DEBT

The components of debt are as follows:



	September 30, 2013						December 31, 2012
	Principal		Unamortized Premium		Total		Principal			Unamortized Premium (Discount)			Total
	(In Thousands)
Credit facility	$	115,000	$	—	$	115,000	$	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		322		1,000,322		1,000,000			365			1,000,365
7½% senior notes due 2020	500,000		—		500,000		500,000			—			500,000
Total debt	1,615,000		322		1,615,322		1,865,012			(2,912		)	1,862,100
Less: current portion of long-term debt	—		—		—		(12		)	—			(12		)
Long-term debt	$	1,615,000	$	322	$	1,615,322	$	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 September 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.

On September 12, 2013, the Company entered into the First Amendment to the Credit Facility (the “First Amendment”), which was effective as of that date. The First Amendment amended, among other things, the permitted ratio of total debt to EBITDA and the definition of total debt used in the ratio calculation, and reduced the borrowing base, which governs Forest’s availability under the Credit Facility.

As of September 30, 2013, the borrowing base under the Credit Facility was $700.0 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 having a fair market value, including any economic loss of unwinding any related hedging agreement, 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 resulted in a $170.0 million reduction to the borrowing base effective February 15, 2013.

The next scheduled semi-annual redetermination of the borrowing base will occur on or about May 1, 2014. However, Forest expects the pending sale of its Panhandle properties to result in a reduction to its borrowing base when the transaction closes, which is expected to be in late November 2013. See Note 5 for discussion of Forest’s divestiture activity. 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 First Amendment to the Credit Facility provides that Forest will not permit its ratio of total debt to EBITDA (as adjusted for non-cash charges) calculated for the preceding four consecutive fiscal quarter period then most recently ended (i) for any time on or before September 11, 2013, to be greater than 4.50 to 1.00, (ii) for any time after September 11, 2013 and on or before March 31, 2014 to be greater than 5.00 to 1.00, (iii) for any time after April 1, 2014 and on or before June 30, 2014 to be greater than 4.75 to 1.00, and (iv) for any time after June 30, 2014, to be greater than 4.50 to 1.00. The First Amendment also amends the definition of total debt such that, during any period of four fiscal quarters that includes the calendar quarter in which the Panhandle divestiture closes, any cash proceeds from the Panhandle divestiture that are reported on Forest’s consolidated balance sheet on such date are subtracted from total debt. Depending on Forest’s overall level of indebtedness, this covenant may limit Forest’s ability to borrow funds as needed under the Credit Facility. Forest’s ratio of total debt to EBITDA for the four consecutive fiscal quarter period ended September 30, 2013, as calculated in accordance with the Credit Facility, was 4.52.

At September 30, 2013, there were outstanding borrowings of $115.0 million under the Credit Facility at a weighted average interest rate of 1.7%, and Forest had used the Credit Facility for $2.1 million in letters of credit.