Business Context and Reporting Period
APA Corporation filed a Form 8-K dated April 29, 2022, reporting the entry into two new syndicated, unsecured five-year revolving credit agreements for general corporate purposes. The facilities replaced and refinanced Apache Corporation’s former syndicated credit facility.
Key Financial and Liquidity Terms
- USD facility: $1.8 billion of aggregate commitments, including a letter-of-credit subfacility of up to $750 million, with $150 million currently committed. Commitments may be increased to $2.3 billion with required lender participation or consent.
- GBP facility: £1.5 billion of aggregate commitments for loans and letters of credit.
- Maturity: April 29, 2027, with up to two potential one-year extensions subject to lender approval. Extension requires approval from lenders holding at least 51% of total commitments.
- Existing borrowings transferred: $680 million outstanding under the former facility was deemed outstanding under the USD facility.
- Letters of credit transferred: A $20 million letter of credit was deemed outstanding under the USD facility, and £748 million of letters of credit were deemed outstanding under the GBP facility.
- Apache borrowing limit: Apache may borrow up to $300 million under the USD facility at any time.
- Current pricing: The Base Rate Margin was 0.60%, the SOFR Applicable Margin was 1.60%, and the quarterly facility fee was 0.275%. GBP borrowings reference adjusted SONIA plus the Applicable Margin.
- Financial covenant: APA must maintain an adjusted debt-to-capital ratio of no more than 60% at the end of each fiscal quarter. Capital excludes certain non-cash write-downs, impairments, and related charges occurring after June 30, 2015.
Material Changes Versus the Prior Comparable Arrangement
- Apache terminated $4.0 billion of commitments under its March 14, 2018 former credit facility.
- The new agreements place APA as the principal borrower and provide separate USD and GBP revolving facilities, while preserving substantially similar representations, covenants, and events of default.
- Letters of credit supporting APA and its subsidiaries, including North Sea decommissioning obligations, may be denominated in U.S. dollars, pounds sterling, Canadian dollars, and certain other approved currencies.
Outlook, Risks, Contingencies, and Unusual Items
- The facilities provide liquidity and letter-of-credit capacity for general corporate purposes and subsidiary obligations, but the filing does not provide earnings, revenue, cash flow, or operating guidance.
- Borrowing availability is limited by total commitments after considering outstanding loans, undrawn letters of credit, and unreimbursed letter-of-credit drawings.
- Apache guarantees obligations under the new agreements until senior notes and debentures outstanding under its existing indentures fall below $1.0 billion in aggregate principal amount.
- Events of default include nonpayment, specified cross-defaults, certain unpaid judgments or pension liabilities, covenant breaches, change of control, and specified insolvency events. Lenders may accelerate obligations and terminate commitments in applicable circumstances.
- The agreements restrict certain liens, mergers, asset dispositions, subsidiary payments, and guarantees. The filing states that lenders cannot accelerate maturity solely because of an unspecified material adverse change or a credit-rating decline.
Facts Investors Should Verify
- Actual utilization of the USD and GBP facilities, including borrowings, letters of credit, and remaining undrawn commitments.
- APA’s adjusted debt-to-capital ratio and compliance with the 60% quarterly covenant.
- The amount and duration of Apache’s guarantee under the new agreements.
- Applicable interest margins and facility fees, which may change with APA’s or Apache’s relevant debt rating.
- Exposure related to North Sea decommissioning obligations and the £748 million of transferred letters of credit.
- The full credit agreements filed as Exhibits 10.1 and 10.2, including detailed covenant definitions, thresholds, and default provisions.
The filing text does not provide a clear value for revenue, profit, operating cash flow, free cash flow, margins, or total debt beyond the credit-facility amounts described above.