Background to and Reasons for the ArrangementIn early April 2021, senior management of AOC met with senior management of Surge to discuss each company’s strategic outlook. Based on these initial discussions AOC and Surge entered into a confidentiality agreement on April 16, 2021.
Below is a summary of Astra's dire Credit Facility situation at that time! Keep in mind that NBF and Scotiabank are the companies advisors!
As at December 31, 2020, the Company had available a $40.0 million revolving operating demand credit facility (“Credit Facility”) with a Canadian chartered bank. The Credit Facility provides that advances may be made by way of direct prime rate loans, bankers’ acceptances, letters of credit or letters of guarantee. The Credit Facility bears interest on a grid system depending on the Company’s debt to cash flow ratio ranging from less than or equal to 1:1, to greater than 3:1. The Credit Facility is secured by a $200 million debenture and a general security agreement over all the petroleum and natural gas assets of the Company. The Company’s bank indebtedness does not have a specific maturity date as it is a demand facility. This means that the lender has the ability to demand repayment of all outstanding indebtedness or a portion thereof at any time. If that were to occur, the Company would be required to find alternative sources of capital or sell assets to repay the indebtedness. The Company reduces the risk by complying with the covenants of the credit facility agreement. The amount of the Credit Facility is subject to a borrowing base redetermination test performed at least annually, primarily based on reserves, using commodity prices estimated by the lender, as well as other factors. The Company is subject to an adjusted working capital covenant ratio of not less than 1:1 at all times under the Credit Facility. The lender defines the working capital ratio as the ratio of (i) current assets plus any undrawn availability under the Credit Facility but excluding the impact of any financial derivative assets, to (ii) current liabilities excluding any amount drawn under the Credit Facility and excluding any financial derivative liabilities. As at December 31, 2020, the Company was in compliance with all covenants outlined in the credit agreement. There can be no assurance that the amount of the available Credit Facility will not be adjusted at the next scheduled borrowing base review, which is scheduled for April 30, 2021.
Speaks volumes...
Kherson