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New Source borrowing base reduced to $24 million, causing deficiency
By Caroline Salls
Pittsburgh, Oct. 13 – New Source Energy Partners LP was notified by administrative agent the Bank of Montreal that the semi-annual re-determination of the borrowing base under the terms of the credit agreement resulted in a lowering of the borrowing base to $24 million from $49 million, according to an 8-K filed Tuesday with the Securities and Exchange Commission.
The partnership said it previously voluntarily agreed to lower the borrowing base to $49 million from $57 million in preparation for the lenders’ review. New Source currently has $49 million borrowed under the credit agreement, resulting in a $25 million borrowing base deficiency.
New Source said it has 30 days to provide written notice to the administrative agent of its plans to cure the deficiency by either prepaying the excess borrowings in full, pledging additional collateral to cure the deficiency or a combination of those actions.
According to the 8-K, the partnership does not currently have sufficient cash resources to repay or additional collateral to cure the borrowing base deficiency.
If it is unable to successfully negotiate a forbearance agreement, obtain a waiver of compliance or cure the borrowing base deficiency, the company said an event of default under the credit facility would occur on Nov. 9, which could result in termination of the partnership’s commitments and acceleration of the outstanding loans.
The partnership has retained Opportune LLP as its financial adviser to assist in working with lenders to eliminate the borrowing base deficiency and evaluate strategic alternatives.
New Source is an Oklahoma City-based energy company.
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