Samson Investment Co., an oil and gas producer owned by a group of investors led by KKR & Co., canceled plans to seek a lower rate on a $1 billion covenant-light loan, according to a person with knowledge of the transaction.
The company was seeking to cut the interest on the debt due in September 2018 to 4 percentage points more than the London interbank offered rate with a 1 percent minimum, from 4.75 percentage points more than Libor with a 1.25 percent minimum, according to data compiled by Bloomberg.
Credit Suisse Group AG had been arranging the refinancing for the Tulsa, Oklahoma-based company, which was bought in 2011 by a group led by KKR, that included Crestview Partners LP, NGP Energy Capital Management LLC and Itochu Corp. (8001), Bloomberg data show.
The loan was quoted today at 100.063 cents on the dollar down from 101.5 cents on July 22, according to prices compiled by Bloomberg.
Kristi Huller, a spokeswoman for KKR, declined to comment on why the transaction was pulled.
Standard & Poor’s lowered its grade on the company to B from B+ on Sept. 24, stating oil and gas exploration “production next year is likely to be lower than we initially contemplated, resulting in debt to Ebitda leverage of more than 4.5 times at least through the end of 2014,” Marc Bromberg and Stephen Scovotti, New York-based analysts at S&P, wrote in a report that day.
Moody’s Investors Service rates the company reflecting “an expectation of lower cash flows largely as a consequence of weaker than expected performance, and the need to raise additional debt financing to rebuild a liquidity cushion in support of Samson’s investment in growing its liquids production,” Moody’s analysts Andrew Brooks and Steven Wood wrote in a report.
Covenant-light loans don’t carry typical lender protections such as financial-maintenance requirements. In a term loan, money can’t be borrowed again once it’s repaid.
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