6.Debt

Senior Notes

2017 Notes

The Company and the Company’s subsidiary Sabine Oil & Gas Finance Corporation, formerly NFR Energy Finance Corporation, have $350 million in 9.75% senior unsecured notes due 2017 (the “2017 Notes”) currently outstanding. The 2017 Notes are unsecured obligations that bear interest at a rate of 9.75% per annum, payable semi-annually on February 15 and August 15 each year. No interest expense has been recognized subsequent to the petition date.

As of March 31, 2016 and December 31, 2015 the 2017 Notes are presented as “Liabilities Subject to Compromise,” whereas the carrying value equals the face value. As of the petition date, the Company had accrued $14.1 million of interest related to the 2017 notes, reflected in “Liabilities Subject to Compromise”.

The 2017 Notes were issued under, and are governed by, an indenture dated February 12, 2010 by and among Sabine Oil & Gas Corporation, Sabine Oil & Gas Finance Corporation, the Bank of New York Mellon Trust Company, N.A. as trustee, and guarantors party thereto. The Company’s filing of the Bankruptcy Petitions described in Note 2 herein constitutes an event of default that accelerated the Company’s obligations under the 2017 Notes.

Under the Bankruptcy Code, the creditors under these debt agreements are stayed from taking any action against the Debtors as a result of the defaults.

2019 Notes

The Company has $577.9 million in 7¼% senior notes due 2019 (the “2019 Notes”). Interest on the 2019 Notes is payable semiannually on June 15 and December 15. No interest expense has been recognized subsequent to the petition date.

Certain subsidiaries of the Company are guarantors to the 2019 Notes. See Note 14 for additional details.

As of March 31, 2016 and December 31, 2015, the 2019 Notes are presented as “Liabilities Subject to Compromise,” whereas the carrying value equals the face value. As of the petition date the Company had accrued $24.3 million of interest related to the 2019 notes, reflected in “Liabilities Subject to Compromise”.

On February 25, 2015, the Company received notice that Wilmington Savings Fund Society, FSB was appointed as successor trustee under the indenture governing the 2019 Notes. The Company’s filing of the Bankruptcy Petitions described in Note 2 herein constitutes an event of default that accelerated the Company’s obligations under the 2019 Notes.

Under the Bankruptcy Code, the creditors under these debt agreements are stayed from taking any action against the Debtors as a result of the default.

2020 Notes

The Company has $222.1 million in 7½% senior notes due 2020 (the “2020 Notes”, and collectively with the 2019 Notes, the “Legacy Forest Notes”). Interest on the 2020 Notes is payable semiannually on March 15 and September 15. No interest expense has been recognized subsequent to the petition date.

Certain subsidiaries of the Company are guarantors to the 2020 Notes. See Note 14 for additional details.

As of March 31, 2016 and December 31, 2015, the 2020 Notes are presented as “Liabilities Subject to Compromise,” whereas the carrying value equals the face value. As of the petition date the Company had accrued $5.5 million of interest related to the 2020 notes, reflected in “Liabilities Subject to Compromise”.

On May 14, 2015, the Company received notice that Delaware Trust Company was appointed as successor trustee under the indenture governing the 2020 Notes. The Company’s filing of the Bankruptcy Petitions described in Note 2 herein constitutes an event of default that accelerated the Company’s obligations under the 2020 Notes.

Under the Bankruptcy Code, the creditors under these debt agreements are stayed from taking any action against the Debtors as a result of the default.

The New Revolving Credit Facility

The New Revolving Credit Facility provides for a $2 billion revolving credit facility, with an initial borrowing base of $1 billion. The New Revolving Credit Facility includes a sub-limit permitting up to $100 million of letters of credit. On April 27, 2015 the borrowing base for the New Revolving Credit Facility was reduced to $750 million. The New Revolving Credit Facility matured on April 7, 2016; however, as a result of the filing of the Bankruptcy Petitions, the obligations are subject to the Bankruptcy Court automatic stay.

The Company’s filing of the Bankruptcy Petitions described in Note 2 herein constituted an event of default that accelerated the Company’s obligations under the New Revolving Credit Facility. Additionally other events of default, including cross-defaults, are present due to the failure to make interest payments, the failure to make the borrowing base deficiency payments, the “going concern” qualification in the Company’s 2015 and 2014 audited financial statements and other matters.

Under the Bankruptcy Code, the creditors under these debt agreements are stayed from taking any action against the Debtors as a result of the default.

The Company is making adequate protection payments to the lenders under the New Revolving Credit Facility in an amount equal to the non-default rate of interest, fees and costs due and payable on a monthly basis under the New Revolving Credit Facility, in accordance with the cash collateral order filed with the Bankruptcy Court. Additionally, cash generated by the Company deemed to be proceeds of the oil and gas properties that represent prepetition collateral is deposited into a segregated account, which is reflected as Cash in the Condensed Consolidated Balance Sheet as of March 31, 2016, and it is used solely to pay for the operations of the prepetition collateral properties.

Prior to May 29, 2015, loans under the New Revolving Credit Facility bore interest at the Company’s option at either:

the sum of (1) the Alternate Base Rate, which is defined as the highest of (a) Wells Fargo Bank, National Association’s prime rate; (b) the federal funds effective rate plus 0.50%; or (c) the Eurodollar Rate (as defined in the New Revolving Credit Facility) for a one-month interest period plus 1% and (2) a margin varying from 0.50% to 1.50% depending on the Company’s most recent borrowing base utilization percentage (the “Revolving Base Rate”); or

the Eurodollar Rate plus a margin varying from 1.50% to 2.50% depending on the Company’s most recent borrowing base utilization percentage.

Beginning in May 29, 2015 and thereafter during the occurrence of an event of default under the New Revolving Credit Facility, the loans under the New Revolving Credit Facility bear interest at the Revolving Base Rate.

Borrowings outstanding under the New Revolving Credit Facility totaled approximately $902 million at both March 31, 2016 and December 31, 2015. Additionally, borrowings outstanding under the New Revolving Credit Facility had a weighted average interest rate of 5.1% and 2.6% for the three months ended March 31, 2016 and 2015, respectively.

The New Revolving Credit Facility provides that all such obligations and the guarantees will be secured by a lien on at least 80% of the PV-9 of the borrowing base properties evaluated in the most recent reserve report delivered to the administrative agent and a pledge of all of the capital stock of the Company’s restricted subsidiaries, subject to certain customary grace periods and exceptions.

As of March 31, 2016 and December 31, 2015 the New Revolving Credit Facility is presented as “Liabilities Subject to Compromise,” whereas the carrying value equals the face value. Interest expense continues to be recognized on the New Revolving Credit Facility subsequent to the petition date.

Term Loan Facility

The Company has a $700 million second lien term loan agreement (“Term Loan Facility”) with a maturity date of December 31, 2018 (provided that if the 2017 Notes are not refinanced to mature at least 91 days thereafter, the maturity date shall be 91 days prior to the February 15, 2017 maturity date of the 2017 Notes).

The Term Loan Facility, including with respect to interest and, in the case of eurodollar borrowings, bears interest at the Adjusted Eurodollar Rate plus 7.50%, with an interest rate floor of 1.25%, and, in the case of alternate base rate borrowings, bears interest at the Alternate Base Rate plus 6.50%, with an interest rate floor of 2.25%. Any time an interest period for loans expires during an event of default under the Term Loan Facility, such loans will bear interest at the Term Base Rate. The weighted average interest rate incurred on this indebtedness for the three months ended March 31, 2016 and 2015, was zero and 8.8%, respectively.

The Company’s filing of the Bankruptcy Petitions described above in Note 2 constituted an event of default that accelerated the Company’s obligations under the Term Loan Facility. Additionally other events of default are present due to the failure to make interest payments, the “going concern” qualification in the Company’s 2015 and 2014 audited financial statements and other matters. Under the Bankruptcy Code, the creditors under these debt agreements are stayed from taking any action against the Debtors as a result of the default.

As of March 31, 2016 and December 31, 2015 the Term Loan is presented as “Liabilities Subject to Compromise,” whereas the carrying value equals the face value. As of the petition date the Company had accrued $30.2 million of interest related to the Term Loan Facility, reflected in “Liabilities Subject to Compromise”. No interest expense has been recognized subsequent to the petition date.

All of the Company’s guarantees for its New Revolving Credit Facility have guaranteed the Term Loan Facility. The obligations under the Term Loan Facility are secured by the same collateral that secures the New Revolving Credit Facility, but the liens securing such obligations are second priority liens to the liens securing the New Revolving Credit Facility. However, the validity of certain liens securing the Term Loan Facility are currently in dispute pursuant to the lawsuit filed by the Company against the Term Loan Facility administrative agent, Wilmington Trust, N.A.