Quest Resource gets $200 million credit facility

By Sara Rosenberg

New York, Nov. 15 - Quest Resource Corp. closed on a new $200 million secured credit facility, according to a company news release.

Guggenheim Corporate Funding LLC is the administrative agent on the deal.

The facility consists of a $50 million five-year revolver at Libor plus 175 basis points with a 75 bps unused fee, a $50 million delayed-draw for 90 days, five-year first-lien term loan at Libor plus 325 bps with a 75 bps unused fee and a $100 million six-year second-lien term loan at Libor plus 600 bps.

The revolver will only be available after the first-lien term loan has been fully drawn.

The second-lien term is non-callable for one year, then at 103 in year two, 102 in year three and 101 in year four.

Security for the revolver and first-lien term loan is a first-priority lien on substantially all of the assets of the company and its subsidiaries. The second-lien term loan is secured by a second-priority lien on those assets.

Covenants include the maintenance of a ratio of PV-10/senior debt of not less than 2.0 to 1.0 and a ratio of PV-10/total net debt of not less than 1.5 to 1.0.

Proceeds from the second-lien loan along with proceeds from a stock sale - both of which were completed Monday - were used to in part to refinance the amounts outstanding under Quest Cherokee LLC's existing credit facility, to repay promissory notes owed by Quest Cherokee to Cherokee Energy Partners LLC, to purchase all of the class A units in Quest Cherokee owned by Cherokee Energy Partners and to pay fees and expenses related to the transactions.

As a result of the purchase of the Quest Cherokee class A units, Quest Cherokee is now a wholly owned subsidiary of the company.

The company plans to use the remaining net proceeds from the stock offering and the borrowings available under the first-lien term loan and the revolver to fund its development drilling program and construction of additional pipeline infrastructure to serve the new wells.

Quest Resource is an Okalahoma City-based company engaged in the acquisition, production, transportation, exploration and development of coal bed methane gas in southeastern Kansas and northeastern Oklahoma.

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