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net proceeds from the Second Lien Credit Facility, after arrangement and legal
fees, were approximately $144.5 million. A portion of the net proceeds were used
to: (1) retire the $52.9 million of outstanding obligations under the Subordinated
Notes and the Senior Secured Notes and (2) repay, at our election, the $18.5 million
outstanding indebtedness under the First Lien Credit Facility. In connection with
these transactions, we recorded a $3.7 million pre-tax charge for the early extinguishment
of longterm debt in the third quarter of 2005 primarily relating to the write
off of unamortized discounts and deferred loan costs. The
interest rate on each base rate loan will be (1) the greater of the Agent’s prime
rate and the federal funds effective rate plus 0.5%, plus (2) a margin of 5.0%.
The interest rate on each eurodollar loan will be the adjusted LIBOR rate plus
a margin of 6.0%. Interest on eurodollar loans is payable on either the last day
of each interest period or every three months, whichever is earlier. Interest
on base rate loans is payable quarterly. We are subject
to certain covenants under the terms of the Second Lien Credit Facility. These
covenants include, but are not limited to, the maintenance of the following financial
covenants: (1) a minimum current ratio of 1.0 to 1.0 including availability under
the borrowing base under the First Lien Credit Facility; (2) a minimum quarterly
interest coverage ratio of 2.75 to 1.0 through June 30, 2006 and 3.0 to 1.0 thereafter;
(3) a minimum quarterly proved reserve coverage ratio of 1.5 to 1.0 through September
30, 2006 and 2.0 to 1.0 thereafter; and (4) a maximum total net recourse debt
to EBITDA (as defined in the Second Lien Credit Facility) ratio of not more than
3.5 to 1.0 through June 30, 2006 and 3.25 to 1.0 thereafter. The Second Lien Credit
Facility also places restrictions on additional indebtedness, dividends to shareholders,
liens, investments, mergers, acquisitions, asset dispositions, repurchase or redemption
of our common stock, speculative commodity transactions, transactions with affiliates
and other matters. The Second Lien Credit Facility
is subject to customary events of default. Subject to certain exceptions, if an
event of default occurs and is continuing, the Agent may accelerate amounts due
under the Second Lien Credit Facility (except for a bankruptcy event of default,
in which case such amounts will automatically become due and payable). If an event
of default occurs under the Second Lien Credit Facility as a result of an event
of default under the First Lien Credit Facility, the Agent may not accelerate
the amounts due under the Second Lien Credit Facility until the earlier of 45
days after the occurrence of the event resulting in the default and acceleration
of the loans under the First Lien Credit Facility. Shelf
Registration Statement In the third quarter of 2005,
we filed a registration statement on Form S-3 with the SEC for the proposed offering
from time to time of up to $250 million of senior or subordinated debt securities,
preferred stock, common stock and warrants to purchase debt securities, preferred
stock, common stock or other securities. Due to the delay in our filing of our
Annual Report on Form 10-K for the year ended December 31, 2005, we believe that
we are not eligible to use a “short form” registration statement on Form S- 3
at the present time. Accordingly, unless and until we regain eligibility to use
Form S-3, we will not be able to offer and sell securities under our shelf registration
statement without first amending it to convert it to a registration statement
on Form S-1 and then obtaining a declaration of effectiveness for the registration
statement from the SEC. The inability to use Form S-3 may increase the costs and
complexity of the registration process. This registration statement has not yet
been declared effective by the SEC. Rocky Mountain Gas
Note In June 2001, CCBM issued a non-recourse promissory
note payable in the amount of $7.5 million to RMG as consideration for certain
interests in oil and natural gas leases held by RMG in Wyoming and Montana. The
RMG note was payable in 41- monthly principal payments of $0.1 million plus interest
at 8% per annum commencing July 31, 2001 with the balance due December 31, 2004.
The RMG note was secured solely by CCBM’s interests in the oil and natural gas
leases in Wyoming and Montana. At December 31, 2003 and 2004, the outstanding
principal balance of this note was $0.9 million and zero, respectively. In connection
with our investment in Pinnacle, we received a reduction in the principal amount
of the RMG note of approximately $1.5 million and relinquished the right to certain
revenues related to the properties contributed to Pinnacle. In the second quarter
of 2004, we opted to exercise our right to cancel one-half of the remaining note
payable to RMG, or approximately $300,000, in exchange for assigning one-half
of our mineral interest in the Oyster Ridge leases to RMG. Capital
Leases In December 2001, we entered into a capital
lease agreement secured by certain production equipment in the amount of $0.2
million. The lease is payable in one payment of $11,323 and 35 monthly payments
of $7,549 including interest at 8.6% per annum. In October 2002, we entered into
a capital lease agreement secured by certain production equipment in the amount
of $0.1 million. The lease is payable in 36 monthly payments of $3,462 including
interest at 6.4% per annum. In May 2003, we entered into a capital lease agreement
secured by certain production equipment in the amount of $0.1 million. The lease
is payable in 36 monthly payments of $3,030 including interest at 5.5% per annum.
In August 2003, we entered into a capital lease agreement | |
