Long-Term Debt

6 Months Ended

Jun. 30, 2020

Note 4. Long-Term Debt

The table below reflects long-term debt outstanding as of the dates indicated:



	June 30,			December 31,
In thousands	2020			2019
Senior Secured Bank Credit Agreement	$	265,000		$	—
9% Senior Secured Second Lien Notes due 2021	584,709			614,919
9¼% Senior Secured Second Lien Notes due 2022	455,668			455,668
7¾% Senior Secured Second Lien Notes due 2024	531,821			531,821
7½% Senior Secured Second Lien Notes due 2024	20,641			20,641
6⅜% Convertible Senior Notes due 2024	225,663			245,548
6⅜% Senior Subordinated Notes due 2021	51,304			51,304
5½% Senior Subordinated Notes due 2022	58,426			58,426
4⅝% Senior Subordinated Notes due 2023	135,960			135,960
Pipeline financings	160,428			167,439
Capital lease obligations	157			—
Total debt principal balance	2,489,777			2,281,726
Debt discount⁽¹⁾	(88,442		)	(101,767		)
Future interest payable⁽²⁾	119,454			164,914
Debt issuance costs	(8,537		)	(10,009		)
Total debt, net of debt issuance costs and discount	2,512,252			2,334,864
Less: current maturities of long-term debt⁽³⁾	(2,366,330		)	(102,294		)
Long-term debt	$	145,922		$	2,232,570


(1)	Consists of discounts related to our 7¾% Senior Secured Second Lien Notes due 2024 and 6⅜% Convertible Senior Notes due 2024 of $24.4 million and $64.0 million, respectively, as of June 30, 2020.


(2)	Future interest payable represents most of the interest due over the terms of our 9% Senior Secured Second Lien Notes due 2021 (the “2021 Senior Secured Notes”) and 9¼% Senior Secured Second Lien Notes due 2022 (the “2022 Senior Secured Notes”) and has been accounted for as debt in accordance with FASC 470-60, Troubled Debt Restructuring by Debtors.


(3)	Our current maturities of long-term debt as of June 30, 2020 include $119.5 million of future interest payable related to the 2021 Senior Secured Notes and 2022 Senior Secured Notes that is due within the next twelve months. See Chapter 11 Restructuring and Effect of Automatic Stay below.

The ultimate parent company in our corporate structure, Denbury Resources Inc. (“DRI”), is the sole issuer of all 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.

Chapter 11 Restructuring and Effect of Automatic Stay

As discussed in Note 1, Basis of Presentation – Entry into Restructuring Support Agreement and Voluntary Reorganization under Chapter 11 of the Bankruptcy Code, on July 30, 2020, Denbury filed for relief under chapter 11 of the Bankruptcy Code. Both the NEJD pipeline lease financing and Free State pipeline transportation agreement are not impaired and are expected to continue post-bankruptcy under their existing terms and maintain their long-term nature. Therefore, the noncurrent portions of our pipeline financings remain classified as long-term debt in the condensed consolidated balance sheet as of June 30, 2020. Any efforts to enforce payment obligations related to the acceleration of the Company’s debt have been automatically stayed as a result of the filing of the Chapter 11 Restructuring, and the creditors’ rights of enforcement are subject to the applicable provisions of the Bankruptcy Code. Refer to Note 1, Basis of Presentation – Entry into Restructuring Support Agreement and Voluntary Reorganization under Chapter 11 of the Bankruptcy Code, for more information on the Chapter 11 Restructuring.

Senior Secured Bank Credit Facility

Since December 2014, the Company maintained a senior secured revolving credit facility with JPMorgan Chase Bank, N.A., as administrative agent, and other lenders party thereto, which has been amended periodically since that time. The Bank Credit Agreement had a scheduled maturity date of December 9, 2021, provided that the maturity date may be accelerated to earlier dates in 2021 if certain defined liquidity ratios are not met, or if the 2021 Senior Secured Notes due in May 2021 or 6⅜% Senior Subordinated Notes due in August 2021 are not repaid or refinanced by each of their respective maturity dates. The borrowing base under the Bank Credit Agreement was evaluated semi-annually, generally around May 1 and November 1. In conjunction with the scheduled May 2020 redetermination on June 26, 2020, we entered into the Eighth Amendment to the Bank Credit Agreement (the “Eighth Amendment”) which among other things:


•	Reaffirmed the borrowing base under the Bank Credit Agreement at $615 million until the next scheduled or interim redetermination or other adjustment to the borrowing base in accordance with the terms of the Bank Credit Agreement;


•	Reduced (until the fall 2020 borrowing base redetermination date) the maximum availability under the Bank Credit Agreement to the sum of $275 million plus the total amount of outstanding letters of credit under the Bank Credit Agreement from time to time (not to exceed $100 million); and


•	Added dollar limits (until the fall 2020 borrowing base redetermination date) on our ability to use certain baskets in the negative covenants governing dispositions, hedge terminations, investments, restricted payments and redemptions of junior lien debt and unsecured debt.

Under the terms of the RSA, the lenders under the Company’s Bank Credit Agreement agreed to provide the Company and its subsidiaries with the DIP Facility, which is to be replaced with the committed exit facility upon emergence from the Chapter 11 Restructuring. Refer to Note 1, Basis of Presentation – Entry into Restructuring Support Agreement and Voluntary Reorganization under Chapter 11 of the Bankruptcy Code, for additional information.

On June 29, 2020, we elected to draw $200 million (the “Credit Draw”) under the Bank Credit Agreement. As of June 30, 2020, we had $265 million of outstanding borrowings and approximately $95 million of outstanding letters of credit under the Bank Credit Agreement.

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


•	A Consolidated Total Debt to Consolidated EBITDAX covenant, with such ratio not to exceed 5.25 to 1.0 through December 31, 2020 and 4.50 to 1.0 thereafter;


•	A consolidated senior secured debt to consolidated EBITDAX covenant, with such ratio not to exceed 2.5 to 1.0. 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 (i.e., Consolidated Current Assets to Consolidated Current Liabilities) of 1.0 to 1.0.

For purposes of computing the current ratio per the Bank Credit Agreement, Consolidated Current Assets exclude the current portion of derivative assets but include available borrowing capacity under the senior secured bank credit facility, and Consolidated Current Liabilities exclude the current portion of derivative liabilities as well as the current portions of long-term indebtedness outstanding.

The above description of our Bank Credit Agreement and defined terms are contained in the Bank Credit Agreement and the amendments thereto.

Second Quarter 2020 Conversion of 6⅜% Convertible Senior Notes due 2024

During the second quarter of 2020, holders of $19.9 million aggregate principal amount outstanding of our 6⅜% Convertible Senior Notes due 2024 (the “2024 Convertible Senior Notes”) converted their notes into shares of Denbury common stock, at the rates specified in the indenture for the notes, resulting in the issuance of 7.4 million shares of our common stock upon conversion. The debt principal balance net of debt discounts totaling $13.9 million, was reclassified to “Paid-in capital in excess of par” and “Common stock” in our Unaudited Condensed Consolidated Balance Sheets upon the conversion of the notes into shares of Denbury common stock. As of June 30, 2020, there was $225.7 million 2024 Convertible Senior Notes outstanding.

First Quarter 2020 Repurchases of Senior Secured Notes

During March 2020, we repurchased a total of $30.2 million aggregate principal amount of our 2021 Senior Secured Notes in open-market transactions for a total purchase price of $14.2 million, excluding accrued interest. In connection with these transactions, we recognized a $19.0 million gain on debt extinguishment, net of unamortized debt issuance costs and future interest payable written off.