our pre-petition Existing First Lien Credit Agreement due in 2017 of $324.9 million were reclassified as a current liability in the condensed consolidated balance sheet dated as of March 31, 2016 and December 31, 2015 due to cross-default provisions as a result of the bankruptcy filings. The associated remaining unamortized debt issuance costs of $2.4 million on the Existing First Lien Credit Agreement were written-off in "Interest expense, net" on the Company's condensed consolidated statement of operations as of March 31, 2016.

Debtor-In-Possession Financing. As part of the Chapter 11 filings, we entered into the DIP Credit Agreement. As of March 31, 2016, the total amount available for borrowing under our DIP Credit Agreement was $30.0 million, of which $15.0 million was outstanding. The remaining $45.0 million under the DIP Credit Agreement became available to the Company upon emergence from bankruptcy. The proceeds of the DIP Credit Agreement were primarily used to pay down the pre-petition Existing First Lien Credit Agreement upon emergence from bankruptcy, and were also used to pay certain costs, fees and expenses related to the Chapter 11 cases, authorized pre-petition claims, and amounts due in connection with the DIP Credit Agreement, including on account of certain “adequate protection” obligations. Pursuant to the plan of reorganization, the DIP Credit Agreement, at the option of the lenders, converted into the post-emergence Company’s common stock, which was part of the 88.5% of the common stock distributed to the current holders of the senior notes and certain unsecured creditors upon emergence from the bankruptcy proceedings. As a result, the $75.0 million borrowed under the DIP Credit Agreement was not required to be repaid and terminated upon the Company’s exit from bankruptcy.

Under the DIP Credit Agreement, interest accrued at a rate per year equal to LIBOR plus 12.0% for Eurodollar Rate Loans or the alternative base rate plus 11.0%. We paid the lenders under the DIP Credit Agreement a 3.0% commitment fee, at the time funds were made available under the facility, totaling $0.9 million during the first quarter of 2016. We were also required to pay to each Backstop Lender (as defined in the DIP Credit Agreement) a non-refundable backstop fee of 7.5% on the pro rata share of such Backstop Lender’s share of the loan commitments, payable in the form of common stock issued by the Company upon emergence from the Chapter 11 cases. An original issue discount of 5% was paid by the Company at the time of any drawdowns against the DIP Credit Agreement, resulting in net proceeds to the Company of 95% of the gross drawdown amount.

The DIP Credit Agreement was secured by security interests in substantially all of the Company’s assets, which were (1) second priority to the existing pre-petition liens of the lenders and JPMorgan Chase Bank, N.A., as administrative agent with respect to the collateral (generally required to be at least 95% of our oil and gas properties) set forth in the Second Amended and Restated Credit Agreement, dated as of September 21, 2010 (the “Existing First Lien Credit Agreement”), and (2) first priority with respect to all other property of the Company. These security interests were subject to certain carve-outs (such as bankruptcy court costs and professional fees), and permitted liens under the DIP Credit Agreement. The DIP Credit Agreement was subject to customary covenants, prepayment events, events of default and other provisions.

Interest expense on the DIP Credit Agreement totaled $1.9 million during the three months ended March 31, 2016.

Bank Borrowings. Effective November 2, 2015, we executed an amendment to our Existing First Lien Credit Agreement lowering our borrowing base and commitment amount from $375.0 million to $330.0 million.

We had $324.9 million in outstanding borrowings under our Existing First Lien Credit Agreement at March 31, 2016 and December 31, 2015, respectively. As of March 31, 2016, the interest rate on our Existing First Lien Credit Agreement was either (a) the lead bank’s prime rate plus an applicable margin or (b) the Eurodollar rate plus an applicable margin. However with respect to (a), if the lead bank’s prime rate was not higher than each of the federal funds rate plus 0.5%, and the adjusted London Interbank Offered Rate (“LIBOR”) plus 1%, the greatest of these three rates then applied. The applicable margins vary depending on the level of outstanding debt with escalating rates of 100 to 200 basis points above the Alternative Base Rate and escalating rates of 200 to 300 basis points for Eurodollar rate loans. At March 31, 2016, the lead bank's prime rate was 3.5%. The commitment fee terms associated with the Existing First Lien Credit Agreement were 0.50% for the three months ended March 31, 2016. During the bankruptcy proceedings we paid interest on our Existing First Lien Credit Agreement in the normal course.

Interest expense on the Existing First Lien Credit Agreement, including commitment fees and amortization of debt issuance costs, totaled $6.1 million and $1.7 million for the three months ended March 31, 2016 and 2015, respectively. The amount of commitment fees included in interest expense, net was immaterial for the three months ended March 31, 2016 and $0.2 million for the three months ended March 31, 2015.

Additionally, we capitalized interest on our unproved properties in the amount $1.2 million for the three months ended March 31, 2015. We did not capitalize interest on our unproved properties for the three months ended March 31, 2016.

Due to the bankruptcy proceedings, most acts to exercise remedies under our Existing First Lien Credit Agreement, including those related to defaults of various financial covenants and ratios, were stayed as of December 31, 2015 and continued to be stayed during the bankruptcy proceedings. No further funds were available to us under the Existing First Lien Credit Agreement. The terms of our Existing First Lien Credit Agreement included, among other restrictions, a limitation on the level of cash dividends (not to exceed $15.0 million in any fiscal year), a remaining aggregate limitation on purchases of our stock of $50.0 million, and limitations on incurring other debt.

At March 31, 2016, our Existing First Lien Credit Agreement contained financial covenants detailing certain minimum financial ratios that must be maintained. The first was an adjusted working capital ratio of adjusted current assets to current liabilities (as defined in the Existing First Lien Credit Agreement) of not less than 0.5 to 1.0 for each of the quarters up to and ending on December 31, 2016, returning to a ratio of not less than 1.0 to 1.0 at any time thereafter. The second ratio was the interest coverage ratio, calculated on a trailing twelve month basis of EBITDAX to interest expense (as defined in the Existing First Lien Credit Agreement), of not less than 1.15 to 1.0 for the quarters ending on December 31, 2015 through June 30, 2016, 1.3 to 1.0 for the quarters ending September 30, 2016 through December 31, 2016, and 2.0 to 1.0 any time thereafter. The third ratio was the senior secured leverage ratio (as defined in the Existing First Lien Credit Agreement), requiring that the ratio of senior secured liabilities on the last day of the quarter to EBITDAX, calculated on a trailing twelve month basis, not be greater than 3.5 to 1.0 for the quarters ending December 31, 2015 through June 30, 2016, 3.0 to 1.0 for the quarters ending September 30, 2016 through December 31, 2016, and 2.5 to 1.0 any time thereafter.

Since inception, no cash dividends have been declared on our common stock. As of March 31, 2016, the terms of the Existing First Lien Credit Agreement required us to secure the facility with collateral equal to at least 95% of our oil and natural gas properties. Under the terms of the Existing First Lien Credit Agreement, the commitment amount can be less than or equal to the total amount of the borrowing base with unanimous consent of the bank group as it might change from time to time.

New Credit Facility. As discussed in Note 1A of these condensed consolidated financial statements, on the Effective Date, April 22, 2016, the Existing First Lien Credit Agreement was terminated and paid in full, and the Company entered the New Credit Facility among the Company, as borrower, JPMorgan Chase Bank, National Association, as administrative agent, and certain lenders party thereto. The New Credit Facility matures three years after the Effective Date and provides for advancing loans of up to the maximum credit amount that the lenders, in the aggregate, make available, subject to the Company meeting certain financial requirements, including certain financial tests. As of the Effective Date, the maximum credit amount was $500.0 million with an initial borrowing base of $320.0 million. The obligations under the New Credit Facility are being secured, subject to certain exceptions, by a first priority lien on substantially all assets of the Company and certain of its subsidiaries. The terms of the New Credit Facility also include the following, based on terms as defined in the New Credit Facility agreement:


•	A non-conforming borrowing base of $70 million, which terminates on November 1, 2017, and a conforming borrowing base of $250 million.


•	The interest rate for Alternative Base Rate ("ABR") loans will be based on the ABR plus the applicable margin, and the interest rate for Eurodollar loans will be based on the adjusted London Interbank Offered Rate (“LIBOR”), plus the applicable margin.

•

The applicable margins vary and have escalating rates of either (a) 500 to 600 basis points for ABR loans and 600 to 700 basis points for Eurodollar loans, during the non-conforming period, and depending on the level of the non-conforming borrowing base and the non-conforming borrowing base loans outstanding, or (b) 200 to 300 basis points for ABR loans and 300 to 400 basis points for Eurodollar loans depending on the borrowing base utilization percentage, after the non-conforming period or when both the non-conforming borrowing base is zero and there are no non-conforming borrowing base loans outstanding.


•	Certain covenants, including (a) a ratio of total debt to EBITDA (not to exceed 6.5 to 1.0 for the quarter ending September 30, 2016, declining gradually over time to 3.5 to 1.0 for the quarter ending March 31, 2019, and thereafter), a current ratio of not less than 1.0 to 1.0 at the end of each quarter beginning June 30, 2016, and (c) a minimum liquidity requirement of $10 million.

Senior Notes Due In 2022. These notes consisted of $400.0 million of 7.875% senior notes due 2022 that were scheduled to mature on March 1, 2022. On November 30, 2011, we issued $250.0 million of these senior notes at a discount of $2.1 million or 99.156% of par, which equated to an effective yield to maturity of 8%. On October 3, 2012, we issued an additional $150.0 million of these senior notes at 105% of par, which equated to a yield to worst of 6.993%. As of March 31, 2016, these senior notes were senior unsecured obligations that ranked equally with all of our existing and future senior unsecured indebtedness, were effectively subordinated to all our existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness, including borrowing under our bank Existing First Lien Credit Agreement, and ranked senior to any future subordinated indebtedness of Swift Energy. Interest on these notes was payable semi-annually on March 1 and September 1 and commenced on March 1, 2012. The filing of the petition for bankruptcy protection constituted an “event of default” under the indenture governing these senior notes. On April 22, 2016, the obligations of the Company and the Chapter 11 Subsidiaries with respect to these notes were canceled.

Senior Notes Due In 2020. These notes consisted of $225.0 million of 8.875% senior notes due 2020 issued at 98.389% of par, which equated to an effective yield to maturity of 9.125%. The notes were issued on November 25, 2009 with an original discount of $3.6 million and were scheduled to mature on January 15, 2020. As of March 31, 2016, these senior notes were senior unsecured obligations that ranked equally with all of our existing and future senior unsecured indebtedness, were effectively subordinated to all our existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness, including borrowing under our bank Existing First Lien Credit Agreement, and ranked senior to any future subordinated indebtedness of Swift Energy. Interest on these notes was payable semi-annually on January 15 and July 15 and commenced on January 15, 2010. The filing of the petition for bankruptcy protection constituted an “event of default” under the indenture governing these senior notes. On April 22, 2016, the obligations of the Company and the Chapter 11 Subsidiaries with respect to these notes were canceled.

Senior Notes Due In 2017. These notes consisted of $250.0 million of 7.125% senior notes due in 2017, which were issued on June 1, 2007 at 100% of the principal amount and were scheduled to mature on June 1, 2017. As of March 31, 2016, the notes were senior unsecured obligations that ranked equally with all of our existing and future senior unsecured indebtedness, were effectively subordinated to all our existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness, including borrowing under our bank Existing First Lien Credit Agreement, and ranked senior to any future subordinated indebtedness of Swift Energy. Interest on these notes was payable semi-annually on June 1 and December 1, and commenced on December 1, 2007. Prior to the Chapter 11 filing, the Company elected not to make the $8.9 million semi-annual interest payment due December 1, 2015, on its outstanding $250.0 million principal amount of 7.125% Senior Notes due 2017. The filing of the petition for bankruptcy protection constituted an “event of default” under the indenture governing these senior notes. On April 22, 2016, the obligations of the Company and the Chapter 11 Subsidiaries with respect to these notes were canceled.

Debt Issuance Costs. Our policy is to capitalize legal fees, accounting fees, underwriting fees, printing costs, and other direct expenses associated with our senior notes, amortizing those costs on an effective interest basis over the term of the senior notes, while issuance costs related to a line of credit arrangement are capitalized and then amortized ratably over the term of the line of credit arrangement, regardless of whether there are any outstanding borrowings.

In April 2015, the FASB issued ASU 2015-03, which requires debt issuance costs related to our debt to be presented on the balance sheet as a reduction of the carrying amount of the long-term debt. We implemented this guidance during the first quarter of 2016 on a retrospective basis, with no material impact to our financial statements as of March 31, 2016, and December 31, 2015, respectively, since we wrote off the debt issuance costs related to our senior notes as of December 31, 2015, as a result of our bankruptcy proceedings. In August 2015, the FASB issued ASU 2015-15, which allows for debt issuance costs related to line of credit arrangements to continue to be presented as assets, regardless of whether there are any outstanding borrowings. Debt issuance costs related to line of credit arrangements continue to be presented as an asset on our condensed consolidated balance sheets.

Interest Expense on Senior Notes. There was no interest expense on the senior notes, for the three months ended March 31, 2016 due to our bankruptcy proceedings. Interest expense on the senior notes totaled $17.7 million for the three months ended March 31, 2015