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Debt | 9 Months Ended
--- | ---
Sep. 30, 2020
Debt Disclosure [Abstract] |
Debt | Debt Our long-term debt consisted of the following as of September 30, 2020 and December 31, 2019:
| September 30, 2020 |  | December 31, 2019
| Principal Amount |  | Carrying Amount |  | Principal Amount |  | Carrying Amount
| ($ in millions)
DIP credit facility | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Pre-petition revolving credit facility | 1,929 |  |  | 1,929 |  |  | 1,590 |  |  | 1,590 |
Term loan due 2024 | 1,500 |  |  | 1,500 |  |  | 1,500 |  |  | 1,470 |
11.5% senior secured second lien notes due 2025 | 2,330 |  |  | 2,330 |  |  | 2,330 |  |  | 3,248 |
6.625% senior notes due 2020 | 176 |  |  | 176 |  |  | 208 |  |  | 208 |
6.875% senior notes due 2020 | 73 |  |  | 73 |  |  | 93 |  |  | 93 |
6.125% senior notes due 2021 | 167 |  |  | 167 |  |  | 167 |  |  | 167 |
5.375% senior notes due 2021 | 127 |  |  | 127 |  |  | 127 |  |  | 127 |
4.875% senior notes due 2022 | 272 |  |  | 272 |  |  | 338 |  |  | 338 |
5.75% senior notes due 2023 | 167 |  |  | 167 |  |  | 209 |  |  | 209 |
7.00% senior notes due 2024 | 624 |  |  | 624 |  |  | 624 |  |  | 624 |
6.875% senior notes due 2025 | 2 |  |  | 2 |  |  | 2 |  |  | 2 |
8.00% senior notes due 2025 | 246 |  |  | 246 |  |  | 246 |  |  | 245 |
5.5% convertible senior notes due 2026 | 1,064 |  |  | 1,064 |  |  | 1,064 |  |  | 765 |
7.5% senior notes due 2026 | 119 |  |  | 119 |  |  | 119 |  |  | 119 |
8.00% senior notes due 2026 | 46 |  |  | 46 |  |  | 46 |  |  | 44 |
8.00% senior notes due 2027 | 253 |  |  | 253 |  |  | 253 |  |  | 253 |
Debt issuance costs | — |  |  | — |  |  | — |  |  | (44 | )
Total debt, net | 9,095 |  |  | 9,095 |  |  | 8,916 |  |  | 9,458 |
Less current maturities of long-term debt | (1,929 | ) |  | (1,929 | ) |  | (385 | ) |  | (385 | )
Less amounts reclassified to liabilities subject to compromise | (7,166 | ) |  | (7,166 | ) |  | — |  |  | — |
Total long-term debt, net | $ | — |  |  | $ | — |  |  | $ | 8,531 |  |  | $ | 9,073 |
Chapter 11 Proceedings Filing of the Chapter 11 Cases constituted an event of default with respect to certain of our secured and unsecured debt obligations. As a result of the Chapter 11 Cases, the principal and interest due under these debt instruments became immediately due and payable. However, Section 362 of the Bankruptcy Code stays the creditors from taking any action as a result of the default. The principal amounts outstanding under the FLLO Term Loan, Second Lien Notes and all of our other unsecured senior and convertible senior notes have been reclassified as liabilities subject to compromise on the accompanying unaudited condensed consolidated balance sheet as of September 30, 2020. Additionally, non-cash adjustments were made to write off all of the related unamortized debt issuance costs and associated discounts and premiums of approximately $457 million, which are included in reorganization items, net in the accompanying unaudited condensed consolidated statements of operations for the Current Period, as discussed in Note 1. The agreements for our FLLO Term Loan, Second Lien Notes, and unsecured senior and convertible senior notes contain provisions regarding the calculation of interest upon default. Upon default, the interest rate on the FLLO Term Loan increases from LIBOR plus 8.00% to alternative base rate (ABR) (3.25% during the third quarter) plus Applicable Margin (7.00% during the third quarter) plus 2.00%. For the Second Lien Notes and all of our other unsecured senior and convertible senior notes, the interest rate remains the same upon default. However, interest accrues on the amount of unpaid interest in addition to the principal balance. We will not pay or recognize interest on the FLLO Term Loan, Second Lien Notes, or unsecured senior and convertible senior notes during the Chapter 11 process. Debtor-in-Possession Credit Agreement On June 28, 2020, prior to the commencement of Chapter 11 Cases, the Company entered into a commitment letter with certain of the lenders (“New Money Lenders”) under the pre-petition revolving credit facility and/or their affiliates to provide the Debtors with a DIP Credit Facility in an aggregate principal amount of up to approximately $2.104 billion in commitments and loans from the New Money Lenders. The DIP Credit Facility consists of a revolving loan facility of new money in an aggregate principal amount of up to $925 million (the “New Money Facility”), which includes a sub-facility of up to $200 million for the issuance of letters of credit, and a $1.179 billion term loan that reflects the roll-up of a portion of outstanding borrowings under the pre-petition revolving credit facility: (i) a $925 million term loan reflecting the roll-up of a portion of outstanding existing borrowings made by the New Money Lenders under the existing revolving credit agreement (the “New Money Roll-Up Loans”) and (ii) an up to approximately $254 million term loan reflecting the roll-up or a portion of outstanding existing borrowings made by certain other lenders under the pre-petition revolving credit facility agreement (the “Incremental Roll-Up Loans”). The $750 million of outstanding borrowings under the pre-petition revolving credit facility that were not rolled up (the “Stub Loans”) will remain outstanding throughout the Chapter 11 Cases but will accrue interest at a lower rate than the rolled-up loans. The proceeds of the DIP Credit Facility may be used for, among other things, post-petition working capital, permitted capital investments, general corporate purposes, letters of credit, administrative costs, premiums, expenses and fees for the transactions contemplated by the Chapter 11 Cases, payment of court approved adequate protection obligations and other such purposes consistent with the DIP Credit Facility. The DIP Credit Facility was approved by the Bankruptcy Court on a final basis on July 31, 2020 and became effective as of July 1, 2020. Borrowings under the DIP Credit Facility will mature, and the lending commitments thereunder will terminate, upon the earliest to occur of: (a) March 28, 2021 (the 9-month anniversary of the Petition Date); (b) the date of the termination of the commitments and/or the acceleration of all of obligations following the occurrence and continuance of an event of default defined the DIP Credit Facility; (c) the first business day on which the interim order, as defined in the DIP Credit Facility, expires or is terminated; (d) the conversion of any of Chapter 11 Cases to a case under Chapter 7 of the Bankruptcy Code; (e) the dismissal of any of the Chapter 11 Cases; (f) the closing of a sale of all or substantially all of the equity or assets of the Debtors; (g) the date of the payment in full in cash of all obligations and termination of all the commitments of the Debtors and; (h) the effective date of any of the Debtors’ approved plan of reorganization. Borrowings under the DIP Credit Facility bear interest at an ABR or LIBOR, at our election, plus an applicable margin of 5.00% per annum for ABR loans and 6.00% per annum for LIBOR loans for the New Money Facility and bear interest at an ABR or LIBOR, at our election, plus an applicable margin of 4.50% per annum for ABR loans and 5.50% per annum for LIBOR loans for the New Money Roll-Up Loans and Incremental Roll-up Loans. The Stub Loans bear interest at LIBOR plus an applicable margin of 3.50% per annum. In addition to paying interest on outstanding principal under the DIP Credit Facility, we are required to pay a commitment fee of 0.50% per annum to the lenders of the DIP Credit Facility in respect of the unutilized revolving commitments thereunder and a letter of credit fee equal to 0.125% per annum. The DIP Credit Facility includes negative covenants that, subject to significant exceptions, limit our ability and the ability of our restricted subsidiaries to, among other things, (i) incur additional indebtedness, (ii) create liens on assets, (iii) engage in mergers, consolidations, liquidations and dissolutions, (iv) sell assets, (v) make investments, loans or advances, except as described in the DIP Credit Facility, (vi) pay dividends and distributions or repurchase capital stock, (vii) engage in certain transactions with affiliates and (viii) change lines of business. The DIP Credit Facility includes certain customary representations and warranties, affirmative covenants and events of default, including but not limited to defaults on account of nonpayment, breaches of representations and warranties and covenants, certain bankruptcy-related events, certain events under ERISA, material judgments and a change in control. If an event of default occurs, the lenders under the DIP Credit Facility will be entitled to take various actions, including the acceleration of all amounts due under the DIP Credit Facility and all actions permitted to be taken under the loan documents or application of law. In addition, the DIP Credit Facility is subject to various other financial performance covenants, including compliance with certain financial metrics to an approved budget and a required Asset Coverage Ratio (as defined in the DIP Credit Agreement) of not less than 1.25:1.00. On September 15, 2020, we entered into the first amendment to the DIP Credit Agreement. The amendment, among other things, amends the maximum hedging covenant to allow the Debtors to enter into additional non-speculative hedge agreements based on forecasted production. Senior Notes In the Current Period, we repurchased approximately $160 million aggregate principal amount of the following senior notes for $95 million and recorded an aggregate gain of approximately $65 million.
|  | Notes Repurchased
|  | ($ in millions)
6.625% senior notes due 2020 |  | $ | 32 |
6.875% senior notes due 2020 |  | 20 |
4.875% senior notes due 2022 |  | 66 |
5.75% senior notes due 2023 |  | 42 |
Total |  | $ | 160 |
In the Prior Quarter, we privately negotiated exchanges of approximately $507 million principal amount of our outstanding senior notes for 235,563,519 shares of common stock and $186 million principal amount of our outstanding convertible senior notes for 73,389,094 shares of common stock. We recorded an aggregate net gain of approximately $64 million associated with the exchanges. In the Prior Quarter, we repurchased approximately $82 million principal amount of our 6.875% Senior Notes due 2025 for $76 million and recorded a $6 million gain. Phase-Out of LIBOR In July 2017, the UK's Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR as a benchmark by the end of 2021. At the present time, our pre-petition revolving credit facility and our term loan have terms that extend beyond 2021. Our pre-petition revolving credit facility and our term loan each provide for a mechanism to amend the underlying agreements to reflect the establishment of an alternate rate of interest upon the occurrence of certain events related to the phase-out of LIBOR. However, we have not yet pursued any technical amendment or other contractual alternative to our pre-petition revolving credit facility or term loan to address this matter. We are currently evaluating the potential impact of the eventual replacement of the LIBOR interest rate. Fair Value of Debt We estimate the fair value of our Level 1 debt based on the market value of our publicly traded debt as determined based on the yield of our senior notes. The fair value of our Level 2 debt is based on a market approach using estimates provided by an independent investment financial data services firm. Upon emergence from the Chapter 11 Cases, the pre-petition revolving credit facility will be paid in full with proceeds from our exit financing and, therefore, the estimated fair value equals the carrying value and is excluded from the table below.
|  | September 30, 2020 |  | December 31, 2019
|  | Carrying Amount |  | Estimated Fair Value |  | Carrying Amount |  | Estimated Fair Value
|  |  |  | ($ in millions) |  |
Short-term debt (Level 1) |  | $ | — |  |  | $ | — |  |  | $ | 385 |  |  | $ | 360 |
Long-term debt (Level 1) |  | $ | — |  |  | $ | — |  |  | $ | 753 |  |  | $ | 622 |
Long-term debt (Level 2) |  | $ | — |  |  | $ | — |  |  | $ | 8,320 |  |  | $ | 6,085 |
Liabilities subject to compromise (Level 1) |  | $ | 982 |  |  | $ | 38 |  |  | $ | — |  |  | $ | — |
Liabilities subject to compromise (Level 2) |  | $ | 6,184 |  |  | $ | 1,475 |  |  | $ | — |  |  | $ | — |

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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