Vanguard Natural Resources pre-markets debt offering as liquidity dwindles
Vanguard Natural Resources is working with BMO Capital Markets to gauge investor interest in a potential debt offering to ease its liquidity crunch, according to two buysiders familiar with the situation.
The exploration and production company, which emerged from bankruptcy last year, is considering a debt raise—most likely a secured deal—to shore up its capital structure following earnings pressure and heavy revolver drawdowns, the sources said.
The company—which is 5.6x levered based on USD 159m of LTM adjusted EBITDA and USD 906m total debt—has drawn USD 689m under its USD 703m revolving credit facility due 2021, filings show. Factoring in USD 7.5m of cash on balance sheet, total liquidity is just USD 21.5m.
Vanguard filed for Chapter 11 bankruptcy in 2016 after missing a coupon payment, as reported by Debtwire. Since emerging from bankruptcy in August 2017, it has struggled to gain earnings traction amid steep natural gas price differentials.
The company has been trying to sell non-core assets to focus on its Pinedale and Arkoma basin facilities. Most recently, it worked with RBC to divest wells in Colorado’s DJ Basin for roughly USD 14.5m, according to a company announcement.
While asset sales would bring in much-needed cash, they would also impact its borrowing base under the revolver, making some form of refinancing or recapitalization more pressing, sources said—although they added that potential lenders would also like to see more progress on asset sales.
“If they close more asset sales, the borrowing base will decline as well, due to the low natural gas environment and [the company’s] production mix,” said one of the buysiders.
The facility’s borrowing base was last redetermined in August, and is expected to undergo another redetermination next month.
In addition to the revolver, the company’s capital structure includes a USD 124m Libor+ 750bps term loan due 2021, USD 81m of 9% second lien secured notes due 2024 and USD 13m in lease financing obligations.
The term loan is quoted in the 85/88 context, in line with recent levels but down from quotes at par last year when the company emerged from bankruptcy, according to Markit.
BMO did not respond to a request for comment. The company did not respond to a request for comment.
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