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DEBT | 3 Months Ended
--- | ---
Mar. 31, 2024
DEBT |
DEBT | 4. DEBT The Company’s debt consisted of the following for the periods presented (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | March 31, 2024 | ​ | ​ | December 31, 2023
Term loan credit facility | ​ | $ | 190,000 | ​ | ​ | $ | 200,000
Other | ​ | ​ | 188 | ​ | ​ | ​ | 215
Total debt (Face Value) | ​ | ​ | 190,188 | ​ | ​ | ​ | 200,215
Less: | ​ | ​ | ​ | ​ | ​ | ​ | ​
Current portion of long-term debt(1) | ​ | ​ | (55,106) | ​ | ​ | ​ | (50,106)
Other(2) | ​ | ​ | (8,261) | ​ | ​ | ​ | (9,833)
Long-Term Debt, net | ​ | $ | 126,821 | ​ | ​ | $ | 140,276
(1) | Amounts primarily reflect amortization payments due of $55.0 million and $50.0 million under the Amended Term Loan Agreement due within one year as of March 31, 2024 and December 31, 2023, respectively.
(2) | Amounts primarily reflect unamortized debt issuance costs of approximately $5.7 million and $6.9 million at March 31, 2024 and December 31, 2023, respectively, but also includes an unamortized debt discount associated with an embedded derivative separately presented and further described in Note 5, “Fair Value Measurements”. For the three months ended March 31, 2024 and 2023, the Company recorded approximately $1.7 million and $1.8 million, respectively, in interest expense reflecting the amortization/accretion of these amounts.
Term Loan Credit Facility On November 24, 2021, the Company and its wholly owned subsidiary, Halcón Holdings, LLC (the “Borrower”) entered into an Amended and Restated Senior Secured Credit Agreement (the “Term Loan Agreement”) with Macquarie Bank Limited, as administrative agent, and certain other financial institutions party thereto, as lenders. On November 14, 2022, the Company paid approximately $2.4 million and entered into a further Amended Credit Agreement (the “Amended Term Loan Agreement”) with its lenders which modified certain provisions of its original Term Loan Agreement including, but not limited to, its Current Ratio financial covenant, interest rate benchmark, and prepayment premiums, all as further described below. On March 28, 2024, the Company entered into the Third Amendment to the Amended Term Loan Agreement (the “Third Amendment”) with its lenders. The Third Amendment, amended the Amended Term Loan Agreement to, among other things, (a) amend the approved plan of development (“APOD”) for certain properties, (b) remove the PDP Production Test and APOD Economic Test (each defined in the Term Loan Agreement), (c) require the Borrower to receive cash proceeds from equity issuances and/or cash contributions in an aggregate amount of not less than $38.0 million during the period from Amendment Effective Date through March 31, 2024 (the “Specified Additional Equity Capital”), which such Specified Additional Equity Capital shall be excluded from the calculation of Consolidated Cash Balance (as defined in the Term Loan Agreement), and (d) make amendments to certain other affirmative covenants in connection with the foregoing. As of March 31, 2024, the Company had $190.0 million of indebtedness and $0.3 million of letters of credit outstanding under the Amended Term Loan Agreement. An additional $4.7 million is available for the issuance of letters of credit as of March 31, 2024 and as of the date of this filing. The maturity date of the Amended Term Loan Agreement is November 24, 2025. Borrowings under the Amended Term Loan Agreement bear a variable interest rate based on the Secured Overnight Financing Rate (“SOFR”) plus 0.15% plus a fixed applicable margin of 7.5%. The weighted average interest rate on the Company’s borrowings for the quarter ended March 31, 2024 was approximately 12.99%. The Company may elect, at its option, to prepay any borrowing outstanding under the Amended Term Loan Agreement subject to the following prepayment premiums:
​ | ​ | ​ | ​
Period (after applicable borrowing date(1)) | ​ | ​ | Premium
Months 0-12 | ​ | ​ | Make-whole amount equal to 12 months of interest plus 2.00%
Months 13-24 | ​ | ​ | 2.00%
Months 25-36 | ​ | ​ | 1.00%
Months 37-48 | ​ | ​ | 0.00%
(1) | Applicable borrowing dates are November 2021 for the original $200.0 million borrowed and April and November 2022 for the $20.0 million and $15.0 million in delayed draw borrowings, respectively.
The Company’s prepayment premiums would differ from those noted in the table above if a change of control results in prepayment within the second anniversary of the amendment date, as a 2% prepayment premium will apply. The Company may be required to make mandatory prepayments under the Amended Term Loan Agreement in connection with the incurrence of non-permitted debt, certain asset sales, or with cash on hand in excess of certain maximum levels beginning in 2023. For each fiscal quarter after January 1, 2023, the Company is required to make mandatory prepayments when the Consolidated Cash Balance, as defined in the Amended Term Loan Agreement, exceeds $20.0 million. Until December 31, 2024, the forecasted capital expenditures for the succeeding fiscal quarter on the APOD wells (i.e. oil and natural gas wells located within a specified boundary as set by the Amended Term Loan Agreement) are excluded for purposes of determining the Consolidated Cash Balance. As of March 31, 2024, the Consolidated Cash Balance, as defined in the Amended Term Loan Agreement, did not exceed $20.0 million; therefore, no mandatory prepayment was necessary. The Company is required to make scheduled remaining amortization payments in the aggregate amount of $75.0 million from the fiscal quarter ending June 30, 2024 through the fiscal quarter ending September 30, 2025 with $12.5 million due at the end of each of the second and third quarters of 2024, $15.0 million due at the end of the fourth quarter of 2024 and the first quarter of 2025, and $10.0 million due at the end of each of the second and third quarters of 2025. The Company will be required to make a final payment of $115.0 million at maturity on November 24, 2025. Amounts outstanding under the Amended Term Loan Agreement are guaranteed by certain of the Borrower’s direct and indirect subsidiaries and secured by substantially all of the assets of the Borrower and such direct and indirect subsidiaries, and by the equity interests of the Borrower held by the Company. As part of the Amended Term Loan Agreement there are certain restrictions on the transfer of assets, including cash, to Battalion from the guarantor subsidiaries. The Amended Term Loan Agreement also contains certain financial covenants (as defined in the Amended Term Loan Agreement), including the maintenance of the following ratios:
| ● | Asset Coverage Ratio of not less than 1.80 to 1.00 as of March 31, 2024 and the last day of each fiscal quarter thereafter
| ● | Total Net Leverage Ratio of not greater than 2.50 to 1.00 as of March 31, 2024, and each fiscal quarter thereafter, and
| ● | Current Ratio of not less than 1.00 to 1.00, determined as of the last day of any fiscal quarter period, as of March 31, 2024 and for each fiscal quarter thereafter.
As of March 31, 2024, the Company was not in compliance with the Total Net Leverage Ratio covenant under the Amended Term Loan Agreement but was in compliance with the other financial covenants. Under the Amended Term Loan Agreement, the Company has a right to cure noncompliance with the Total Net Leverage Ratio covenant within 15 days of delivery of financial statements by making an optional prepayment in an amount not greater than the amount required for purposes of complying with the Total Net Leverage Ratio and such prepayment shall not be subject to the applicable prepayment premium. Once such prepayment is made, the Total Net Leverage Ratio shall be recalculated giving effect to the reduction in the outstanding amount of borrowings as if such prepayment had occurred on the last day of the quarter. Accordingly, on May 14, 2024, the Company made a prepayment of outstanding borrowings under the Amended Term Loan Agreement in the amount of $17.3 million resulting in total borrowings outstanding of $172.7 million. Upon giving effect to such prepayment for the calculation of the Total Net Leverage Ratio at March 31, 2024, the Company was in compliance with such financial covenant. See Note 13, “Subsequent Events,” for additional discussion of funding the prepayment. The Amended Term Loan Agreement contains an APOD for the Company’s Monument Draw acreage through the drilling and completion of certain wells. The Amended Term Loan Agreement also contains certain events of default, including non-payment; breaches of representations and warranties; non-compliance with covenants or other agreements; cross-default to material indebtedness; judgments; change of control; and voluntary and involuntary bankruptcy. In conjunction with entering into the original Term Loan Agreement in November 2021, the Company agreed to pay a premium to the lenders upon a future change of control event in which a majority of the board of directors or the Chief Executive Officer (the “CEO”) or the Principal Financial Officer positions do not remain held by the same persons as before the change of control event (“Change of Control Call Option”). The premium is reduced over time through the payment of interest and certain fees. The Change of Control Call Option is accounted for as an embedded derivative not clearly and closely related to the host debt instrument. Accordingly, the Company recorded the initial fair value separately on the unaudited condensed consolidated balance sheet within “Other noncurrent liabilities” and records changes in the fair value of the embedded derivative each reporting period in “Interest expense and other” on the unaudited condensed consolidated statements of operations. Refer to Note 5, “Fair Value Measurements,” for a discussion of the valuation approach used, the significant inputs to the valuation, and for a reconciliation of the change in fair value of the Change of Control Call Option.

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