Goodrich Petroleum (ticker: GDP) reorganized its debt structure on September 2, 2015 in an effort to enhance near-term liquidity. The terms, as explained in a company-issued news release, include replacing its initial loan of $55 million in 5% senior convertible notes due 2032 in exchange for $27.5 million in 5% senior convertible notes also due 2032. The new agreement carries the same 5% annual cash interest rate yield and will accrete at a rate of 2% per year on a semi-annual basis. The accreted portion is payable in cash upon maturity.
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Goodrich shored up its balance sheet with the $118 million sale of select Eagle Ford assets in July. The company expects a net gain of $50 to $60 million after factoring in closing adjustments and will use the proceeds to pay off the $52 million withdrawn on its bank revolver. Approximately 17,000 net Eagle Ford acres remain in GDP’s portfolio, and Stifel believes the assets could bring in about $200 million if divested.
The latest debt rebalancing provides a slight cushion from its previous standing, as Capital One Securities believes the company’s net debt will be reduced by approximately 5%. Goodrich also secured near-term capital by electing to suspend dividend payments on preferred stock in Q3’15. The unpaid dividends will accumulate but the suspension will save the company about $7.4 million per quarter.
Although Goodrich is required to meet certain debt covenants, Raymond James & Associates believe GDP’s undrawn credit facility (pro forma the Eagle Ford sale) may provide some covenant relief.
