Business Context and Reporting Period
Company: Matador Resources Company
Filing Type: Form 8-K (Current Report)
Date of Report: October 1, 2018
Reporting Period: Events occurring on August 21, 2018, and October 1, 2018, with the offering closing on October 4, 2018.
The filing details the entry into material definitive agreements regarding the issuance of senior notes and an amendment to the company's revolving credit facility.
Key Financial Metrics and Capital Structure
- Debt Issuance: Issued $300 million in aggregate principal amount of 5.875% Senior Notes due 2026 (Additional Notes). This follows an initial issuance of $750 million on August 21, 2018, creating a total class of $1.05 billion in Notes.
- Net Proceeds: Approximately $297.6 million from the Additional Notes offering, after deducting discounts and estimated expenses.
- Interest Terms: Interest is payable semiannually on March 15 and September 15, with the first payment due March 15, 2019.
- Maturity: September 15, 2026.
- Use of Proceeds: Repayment of outstanding borrowings under the revolving credit facility and general corporate purposes.
Material Changes and Agreements
- Upsized Offering: The offering was upsized from a previously announced $250 million to $300 million.
- Credit Facility Amendment: On October 1, 2018, the company amended its Revolving Credit Agreement to permit the issuance of the Additional Notes.
- Registration Rights: Entered into a Registration Rights Agreement requiring the filing of a registration statement to exchange the Additional Notes for registered notes within 365 days, or payment of additional interest if not complied with.
- Lock-up Period: Agreed not to offer or sell certain debt securities for 45 days following October 1, 2018, without Merrill Lynch's consent.
Outlook, Risks, and Covenants
Redemption Provisions:
- Before Sept 15, 2021: Company may redeem up to 35% at 105.875% of principal using equity offering proceeds; or all/part at 100% plus make-whole premium.
- After Sept 15, 2021: Redemption prices decline from 104.406% (2021-2022) to 100.000% (Sept 15, 2024 onwards).
Change of Control: Holders may require repurchase at 101% of principal plus accrued interest upon a Change of Control.
Covenants: The Indenture restricts additional debt, dividends, asset sales, and mergers. Many covenants terminate if the Notes are rated investment grade by both Moody's and S&P.
Events of Default: Include payment defaults, failure to comply with reporting obligations, bankruptcy, and payment defaults on other indebtedness exceeding $50 million.
Investor Verification Checklist
- Verify the total outstanding debt load post-issuance ($1.05 billion in Notes plus remaining credit facility balance).
- Confirm the specific amount of the revolving credit facility repaid with the $297.6 million net proceeds.
- Monitor the timeline for the registration statement filing required under the Registration Rights Agreement (within 365 days of Oct 4, 2018).
- Review the company's current credit ratings to determine if covenants are currently active or terminated.
- Assess the impact of the 5.875% interest rate on future cash flows relative to current market rates.