Lonestar Resources US Inc. and certain of its subsidiaries, entered into a forbearance agreement with certain holders of outstanding notes and any additional holder of Notes on July 31, 2020.
Lonestar Resources elected not to make the approximately $14.1 million interest payment due and payable on July 1, 2020 with respect to its 11.25% senior notes due 2023 issued under the indenture governing the Notes, dated as of Jan. 4, 2018. The Company elected not to make the Interest Payment in order to evaluate certain financial alternatives.
The Company’s failure to make the Interest Payment on July 1, 2020 represented an event of default under the Credit Facility at that time and the Company’s failure to make the Interest Payment within thirty days after it is due and payable constitutes an “event of default” under the Indenture. As active discussions are still ongoing regarding the Company’s evaluation of financial alternatives, the Company determined it would not make the Interest Payment prior to the expiration of the thirty day grace period, resulting in an event of default under the Indenture.
Pursuant to the Forbearance Agreement, subject to certain terms and conditions, the Forbearing Holders have agreed to temporarily forbear from the exercise of any rights or remedies they may have in respect of the aforementioned event of default under the Indenture. The Forbearance Agreement terminates on Aug. 21, 2020, unless certain specified circumstances cause an earlier termination.
Amendment to the Forbearance Agreement, Fourteenth Amendment, and Borrowing Base Agreement
As previously disclosed, on July 2, 2020, the Company and certain of its subsidiaries entered into a Forbearance Agreement, Fourteenth Amendment, and Borrowing Base Agreement with Citibank, N.A., as administrative agent, and the lenders party thereto with respect to the Company’s senior secured credit facility. Pursuant to the Credit Facility Forbearance Agreement, among other things, the administrative agent and the lenders under the Credit Facility agreed to refrain from exercising their rights and remedies under the Credit Facility and related loan documents with respect to certain defaults, including the Company’s failure to make the Interest Payment on time, until July 31, 2020, subject to an earlier termination as a result of certain specified circumstances.
On July 31, 2020, the Company and certain of its subsidiaries entered into an Amendment with respect to the Credit Facility Forbearance Agreement with the Lenders, pursuant to which the Lenders agreed to extend the stated term of the Credit Facility Forbearance Agreement until Aug. 21, 2020.
About Lonestar Resources
Headquartered in Fort Worth, Texas, Lonestar is an independent oil and natural gas company, focused on the development, production, and acquisition of unconventional oil, natural gas liquids, and naturalgas properties in the Eagle Ford Shale in Texas, where the Company has accumulated approximately 72,642 gross (53,831 net) acres in what it believes to be the formation’s crude oil and condensate windows, as of Dec. 31, 2019.
Lonestar Resources reported a net loss attributable to common stockholders of $111.56 million for the year ended Dec. 31, 2019, compared to net income attributable to common stockholders of $11.53 million for the year ended Dec. 31, 2018.
As of March 31, 2020, the Company had $616.35 million in total assets, $586.73 million in total current liabilities, $19.28 million in total long-term liabilities, and $10.34 million in total stockholders’ equity.
BDO USA, LLP, in Dallas, Texas, the Company’s auditor since 2013, issued a “going concern” qualification in its report dated April 13, 2020 citing that the Company did not satisfy certain covenants under the Company’s revolving credit facility as of Dec. 31, 2019 and does not anticipate maintaining compliance with the consolidated current ratio covenant over the next twelve months, which could lead to acceleration of the Company’s debt obligations. These matters raise substantial doubt about the Company’s ability to continue as a going concern.