Debt

The following summarizes the Company’s outstanding debt:



	December 31,
	2015			2014
	(in thousands, except percentages)

Credit facility ⁽¹⁾	$	873,175		$	1,173,175
6.75% senior notes due November 2020	261,100			299,970
6.375% senior notes due September 2022	572,700			599,163
Net unamortized premiums	11,568			14,644
Total debt, net	1,718,543			2,086,952
Less current portion ⁽²⁾	(873,175		)	—
Total long-term debt, net	$	845,368		$	2,086,952


⁽¹⁾	Variable interest rates of 3.17% and 2.67% at December 31, 2015, and December 31, 2014, respectively.


⁽²⁾	Due to existing and anticipated covenant violations, the Company’s credit facility was classified as current at December 31, 2015.

Fair Value

The Company’s debt is recorded at the carrying amount in the balance sheets. The carrying amount of the Company’s Credit Facility, as defined below, approximates fair value because the interest rate is variable and reflective of market rates. The Company uses a market approach to determine the fair value of its senior notes using estimates based on prices quoted from third-party financial institutions, which is a Level 2 fair value measurement.



	December 31, 2015				December 31, 2014
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in thousands)

Credit facility	$	873,175	$	873,175	$	1,173,175	$	1,173,175
Senior notes, net	845,368		200,249		913,777		699,462
Total debt, net	$	1,718,543	$	1,073,424	$	2,086,952	$	1,872,637

Credit Facility

The Company’s Second Amended and Restated Credit Agreement (“Credit Facility”) had a borrowing base of $900 million, subject to lender commitments, as of December 31, 2015. The maturity date is April 2019. At December 31, 2015, lender commitments under the facility were also $900 million but there was less than $1 million of available borrowing capacity, including outstanding letters of credit.

In October 2015, the Company entered into an amendment to the Credit Facility to provide for, among other things: (i) a springing maturity based on the maturity of any outstanding junior lien debt; (ii) the ability of the Company to incur junior lien debt to refinance its senior notes or as additional indebtedness, but such additional indebtedness issued may not exceed $500 million outstanding at any one time and is subject to a borrowing base reduction; (iii) a decrease in the Company’s covenant requiring the maintenance of an EBITDA to Interest Expense ratio of 2.5 to 1.0, such that the permissible ratio is decreased to 2.0 to 1.0 from December 31, 2015 through December 31, 2016, to 2.25 to 1.0 from March 31, 2017 through June 30, 2017 and returning to 2.5 to 1.0 thereafter; (iv) an increase in the mortgage requirement on the total value of the oil and natural gas properties included in the Company’s most recent reserve report from 80% to 90%; (v) an increase to the applicable margin charged on borrowings under the Credit Facility by 0.25% and increase the commitment fee under the Credit Facility to 0.5% per annum; and (vi) permission to prepay or exchange the Company’s senior notes with notes issued by LINN Energy.

Redetermination of the borrowing base under the Credit Facility, based primarily on reserve reports using lender commodity price expectations at such time, occurs semi-annually, in April and October. A super-majority of the lenders under the Credit Facility and Berry also have the right to request interim borrowing base redeterminations once between scheduled redeterminations. The spring 2015 semi-annual borrowing base redetermination was completed in May 2015, and as a result of lower commodity prices, the borrowing base under the Credit Facility decreased from $1.4 billion to $1.2 billion. The fall 2015 semi-annual redetermination was completed in October 2015 and the borrowing base under the Credit Facility decreased from $1.2 billion to $900 million. In connection with the reduction in Berry’s borrowing base in October 2015, Berry repaid $300 million of borrowings outstanding under the Credit Facility. Continued low commodity prices, reductions in the Company’s capital budget and the resulting reserve write-downs are expected to adversely impact future redeterminations.

In connection with the reduction in Berry’s borrowing base in May 2015, LINN Energy contributed $250 million to Berry to post as restricted cash with Berry’s lenders. As directed by LINN Energy, the $250 million was deposited on Berry’s behalf in a security account with the administrative agent subject to a security control agreement. Berry’s ability to withdraw funds from this account is subject to a concurrent reduction of the borrowing base under the Credit Facility or lender’s consent in connection with a redetermination of such borrowing base. The $250 million may be used to satisfy obligations under the Credit Facility or, subject to restrictions in the indentures governing Berry’s senior notes, may be returned to LINN Energy in the future. The amount is included in “restricted cash” on the balance sheet.

The Company’s obligations under the Credit Facility, as amended, are secured by mortgages on its oil and natural gas properties and other personal property. The Company is required to maintain mortgages on properties representing at least 90% of the present value of its oil and natural gas proved reserves.

At the Company’s election, interest on borrowings under the Credit Facility, as amended, is determined by reference to either the LIBOR plus an applicable margin between 1.75% and 2.75% per annum (depending on the then-current level of borrowings under the Credit Facility) or a Base Rate (as defined in the Credit Facility) plus an applicable margin between 0.75% and 1.75% per annum (depending on the then-current level of borrowings under the Credit Facility). Interest is generally payable quarterly for loans bearing interest based on the Base Rate and at the end of the applicable interest period for loans bearing interest at the LIBOR. The Company is required to pay a commitment fee to the lenders under the Credit Facility, which accrues at a rate per annum of 0.5% on the average daily unused amount of the maximum commitment amount of the lenders.

Senior Notes Due November 2020

The Company has approximately $261 million in aggregate principal amount of 6.75% senior notes due November 2020 (“November 2020 Senior Notes”). The November 2020 Senior Notes were recorded at their fair value of $310 million on the acquisition date including a $10 million premium which is being amortized to interest expense over the life of the related notes.

The Company may redeem all or any part of the November 2020 Senior Notes at any time at the redemption prices set forth below, expressed as percentages of the principal amount redeemed, plus accrued and unpaid interest:



2015	103.375	%
2016	102.250	%
2017	101.125	%
2018 and thereafter	100.000	%

The Company may also redeem the November 2020 Senior Notes, in whole or in part, at a price equal to 100% of the principal amount of the notes plus a “make-whole” premium, plus accrued and unpaid interest to the redemption date.

Senior Notes Due September 2022

The Company has approximately $573 million in aggregate principal amount of 6.375% senior notes due September 2022 (“September 2022 Senior Notes”). The September 2022 Senior Notes were recorded at their fair value of $607 million on the acquisition date including a $7 million premium which is being amortized to interest expense over the life of the related notes.

At any time prior to March 15, 2017, the Company may redeem all or part of the September 2022 Senior Notes at a redemption price equal to 100% of the principal amount of the notes redeemed plus a “make-whole” premium described in the indenture, plus accrued and unpaid interest, if any, to the redemption date.

On and after March 15, 2017, the Company may redeem all or, from time to time, a part of the September 2022 Senior Notes upon not less than 30 nor more than 60 days’ notice, at the following redemption prices (expressed as a percentage of principal amount of notes to be redeemed), plus accrued and unpaid interest, if any, to the applicable redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period beginning on March 15 of the years indicated below:



2017	103.188	%
2018	102.125	%
2019	101.063	%
2020 and thereafter	100.000	%

The November 2020 Senior Notes and September 2022 Senior Notes are senior unsecured obligations of the Company, which rank effectively junior in right of payment to all of the Company’s existing and any future secured debt, to the extent of the value of the collateral securing that debt, rank equally in right of payment with any of the Company’s future senior unsecured debt and rank senior in right of payment to any of the Company’s future subordinated debt.

Redemption and Repurchases of Senior Notes

During the year ended December 31, 2015, the Company repurchased, on the open market and through a privately negotiated transaction, approximately $65 million of its outstanding senior notes including approximately $39 million of its 6.75% senior notes due November 2020 and approximately $26 million of its 6.375% senior notes due September 2022. In connection with the repurchases, the Company paid approximately $55 million in cash and recorded a gain on extinguishment of debt of approximately $11 million for the year ended December 31, 2015.

On May 30, 2014, in accordance with the provisions of the indenture related to its 10.25% senior notes due June 2014 (“June 2014 Senior Notes”), the Company paid in full the remaining outstanding principal amount of approximately $205 million using a cash capital contribution from LINN Energy (see Note 12).

In February 2014, in accordance with the indentures related to the senior notes, the Company repurchased through cash tender offers $321,000, $30,000 and $837,000 of its June 2014 Senior Notes, November 2020 Senior Notes and September 2022 Senior Notes, respectively.

Senior Notes Covenants

The Company’s senior notes contain covenants that, among other things, may limit its ability to: (i) incur or guarantee additional indebtedness; (ii) pay distributions or dividends on its equity or redeem its subordinated debt; (iii) create certain liens; (iv) enter into agreements that restrict distributions or other payments from the Company’s restricted subsidiaries to the Company; (v) sell assets; (vi) engage in transactions with affiliates; and (vii) consolidate, merge or transfer all or substantially all of the Company’s assets. As of December 31, 2015, the Company was in compliance with all financial and other covenants of its senior notes.

In addition, any cash generated by the Company is currently being used by the Company to fund its activities. To the extent that the Company generates cash in excess of its needs and determines to distribute such amounts to LINN Energy, the indentures governing the Company’s senior notes limit the amount it may distribute to LINN Energy to the amount available under a “restricted payments basket,” and the Company may not distribute any such amounts unless it is permitted by the indentures to incur additional debt pursuant to the consolidated coverage ratio test set forth in the Company’s indentures. The Company’s restricted payments basket may be increased in accordance with the terms of the Company’s indentures by, among other things, 50% of the Company’s future net income, reductions in its indebtedness and restricted investments, and future capital contributions.

The Company may from time to time seek to repurchase its outstanding debt through open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, may be material and will depend on prevailing market conditions, the Company’s liquidity requirements, contractual restrictions and other factors.

Covenant Violations

The audit report the Company received with respect to its financial statements contains an explanatory paragraph expressing uncertainty as to the Company’s ability to continue as a going concern, the delivery of which constitutes a default under the Credit Facility. The Company also deferred making an interest payment totaling approximately $18 million due March 15, 2016, on the Company’s senior notes due September 2022, which resulted in the Company being in default under these senior notes. See “Going Concern Uncertainty” in Note 1 for additional information.