Closing in conjunction with a proposed merger with Cano Petroleum Inc., Resaca Exploitation Inc. has received a new $200 million senior secured revolving credit facility provided by Union Bank NA. The bank will act as Lead Arranger and Administrative Agent.
Proceeds will be used to repay and refinance Resaca's and Cano's existing debt, to fund future acquisitions, and for general corporate purposes. The Cano merger is subject to a number of closing conditions, including refinancing of existing bank debt. The commitment for the New Facility is expected to satisfy this closing condition.
Jay Lendrum, CEO, commented, "Not only will this facility provide the refinancing required to satisfy a condition of closing the Cano merger, we believe this facility will position the company for future growth.”
Last fall, Resaca Exploitation, formed in 2006 by Torch Energy Advisors to acquire, develop and explore high quality, long lived oil and gas assets in the Permian Basin of the US, worked out an agreement to acquire Cano Petroleum.
An initial borrowing base of $90 million has been established based on the company and Cano's combined reserves. Based on values assigned to crude oil and natural gas properties which may be either acquired or discovered over time, the company's borrowing base may be increased up to a maximum of $200 million.
The applicable interest rate margin for facility will range from LIBOR plus 2.50% to LIBOR plus 3.25% depending on the actual level of outstanding borrowings.
