Trans Energy unit American Shale increases facility to $75 million

By Angela McDaniels

Tacoma, Wash., March 6 - Trans Energy, Inc. subsidiary American Shale Development, Inc. increased its credit facility to $75 million from $50 million on Feb. 28, according to an 8-K filing with the Securities and Exchange Commission.

The original $50 million of borrowings are classified as tranche A loans, and the incremental $25 million of borrowings are classified as tranche B loans.

The interest rate continues to be Libor plus 1,000 basis points with a 1% Libor floor.

As was the case with the original credit agreement, an additional 1% per quarter may be charged on the tranche A loans - but not the tranche B loans - if American Shale exceeds the maximum consolidated leverage ratio, which is 5.5 times and will decline to 4.5 times for the quarter ending March 31, 2014 and to 4 times for each quarter after June 30, 2014. This additional 1% will be paid in kind.

The maturity date remains Feb. 28, 2015. There is no amortization required.

The loans may be prepaid but not reborrowed. If the loans are prepaid on or prior to Feb. 28, 2014, a make-whole amount will be charged equal to the sum of the remaining scheduled payments of interest on the tranche A loans through the second anniversary of the original funding date, which was April 26, 2012. There is no make-whole amount required on the tranche B loans.

Trans Energy and subsidiary Prima Oil Co., Inc. remain guarantors of the credit facility.

Financial covenants remain the same as under the original credit agreement and include a minimum collateral coverage ratio and minimum consolidated current ratio.

Trans Energy said the definition of working capital has been modified slightly in favor of American Shale in order to reflect the timing of expenditures related to drilling new wells.

None of the material terms of the warrants issued at the time of the original credit agreement have been changed.

American Shale will be have to pay a termination fee with respect to the tranche B loans upon the earliest to occur of (a) a change of control, (b) the exercise of the warrant put option and (c) certain defaults under the credit agreement related to seeking relief from creditors or generally being unable to repay debts as they come due. The termination fee will be equal to $12.5 million less all interest payments actually made on the tranche B loans prior to that date.

Chambers Energy Management, LP is the administrative agent.

Trans Energy is an oil and gas exploration and production company based in St. Mary's, W.Va.

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