DEBT

3 Months Ended

Mar. 31, 2021

The components of debt as of March 31, 2021 and December 31, 2020 consisted of the following:


	March 31, 2021
(in millions)	Debt Instrument		Unamortized Issuance Expense			Unamortized Debt Discount		Total
Current portion of long-term debt:
4.10% Senior Notes due March 2022	$	207	$	—		$	—	$	207
Total current portion of long-term debt	$	207	$	—		$	—	$	207

Long-term debt:
Variable rate (2.09% at March 31, 2021) 2018 revolving credit facility due April 2024	$	567	$	—	(1)	$	—	$	567
4.95% Senior Notes due January 2025 (2)	856		(4)			(1)		851
7.50% Senior Notes due April 2026	618		(5)			—		613
7.75% Senior Notes due October 2027	440		(4)			—		436
8.375% Senior Notes due September 2028	350		(5)			—		345
Total long-term debt	$	2,831	$	(18)		$	(1)	$	2,812

Total debt	$	3,038	$	(18)		$	(1)	$	3,019

	December 31, 2020
(in millions)	Debt Instrument		Unamortized Issuance Expense			Unamortized Debt Discount		Total
Long-term debt:
Variable rate (2.11% at December 31, 2020) 2018 term loan facility due April 2024	$	700	$	—	(1)	$	—	$	700
4.10% Senior Notes due March 2022	207		—			—		207
4.95% Senior Notes due January 2025 (2)	856		(4)			(1)		851
7.50% Senior Notes due April 2026	618		(6)			—		612
7.75% Senior Notes due October 2027	440		(5)			—		435
8.375% Senior Notes due September 2028	350		(5)			—		345
Total long-term debt	$	3,171	$	(20)		$	(1)	$	3,150

(1)At March 31, 2021 and December 31, 2020, unamortized issuance expense of $11 million and $12 million, respectively, associated with the 2018 credit facility (as defined below) was classified as other long-term assets on the consolidated balance sheets.

(2)Effective in July 2018, the interest rate was 6.20% for the 2025 Notes, reflecting a net downgrade in the Company’s bond ratings since the initial offering. On April 7, 2020, S&P downgraded the Company’s bond rating to BB-, which had the effect of increasing the interest rate on the 2025 Notes to 6.45% following the July 23, 2020 interest payment date. The first coupon payment to the bondholders at the higher interest rate was paid in January 2021.

The following is a summary of scheduled debt maturities by year as of March 31, 2021:


(in millions)
2021	$	—
2022	207
2023	—
2024	567
2025	856
Thereafter	1,408
	$	3,038

(1)The Company’s current revolving credit facility matures in 2024.

Credit Facilities

2018 Revolving Credit Facility

In April 2018, the Company replaced its credit facility that was entered into in 2016 with a new revolving credit facility (the “2018 credit facility”) with a group of banks that, as amended, has a maturity date of April 2024. The 2018 credit facility has an aggregate maximum revolving credit amount of $3.5 billion and, in March 2021, the banks participating in the 2018 credit facility reaffirmed the elected borrowing base and aggregate commitments to be $2.0 billion. The borrowing base is subject to redetermination at least twice a year, in April and October, and is secured by substantially all of the assets owned by the Company and its subsidiaries. The permitted lien provisions in certain senior note indentures currently limit liens securing indebtedness to the greater of $2.0 billion or 25% of adjusted consolidated net tangible assets.

The Company may utilize the 2018 credit facility in the form of loans and letters of credit. Loans under the 2018 credit facility are subject to varying rates of interest based on whether the loan is a Eurodollar loan or an alternate base rate loan. Eurodollar loans bear interest at the Eurodollar rate, which is adjusted LIBOR for such interest period plus the applicable margin (as those terms are defined in the 2018 credit facility documentation). The applicable margin for Eurodollar loans under the 2018 credit facility, as amended, ranges from 1.75% to 2.75% based on the Company’s utilization of the 2018 credit facility. Alternate base rate loans bear interest at the alternate base rate plus the applicable margin. The applicable margin for alternate base rate loans under the 2018 credit facility, as amended, ranges from 0.75% to 1.75% based on the Company’s utilization of the 2018 credit facility.

The 2018 credit facility contains customary representations and warranties and contains covenants including, among others, the following:

•a prohibition against incurring debt, subject to permitted exceptions;

•a restriction on creating liens on assets, subject to permitted exceptions;

•restrictions on mergers and asset dispositions;

•restrictions on use of proceeds, investments, transactions with affiliates, or change of principal business; and

•maintenance of the following financial covenants, commencing with the fiscal quarter ending June 30, 2018:

1.Minimum current ratio of no less than 1.00 to 1.00, whereby current ratio is defined as the Company’s consolidated current assets (including unused commitments under the credit agreement, but excluding non-cash derivative assets) to consolidated current liabilities (excluding non-cash derivative obligations and current maturities of long-term debt).

2.Maximum total net leverage ratio of no greater than, with respect to each fiscal quarter ending on or after June 30, 2020, 4.00 to 1.00. Total net leverage ratio is defined as total debt less cash on hand (up to the lesser of 10% of credit limit or $150 million) divided by consolidated EBITDAX for the last four consecutive quarters. EBITDAX, as defined in the credit agreement governing the Company’s 2018 credit facility, excludes the effects of interest expense, depreciation, depletion and amortization, income tax, any non-cash impacts from impairments, certain non-cash hedging activities, stock-based compensation expense, non-cash gains or losses on asset sales, unamortized issuance cost, unamortized debt discount and certain restructuring costs.

The 2018 credit facility contains customary events of default that include, among other things, the failure to comply with the financial covenants described above, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgments and cross-defaults to material indebtedness. If an event of default occurs and is continuing, all amounts outstanding under the 2018 credit facility may become immediately due and payable. As of March 31, 2021, the Company was in compliance with all of the covenants contained in the credit agreement governing the 2018 credit facility.

Each United States domestic subsidiary of the Company for which the Company owns 100% guarantees the 2018 credit facility. Pursuant to requirements under the indentures governing its senior notes, each subsidiary that became a guarantor of the 2018 credit facility also became a guarantor of each of the Company’s senior notes.

As of March 31, 2021, the Company had $233 million in letters of credit and $567 million borrowings outstanding under the 2018 credit facility. The Company currently does not anticipate being required to supply a materially greater amount of letters of credit under its existing contracts.

The Company’s debt exposure to the anticipated transition from LIBOR in late 2021 is limited to the 2018 credit facility. Upon announcement by the administrator of LIBOR identifying a specific date for LIBOR cessation, the credit agreement governing the 2018 credit facility will be amended to reference an alternative rate as established by JP Morgan, as Administrative Agent, and the Company. The alternative rate will be based on the prevailing market convention and is expected to be the Secured Overnight Financing Rate (“SOFR”).

Senior Notes

In January 2015, the Company completed a public offering of $1.0 billion aggregate principal amount of its 4.95% senior notes due 2025 (the “2025 Notes”). The interest rate on the 2025 Notes is determined based upon the public bond ratings from Moody’s and S&P. Downgrades on the 2025 Notes from either rating agency increase interest costs by 25 basis points per downgrade level and upgrades decrease interest costs by 25 basis points per upgrade level, up to the stated coupon rate, on the following semi-annual bond interest payment. Effective in July 2018, the interest rate for the 2025 Notes was 6.20%, reflecting a net downgrade in the Company’s bond ratings since the initial offering. On April 7, 2020, S&P downgraded the Company’s bond rating to BB-, which had the effect of increasing the interest rate on the 2025 Notes to 6.45% following the July 23, 2020 interest payment date. The first coupon payment to the 2025 Notes bondholders at the higher interest rate was paid in January 2021. In the event of future downgrades, the coupons for this series of notes have been capped at 6.95%.

In the first quarter of 2020, the Company repurchased $3 million of its 4.10% Senior Notes due 2022, $28 million of its 4.95% Senior Notes due 2025, $18 million of its 7.50% Senior Notes due 2026 and $31 million of its 7.75% Senior Notes due 2027 for $52 million, and recognized a $28 million gain on the extinguishment of debt.

In August 2020, the Company completed a public offering of $350 million aggregate principal amount of its 8.375% Senior Notes due 2028 (the “2028 Notes”), with net proceeds from the offering totaling approximately $345 million after underwriting discounts and offering expenses. The 2028 Notes were sold to the public at 100% of their face value. The net proceeds from the notes, in conjunction with the net proceeds from the August 2020 common stock offering and borrowings under the revolving credit facility, were utilized to fund a redemption of $510 million of Montage’s Notes in connection with the closing of the Merger.