Business Context and Reporting Period
This filing is a Form 6-K containing the text of an Amended and Restated Credit Agreement dated November 29, 2007, between Baytex Energy Ltd. (the "Borrower") and a syndicate of lenders led by The Toronto-Dominion Bank (the "Agent"). The agreement governs a revolving credit facility used for general corporate purposes, including the acquisition of petroleum and natural gas (P&NG) rights and capital expenditures. The filing date is October 28, 2008.
Key Financial Metrics and Facility Terms
- Total Credit Facilities: Cdn.$370,000,000 (Cdn.$350,000,000 Syndicated Facility + Cdn.$20,000,000 Operating Facility).
- Borrowing Base: Set at Cdn.$370,000,000 as of the agreement date, determined based on the lending value of proved, producing reserves.
- Maturity Date: July 2, 2008 (subject to extension provisions).
- Interest Rates: Variable rates based on Canadian Prime Rate, U.S. Base Rate, or LIBOR, plus an Applicable Pricing Rate (margin).
- Pricing Margins: Tied to the Debt to EBITDA Ratio. Margins range from 0.00% to 0.750% per annum on Prime/Base Rate loans and 0.85% to 1.75% per annum on LIBOR loans.
- Letters of Credit: Sub-limit of Cdn.$10,000,000 under the Syndicated Facility.
- Overdrafts: Sub-limit of Cdn.$10,000,000 under the Operating Facility.
- Security: First priority security interests on all present and future property, assets, and undertakings of Baytex Trust and its Material Subsidiaries.
Material Changes and Covenants
The agreement represents a restatement of previous credit facilities (originally dated 2003, amended 2006). Key covenants include:
- Financial Covenants: The Borrower must maintain Outstanding Principal within the Borrowing Base. Distributions are restricted if a Borrowing Base Shortfall exists.
- Debt Limitations: Incurrence of new debt is restricted to "Permitted Debt," which includes the existing 9 3/4% and 10 1/2% Subordinated Notes and specific amounts of other unsecured debt.
- Asset Sales: Sales of assets exceeding 10% of the Borrowing Base in a calendar year require proceeds to be used to repay the credit facilities.
- Investment Limits: Investments outside the Western Canadian Sedimentary Basin or the U.S. are limited to Cdn.$5,000,000 per calendar year.
- Reporting: Requires delivery of annual and quarterly financial statements, annual independent engineering reports, and semi-annual engineering updates.
Guidance, Risks, and Contingencies
- Extension Mechanism: The Borrower may request an extension of the maturity date up to 364 days prior to the current maturity. If lenders do not unanimously agree, the Borrower may force the assignment of non-extending lenders' commitments to extending lenders or repay them.
- Hostile Acquisitions: Lenders may opt out of financing a takeover bid. If a lender declines, it is not obligated to fund the acquisition, and subsequent loans/repayments are adjusted to restore pro-rata sharing.
- Events of Default: Include failure to pay principal/interest, breach of covenants, incorrect representations, insolvency, cross-defaults on debt exceeding Cdn.$10,000,000, and a Change of Control.
- Market Disruption: Provisions allow for conversion of LIBOR or Bankers' Acceptance loans to Base Rate loans if market disruption occurs.
- Environmental Indemnity: The Borrower indemnifies lenders against environmental claims related to its properties and operations.
Investor Verification Checklist
- Verify the current utilization of the Cdn.$370,000,000 facility against the most recent Borrowing Base determination.
- Confirm the status of the July 2, 2008 maturity date and whether an extension was successfully negotiated.
- Review the latest Debt to EBITDA Ratio to determine the current applicable interest rate margin.
- Check for any outstanding Borrowing Base Shortfalls that may restrict distributions to Baytex Trust.
- Verify compliance with the 10% asset sale limitation and the Cdn.$5,000,000 investment limitation for the current fiscal year.
- Confirm the status of the 9 3/4% Subordinated Notes and 10 1/2% Subordinated Notes, as defaults on these instruments trigger an Event of Default under this agreement.