Long-Term Debt

3 Months Ended

Mar. 31, 2020

Note 4. Long-Term Debt

The table below reflects long-term debt outstanding as of the dates indicated:



	March 31,			December 31,
In thousands	2020			2019
Senior Secured Bank Credit Agreement	$	—		$	—
9% Senior Secured Second Lien Notes due 2021	584,709			614,919
9¼% Senior Secured Second Lien Notes due 2022	455,668			455,668
7¾% Senior Secured Second Lien Notes due 2024	531,821			531,821
7½% Senior Secured Second Lien Notes due 2024	20,641			20,641
6⅜% Convertible Senior Notes due 2024	245,548			245,548
6⅜% Senior Subordinated Notes due 2021	51,304			51,304
5½% Senior Subordinated Notes due 2022	58,426			58,426
4⅝% Senior Subordinated Notes due 2023	135,960			135,960
Pipeline financings	163,748			167,439
Total debt principal balance	2,247,825			2,281,726
Debt discount⁽¹⁾	(97,873		)	(101,767		)
Future interest payable⁽²⁾	143,749			164,914
Debt issuance costs	(9,505		)	(10,009		)
Total debt, net of debt issuance costs and discount	2,284,196			2,334,864
Less: current maturities of long-term debt⁽³⁾	(98,212		)	(102,294		)
Long-term debt	$	2,185,984		$	2,232,570


(1)	Consists of discounts related to our 7¾% Senior Secured Second Lien Notes due 2024 and 6⅜% Convertible Senior Notes due 2024 of $25.7 million and $72.2 million, respectively, as of March 31, 2020.


(2)	Future interest payable represents most of the interest due over the terms of our 2021 Senior Secured Notes and 9¼% Senior Secured Second Lien Notes due 2022 (the “2022 Senior Secured Notes”) and has been accounted for as debt in accordance with FASC 470-60, Troubled Debt Restructuring by Debtors.


(3)	Our current maturities of long-term debt as of March 31, 2020 include $83.8 million of future interest payable related to the 2021 Senior Secured Notes and 2022 Senior Secured Notes that is due within the next twelve months.

The ultimate parent company in our corporate structure, Denbury Resources Inc. (“DRI”), is the sole issuer of all our outstanding senior secured, convertible senior, and senior subordinated notes. DRI has no independent assets or operations. Each of the subsidiary guarantors of such notes is 100% owned, directly or indirectly, by DRI, and the guarantees of the notes are full and unconditional and joint and several; any subsidiaries of DRI that are not subsidiary guarantors of such notes are minor subsidiaries.

Senior Secured Bank Credit Facility

In December 2014, we entered into an Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and other lenders party thereto (as amended, the “Bank Credit Agreement”), which has been amended periodically since that time. The Bank Credit Agreement is a senior secured revolving credit facility with a maturity date of December 9, 2021, provided that the maturity date may be accelerated to earlier dates in 2021 (February 12, 2021, May 14, 2021 or August 13, 2021) if certain defined liquidity ratios are not met, or if the 2021 Senior Secured Notes due in May 2021 or 2021 Senior Subordinated Notes due in August 2021 are not repaid or refinanced by each of their respective maturity dates. The borrowing base under the Bank Credit Agreement is evaluated semi-annually, generally around May 1 and November 1. As of May 13, 2020, the bank group has not yet completed the process for the spring redetermination, and therefore the borrowing base and commitment levels currently remain at $615 million. The Company currently anticipates that the bank group will complete the redetermination process over the next several weeks, and it is currently uncertain if there will be any change to the borrowing base or banks’ commitment levels. If our outstanding debt under the Bank Credit Agreement were to ever exceed the borrowing base, we would be required to repay the excess amount over a period not to exceed six months. We incur a commitment fee of 0.50% on the undrawn portion of the aggregate lender commitments under the Bank Credit Agreement.

The Bank Credit Agreement contains certain financial performance covenants through the maturity of the facility, including the following:


•	A Consolidated Total Debt to Consolidated EBITDAX covenant, with such ratio not to exceed 5.25 to 1.0 through December 31, 2020 and 4.50 to 1.0 thereafter;


•	A consolidated senior secured debt to consolidated EBITDAX covenant, with such ratio not to exceed 2.5 to 1.0. Only debt under our Bank Credit Agreement is considered consolidated senior secured debt for purposes of this ratio;


•	A minimum permitted ratio of consolidated EBITDAX to consolidated interest charges of 1.25 to 1.0; and


•	A requirement to maintain a current ratio (i.e., Consolidated Current Assets to Consolidated Current Liabilities) of 1.0 to 1.0.

For purposes of computing the current ratio per the Bank Credit Agreement, Consolidated Current Assets exclude the current portion of derivative assets but include borrowing base availability under the senior secured bank credit facility, and Consolidated Current Liabilities exclude the current portion of derivative liabilities as well as the current portions of long-term indebtedness outstanding.

As of March 31, 2020, we were in compliance with all debt covenants under the Bank Credit Agreement. However, declining industry conditions and reductions in our cash flows and liquidity over the past few months have made our ability to comply with the maximum permitted ratio of total net debt to consolidated EBITDAX maintenance financial covenant in our senior secured bank credit facility increasingly unlikely if these conditions continue, and we foresee the potential to be in violation of this covenant by the end of the second or third quarter of this year. The above description of our Bank Credit Agreement and defined terms are contained in the Bank Credit Agreement and the amendments thereto.

2020 Repurchases of Senior Secured Notes

During March 2020, we repurchased a total of $30.2 million in aggregate principal amount of our 2021 Senior Secured Notes in open-market transactions for a total purchase price of $14.2 million, excluding accrued interest. In connection with these transactions, we recognized a $19.0 million gain on debt extinguishment, net of unamortized debt issuance costs and future interest payable written off.