DEBT

The components of debt are as follows:



	June 30, 2013						December 31, 2012
	Principal		Unamortized Premium		Total		Principal			Unamortized Premium (Discount)			Total
	(In Thousands)
Credit facility	$	130,000	$	—	$	130,000	$	65,000		$	—		$	65,000
7% senior subordinated notes due 2013⁽¹⁾	—		—		—		12			—			12
8½% senior notes due 2014⁽²⁾	—		—		—		300,000			(3,277		)	296,723
7¼% senior notes due 2019	1,000,000		337		1,000,337		1,000,000			365			1,000,365
7½% senior notes due 2020	500,000		—		500,000		500,000			—			500,000
Total debt	1,630,000		337		1,630,337		1,865,012			(2,912		)	1,862,100
Less: current portion of long-term debt	—		—		—		(12		)	—			(12		)
Long-term debt	$	1,630,000	$	337	$	1,630,337	$	1,865,000		$	(2,912	)	$	1,862,088

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(1)	In June 2013, Forest redeemed the 7% senior subordinated notes due 2013 at their maturity.


(2)	In March 2013, Forest redeemed the 8½% senior notes due 2014 at 107.11% of par, recognizing a loss of $25.2 million upon redemption.

Bank Credit Facility

As of June 30, 2013, the Company had a $1.5 billion credit facility (the “Credit Facility”) with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the “Administrative Agent”), which matures in June 2016. The size of the Credit Facility may be increased by $300.0 million, to a total of $1.8 billion, upon agreement between the applicable lenders and Forest.

Forest’s availability under the Credit Facility is governed by a borrowing base. As of June 30, 2013, the borrowing base under the Credit Facility was $900.0 million. The determination of the borrowing base is made by the lenders in their sole discretion, on a semi-annual basis, taking into consideration the estimated value of Forest’s oil and natural gas properties based on pricing models determined by the lenders at such time, in accordance with the lenders’ customary practices for oil and natural gas loans. The available borrowing amount under the Credit Facility could increase or decrease based on such redetermination. In addition to the scheduled semi-annual redeterminations, Forest and the lenders each have discretion at any time, but not more often than once during a calendar year, to have the borrowing base redetermined. The borrowing base is also subject to automatic adjustments if certain events occur, such as if Forest or any of its Restricted Subsidiaries (as defined in the Credit Facility) issue senior unsecured notes, in which case the borrowing base will immediately be reduced by an amount equal to 25% of the stated principal amount of such issued senior notes, excluding any senior unsecured notes that Forest or any of its Restricted Subsidiaries may issue to refinance senior notes that were outstanding on June 30, 2011. The borrowing base is also subject to automatic adjustment if Forest or any of its Restricted Subsidiaries sell oil and natural gas properties included in the borrowing base, as applicable, having a fair market value in excess of 10% of the borrowing base then in effect. In this case, the borrowing base will be reduced by an amount equal to either (i) the percentage of the borrowing base attributable to the sold properties, as determined by the Administrative Agent, or (ii) if none of the borrowing base is attributable to the sold properties, a value agreed upon by Forest and the required lenders. The February 2013 sale of Forest’s South Texas properties, discussed in Note 5, resulted in a $170.0 million reduction to the borrowing base effective February 15, 2013.

The borrowing base was reaffirmed at $900.0 million in April 2013 and the next scheduled semi-annual redetermination of the borrowing base will occur on or about November 1, 2013. A lowering of the borrowing base could require Forest to repay indebtedness in excess of the borrowing base in order to cover the deficiency. The Credit Facility is collateralized by Forest’s assets, and Forest is required to mortgage and grant a security interest in 75% of the present value of the estimated proved oil and natural gas properties and related assets of Forest and its U.S. subsidiaries.

The Credit Facility includes terms and covenants that place limitations on certain types of activities, including restrictions or requirements with respect to additional debt, liens, asset sales, hedging activities, investments, dividends, mergers, and acquisitions, and also includes a financial covenant. The Credit Facility provides that Forest will not permit its ratio of total debt outstanding to EBITDA (as adjusted for non-cash charges) for a trailing twelve-month period to be greater than 4.50 to 1.00 at any time. Depending on Forest’s overall level of indebtedness, this covenant may limit its ability to borrow funds as needed under the Credit Facility. Forest’s ratio of total debt outstanding to EBITDA for the twelve-month period ended June 30, 2013, as calculated in accordance with the Credit Facility, was 4.37.

At June 30, 2013, there were outstanding borrowings of $130.0 million under the Credit Facility at a weighted average interest rate of 1.8%, and Forest had used the Credit Facility for $2.1 million in letters of credit.