Business Context and Reporting Period
Company: California Resources Corporation
Filing Type: Form 8-K (Current Report)
Date: November 9, 2017
Event: Entry into a Material Definitive Agreement (Seventh Amendment to Credit Agreement).
Key Financial Metrics and Terms
This filing details the terms of a proposed amendment to the 2014 First Out Credit Agreement. Specific financial performance metrics (revenue, profit, cash flow) are not reported in this document. Key debt and liquidity terms include:
- New Term Loan Requirement: Minimum proceeds of $900 million required for effectiveness.
- Liquidity Requirement: Minimum liquidity of $500 million at closing; reduced minimum liquidity requirement to $150 million post-amendment.
- Revolving Credit Facility: Commitment reduced to $1 billion.
- Interest Margins: LIBOR-based loans increased to 3.25%–4.00%; ABR-based loans increased to 2.25%–3.00%.
- Covenants (if effective):
- Maximum Leverage Ratio: <1.90:1.00 through 2019; <1.50:1.00 thereafter.
- Minimum Interest Coverage Ratio: >1.20:1.00.
- Term Loan Payments: Quarterly payments deferred until September 30, 2019; reduced to $12.5 million per quarter thereafter.
Material Changes Versus Prior Period
The amendment represents a significant restructuring of the company's credit facilities compared to the prior 2014 agreement terms:
- Maturity Extension: Maturity date extended to June 30, 2021, subject to springing maturity dates tied to 2020 and 2021 Notes.
- Covenant Reset: Financial performance covenants have been reset to the levels listed above.
- Prepayment Flexibility: New provisions allow the use of 50% of Elk Hills power plant monetization proceeds and tiered percentages of other asset sale proceeds to prepay 2016 Credit Agreement, Second Lien Notes, and Senior Notes.
- Deleveraging: Permits incurrence of certain other first-lien indebtedness for deleveraging activities.
Guidance, Outlook, and Risks
Conditions Precedent: The amendment is not yet effective. It is contingent upon the closing of a new term loan with at least $900 million in proceeds and maintaining $500 million in liquidity at closing.
Management Commentary: The filing includes standard forward-looking statement disclaimers, noting that actual results could differ materially from projections.
Risks: The primary risk is the failure to satisfy the conditions precedent (specifically the new term loan closing), which would prevent the amendment from becoming effective.
Investor Verification Checklist
- Verify whether the new term loan with minimum $900 million proceeds has closed.
- Confirm the company's liquidity position meets the $500 million threshold at closing.
- Review the full text of Exhibit 10.1 (Seventh Amendment to Credit Agreement) for execution details and specific legal conditions.
- Monitor the status of the 2020 and 2021 Notes to determine if springing maturity dates are triggered.
- Assess the impact of increased interest margins (LIBOR and ABR) on future interest expense.