Note 4. Long-Term Debt

The table below reflects long-term debt and capital lease obligations outstanding as of the dates indicated. In April 2018, all $84.7 million of our outstanding 3½% Convertible Senior Notes due 2024 was extinguished as a result of conversion into common stock (see April 2018 Conversion of 2024 Convertible Senior Notes below):



	March 31,			December 31,
In thousands	2018			2017
Senior Secured Bank Credit Agreement	$	450,000		$	475,000
9% Senior Secured Second Lien Notes due 2021	614,919			614,919
9¼% Senior Secured Second Lien Notes due 2022	455,668			381,568
5% Convertible Senior Notes due 2023	59,439			—
3½% Convertible Senior Notes due 2024	84,650			84,650
6⅜% Senior Subordinated Notes due 2021	203,545			215,144
5½% Senior Subordinated Notes due 2022	314,662			408,882
4⅝% Senior Subordinated Notes due 2023	307,978			376,501
Pipeline financings	189,547			192,429
Capital lease obligations	22,585			26,298
Total debt principal balance	2,702,993			2,775,391
Future interest payable⁽¹⁾	356,223			316,818
Debt issuance costs	(6,171		)	(7,935		)
Total debt, net of debt issuance costs	3,053,045			3,084,274
Less: current maturities of long-term debt⁽¹⁾	(129,667		)	(105,188		)
Long-term debt and capital lease obligations	$	2,923,378		$	2,979,086

(1)

Future interest payable represents most of the interest due over the terms of our 9% Senior Secured Second Lien Notes due 2021, 9¼% Senior Secured Second Lien Notes due 2022 (the “2022 Senior Secured Notes”), 5% Convertible Senior Notes due 2023 (the “2023 Convertible Senior Notes”), and 2024 Convertible Senior Notes and has been accounted for as debt in accordance with FASC 470-60, Troubled Debt Restructuring by Debtors. Our current maturities of long-term debt as of March 31, 2018 include $100.1 million of future interest payable related to these notes that is due within the next twelve months. See January 2018 Note Exchanges below for further discussion.

The ultimate parent company in our corporate structure, Denbury Resources Inc. (“DRI”), is the sole issuer of all of our outstanding senior secured, convertible senior, and senior subordinated notes. DRI has no independent assets or operations. Each of the subsidiary guarantors of such notes is 100% owned, directly or indirectly, by DRI, and the guarantees of the notes are full and unconditional and joint and several; any subsidiaries of DRI that are not subsidiary guarantors of such notes are minor subsidiaries.

Senior Secured Bank Credit Facility

In December 2014, we entered into an Amended and Restated Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and other lenders party thereto (as amended, the “Bank Credit Agreement”). The Bank Credit Agreement is a senior secured revolving credit facility with a maturity date of December 9, 2019 and semiannual borrowing base redeterminations in May and November of each year. As part of our spring 2018 semiannual borrowing base redetermination, the borrowing base and lender commitments for our Bank Credit Agreement were reaffirmed at $1.05 billion, with the next such redetermination being scheduled for November 2018. If our outstanding debt under the Bank Credit Agreement were to ever exceed the borrowing base, we would be required to repay the excess amount over a period not to exceed six months. The weighted average interest rate on borrowings outstanding under the Bank Credit Agreement was 4.5% as of March 31, 2018. We incur a commitment fee of 0.50% on the undrawn portion of the aggregate lender commitments under the Bank Credit Agreement.

The Bank Credit Agreement contains certain financial performance covenants through the maturity of the facility, including the following:


•	A consolidated senior secured debt to consolidated EBITDAX covenant, with such ratio not to exceed 3.0 to 1.0 through the first quarter of 2018, and thereafter not to exceed 2.5 to 1.0. Currently, only debt under our Bank Credit Agreement is considered consolidated senior secured debt for purposes of this ratio;


•	A minimum permitted ratio of consolidated EBITDAX to consolidated interest charges of 1.25 to 1.0; and


•	A requirement to maintain a current ratio of 1.0 to 1.0.

The above description of our Bank Credit Agreement is qualified by the express language and defined terms contained in the Bank Credit Agreement and the amendments thereto, each of which are filed as exhibits to our periodic reports filed with the SEC.

January 2018 Note Exchanges

During January 2018, we closed transactions to exchange a total of $174.3 million aggregate principal amount of our then existing senior subordinated notes for $74.1 million aggregate principal amount of new 2022 Senior Secured Notes and $59.4 million aggregate principal amount of new 2023 Convertible Senior Notes, resulting in a net reduction in our debt principal from these exchanges of $40.8 million. The exchanged notes consisted of $11.6 million aggregate principal amount of our 6⅜% Senior Subordinated Notes due 2021 (the “2021 Notes”), $94.2 million aggregate principal amount of our 5½% Senior Subordinated Notes due 2022 (the “2022 Notes”) and $68.5 million aggregate principal amount of our 4⅝% Senior Subordinated Notes due 2023 (the “2023 Notes”).

In accordance with FASC 470-60, the exchange was accounted for as a troubled debt restructuring due to the level of concession provided by our senior subordinated note holders. Under this guidance, future interest applicable to the new 2022 Senior Secured Notes and 2023 Convertible Senior Notes is recorded as debt up to the point that the principal and future interest of the new notes is equal to the principal amount of the extinguished notes, rather than recognizing a gain on extinguishment for this amount. As of March 31, 2018, $37.6 million of future interest on the new 2022 Senior Secured Notes and 2023 Convertible Senior Notes was recorded as debt, which will be reduced as semiannual interest payments are made, with the remaining $6.8 million of future interest to be recognized as interest expense over the term of these notes. Therefore, future interest expense reflected in our Unaudited Condensed Consolidated Statements of Operations on the new 2022 Senior Secured Notes and 2023 Convertible Senior Notes will be significantly lower than the actual cash interest payments.

9¼% Senior Secured Second Lien Notes due 2022

In January 2018, we issued $74.1 million of principal amount of 2022 Senior Secured Notes, which principal amount is in addition to the $381.6 million of 2022 Senior Secured Notes issued during December 2017. The 2022 Senior Secured Notes, which bear interest at a rate of 9.25% per annum, were issued at par in connection with exchanges with a limited number of holders of existing senior subordinated notes in December 2017 and January 2018 (see January 2018 Note Exchanges above). The 2022 Senior Secured Notes mature on March 31, 2022, and interest is payable semiannually in arrears on March 31 and September 30 of each year. We may redeem the 2022 Senior Secured Notes in whole or in part at our option beginning March 31, 2019, at a redemption price of 109.25% of the principal amount, and at declining redemption prices thereafter, as specified in the indenture governing the 2022 Senior Secured Notes. Prior to March 31, 2019, we may at our option redeem up to an aggregate of 35% of the principal amount of the 2022 Senior Secured Notes at a price of 109.25% of par with the proceeds of certain equity offerings. In addition, at any time prior to March 31, 2019, we may redeem the 2022 Senior Secured Notes in whole or in part at a price equal to 100% of the principal amount plus a “make-whole” premium and accrued and unpaid interest. The 2022 Senior Secured Notes are not subject to any sinking fund requirements.

The 2022 Senior Secured Notes are guaranteed jointly and severally by our subsidiaries representing substantially all of our assets, operations and income and are secured by second-priority liens on substantially all of the assets that secure the Bank Credit Agreement, which second-priority liens are contractually subordinated to liens that secure our Bank Credit Agreement and any future additional priority lien debt.

5% Convertible Senior Notes due 2023

In January 2018, we issued $59.4 million of 2023 Convertible Senior Notes. The 2023 Convertible Senior Notes, which bear interest at a rate of 5% per annum, were issued at par in exchange offers with a limited number of holders of existing senior subordinated notes (see January 2018 Note Exchanges above). The 2023 Convertible Senior Notes mature on December 15, 2023, and interest is payable semiannually in arrears on June 15 and December 15 of each year, beginning in June 2018. We do not have the right to redeem the 2023 Convertible Senior Notes prior to their maturity. The 2023 Convertible Senior Notes are convertible into shares of our common stock at any time, at the option of the holders, at a rate of 281.69 shares of common stock per $1,000 principal amount of 2023 Convertible Senior Notes, subject to customary adjustments to the conversion rate and threshold price with respect to, among other things, stock dividends and distributions, mergers and reclassifications. The 2023 Convertible Senior Notes will be automatically converted into shares of common stock at this rate if the volume weighted average trading price of the Company’s common stock equals or exceeds the threshold price, which initially is $3.55 per share, for 10 trading days in any period of 15 consecutive trading days, subject to satisfaction of certain other conditions. Additionally, the Company may, based on a determination of its Board of Directors that such changes are in the best interests of the Company, and subject to certain limitations, increase the conversion rate (which increase in conversion rate is limited until January 9, 2019 to no greater than 393.55 shares of common stock per $1,000 principal amount of 2023 Convertible Senior Notes). Any such conversion rate increase would cause a proportional decrease in the threshold price for mandatory conversions, and thereby would enable the Company to require a mandatory conversion into common stock at a lower price than the initial or then-prevailing threshold price.

April 2018 Conversion of 2024 Convertible Senior Notes

In April 2018, holders of all $84.7 million aggregate outstanding principal amount of our 2024 Convertible Senior Notes converted their notes into shares of Denbury common stock, at rates specified in the indenture for the notes, resulting in the issuance of 38.5 million shares of our common stock upon conversion. As of April 18, 2018, there were no remaining 2024 Convertible Notes outstanding.