AKITA Announces Credit Facility Amendments
Jul 20, 2020
AKITA Drilling Ltd. (TSX: AKT.A)
CALGARY, AB, July 20, 2020 /CNW/ - AKITA Drilling Ltd. (the "Company") announces it has entered into an amending agreement to its December 19, 2018 credit facility agreement (the "Amended Facility") with a syndicate of lenders comprised of ATB Financial, The Bank of Nova Scotia, HSBC Bank Canada and the Toronto-Dominion Bank (the "Lenders"). The Amended Facility includes adjustments to certain terms and conditions, including an adjustment to the borrowing base calculation, and provision of a five quarter covenant relief period, and revisions to the size of the credit facility.
Covenant Relief Period
A covenant relief period is available until June 30, 2021 (the "Covenant Relief Period") and provides as follows:
- The Funded Debt to EBITDA ratio has been replaced with a Funded Debt to Tangible Net Worth Ratio as follows:
- For the fiscal quarter ended June 30, 2020 Funded Debt to Tangible Net Worth Ratio shall not be more than 0.50:1.00; and
- For the fiscal quarters ended September 30, 2020 to June 30, 2021 the Funded Debt to Tangible Net Worth Ratio shall not be more than 0.75:1.00.
- A minimum trailing twelve month EBITDA test will be required quarterly during the Covenant Relief Period, with EBITDA varying each period in line with agreed upon forecasts.
- The EBITDA to Interest ratio is amended to the following:
- For the fiscal quarter ended September 30, 2020 EBITDA to Interest Expense ratio shall not be less than 2.00:1.00;
- For the fiscal quarter ended December 31, 2020 EBITDA to Interest Expense Ratio shall not be less than 1.25:1.00; and
- For the fiscal quarters ended March 31, 2021 and June 30, 2021 the EBITDA to Interest Expense Ratio is waived.
Upon the end of the Covenant Relief Period the Company's covenants revert back to:
- Funded Debt to EBITDA Ratio of not more than 3.00:1.00
- EBITDA to Interest Expense Ratio of not less than 3.00:1.00
AKITA has the option to extend the Covenant Relief Period on a quarterly basis subject to the consent of the Lenders.
The calculation of the Company's borrowing base has been amended from 75% of Eligible Accounts Receivable plus 40% of the net book value of Eligible Fixed Assets less Priority Payables, to 75% of Eligible Accounts Receivable plus 50% of the orderly liquidation value of Eligible Rig Assets less Priority Payables
The total size of the credit facility has been reduced from CAD. $120,000,000 and US $5,000,000 to CAD. $110,000,000.
The Amended Facility, coupled with extensive cost cutting undertaken by the Company over the first half of the year, which resulted in a one-third reduction of the Company's full time labour force, are expected to provide the Company with the financial flexibility it will require in order to sustain operations over this period of low oil and gas commodity pricing and corresponding weak demand for drilling services.
Certain statements contained in this news release may constitute forward-looking information. Forward-looking information is often, but not always, identified by the use of words such as "anticipate", "plan", "estimate", "expect", "may", "will", "intend", "should", and similar expressions.
Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information.
The Company's actual results could differ materially from those anticipated in this forward-looking information as a result of regulatory decisions, competitive factors in the industries in which the Company operates, prevailing economic conditions (including as may be affected by the COVID-19 pandemic), and other factors, many of which are beyond the control of the Company.
The Company believes that the expectations reflected in the forward-looking information are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking information should not be unduly relied upon.
Any forward-looking information contained in this news release represents the Company's expectations as of the date hereof, and is subject to change after such date. The Company disclaims any intention or obligation to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required by applicable securities legislation.
SOURCE AKITA Drilling Ltd.
For further information: INVESTOR INQUIRIES: Darcy Reynolds, CPA, CA, Vice President, Finance and Chief Financial Officer, (403) 292-7530