Item
1.01- Entry into a Material Definitive Agreement
Exit
Credit Facility
Capitalized
terms used, but not defined, in this section have the meanings ascribed to them in the Plan. On May 17, 2021, the Debtors entered into
a Second Amended and Restated Credit Agreement (as amended, supplemented or modified from time to time, together with all Exhibits and
schedules thereto, the “Exit Credit Agreement”) with The Bank of Nova Scotia as administrative agent (in such capacity, the
“Administrative Agent”), various lender parties (collectively, the “Lenders”) and acknowledged and agreed to
by certain of Gulfport’s subsidiaries, as guarantors (the “Guarantors”), providing for (i) a new money senior secured
reserve-based revolving credit facility in an aggregate maximum principal amount of up to $1.50 billion (the “Exit Facility”);
(ii) a senior secured term loan in an aggregate maximum principal amount of up to $180.0 million (the “First-Out Term Loan Facility,”
and together with the Exit Facility, the “Exit Credit Facility”), collectively with an initial borrowing base and elected
commitments amount of up to $580.0 million (less the amount of any term loan deemed funded by any RBL Lender that is not a Consenting
RBL Lender).
The
borrowing base will be redetermined semiannually on or around May 1 and November 1 of each year, with one interim “wildcard”
redetermination available to each of Gulfport and the Administrative Agent between scheduled redeterminations during each calendar year.
The next scheduled redetermination will be on or around November 1, 2021.
Loans
drawn under the Exit Facility will not be subject to amortization, while loans drawn under the First-Out Term Loan Facility will amortize
with quarterly installments in an amount equal to $15.0 million, commencing on the closing date and occurring every three months after
the closing date.
The
Exit Facility provides for a $150.0 million sublimit of the aggregate commitments that is available for the issuance of letters
of credit. The Exit Facility bears interest at a rate equal to, at Gulfport’s election, either (a) LIBOR plus an applicable
margin that varies from 3.00% to 4.00% per annum or (b) a base rate plus an applicable margin that varies from 2.00% to 3.00% per
annum. The First-Out Term Loan Facility bears interest at a rate equal to, at Gulfport’s election, either (a) LIBOR (subject to
a 1.00% floor) plus 4.50% or (b) a base rate (subject to a 2.00% floor) plus 3.50%. The Exit Facility and First-Out Term Loan Facility
will mature on May 17, 2024.
The
Exit Credit Agreement requires Gulfport to maintain (i) a net funded leverage ratio of less than or equal to 3.00 to 1.00, (ii) a net
senior secured leverage ratio of less than or equal to 2.00 to 1.00, and (iii) a current ratio of greater than or equal to 1.00 to 1.00.
Gulfport
is required to pay a commitment fee of 0.50% per annum on the average daily unused portion of the current aggregate commitments under
the Exit Facility. Gulfport is also required to pay customary letter of credit and fronting fees.
The
Exit Credit Agreement also contains customary affirmative and negative covenants, including, among other things, as to compliance with
laws (including environmental laws and anti-corruption laws), delivery of quarterly and annual financial statements and borrowing base
certificates, conduct of business, maintenance of property, maintenance of insurance, restrictions on the incurrence of liens, indebtedness,
asset dispositions, restricted payments, and other customary covenants.
Additionally,
the Exit Credit Agreement contains customary events of default and remedies for credit facilities of this nature. If Gulfport does not
comply with the financial and other covenants in the Exit Credit Agreement, the Lenders may, subject to customary cure rights, require
immediate payment of all amounts outstanding under the Exit Credit Agreement and any outstanding unfunded commitments may be terminated.
This
summary of the Exit Credit Agreement does not purport to be complete and is subject to, and qualified in its entirety by reference to,
the full text of the Exit Credit Agreement, which is filed as Exhibit 10.1 to this Current Report and incorporated herein by reference.
Guarantee
and Security of the Exit Credit Facility
The
obligations under the Exit Credit Facility are guaranteed by Gulfport and the Guarantors (collectively, the “Loan Parties”)
and secured by substantially all of the Loan Parties’ assets (subject to customary exceptions), including mortgages on at least
85% of the PV-10 of the borrowing base properties as set forth on the reserve report. On the Effective Date, the Guarantors entered into
a guarantee and collateral agreement in favor of the Administrative Agent, for the benefit of the secured parties thereunder, pursuant
to which the Guarantors guaranteed the payment and performance of all indebtedness and liabilities arising pursuant to, or in connection
with, the Exit Credit Agreement.
Senior
Unsecured Notes Indentures
On
the Effective Date, Gulfport Energy Operating Corporation, a Delaware corporation and a subsidiary of Gulfport (the “Issuer”),
entered into an indenture to issue up to $550 million aggregate principal amount of its 8.000% senior notes due 2026, dated as of May
17, 2021, by and among the Issuer, UMB Bank, National Association, as trustee, and the guarantors party thereto (such indenture, the
“1145 Indenture,” and such senior notes issued thereunder, the “1145 Notes”), under section 1145 of the Bankruptcy
Code (“Section 1145”). Certain eligible holders have made an election (the “4(a)(2) Election”) entitling such
holders to receive senior notes issued pursuant to an indenture, dated as of May 17, 2021, by and among the Issuer, UMB Bank, National
Association, as trustee, and the guarantors party thereto (such indenture, the “4(a)(2) Indenture,” and such senior notes
issued thereunder, the “4(a)(2) Notes”), under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities
Act”) as opposed to its share of the up to $550 million aggregate principal amount of 1145 Notes. The 4(a)(2) Indenture’s
terms are substantially similar to the terms of the 1145 Indenture. The primary differences between the terms of the 4(a)(2) Indenture
and the terms of the 1145 Indenture are that (i) affiliates of the Issuer holding 4(a)(2) Notes are permitted to vote in determining
whether the holders of the required principal amount of indenture securities have concurred in any direction or consent under the 4(a)(2)
Indenture, while affiliates of the Issuer holding 1145 Notes will not be permitted to vote on such matters under the 1145 Indenture,
(ii) the covenants of the 1145 Indenture (other than the payment covenant) require that the Issuer comply with the covenants of the 4(a)(2)
Indenture, as amended, and (iii) the 1145 Indenture requires that the 1145 Securities be redeemed pro rata with the 4(a)(2) Securities
and that the 1145 Indenture be satisfied and discharged if the 4(a)(2) Indenture is satisfied and discharged.
The
offering of the 1145 Notes and the 4(a)(2)Notes (together, the “Notes”) is part of a series of exit financing transactions
being undertaken in connection with the Debtors’ Chapter 11 Cases and pursuant to the terms of the Plan as approved by the Bankruptcy
Court on April 28, 2021. The following is a brief description of the material provisions of the 1145 Indenture, the 4(a)(2) Indenture
and the Notes. The 1145 Indenture and the 4(a)(2) Indentures are referred to together as the “Indentures.”
Ranking
The
Notes are the Issuer’s senior unsecured obligations. Accordingly, they rank (i) equal in right of payment to all existing and future
senior indebtedness, including borrowings under the Exit Credit Facility, (ii) effectively subordinate in right of payment to all of
existing and future secured indebtedness, including indebtedness under the Exit Credit Facility, to the extent of the value of the collateral
securing such indebtedness, (iii) structurally subordinate in right of payment to all existing and future indebtedness and other liabilities
of any future subsidiaries that do not guarantee the Notes and any entity that is not a subsidiary that does not guarantee the Notes
and (iv) senior in right of payment to all future subordinated indebtedness. Each guarantee of the Notes by a guarantor is a general,
unsecured, senior obligation of such guarantor. Accordingly, the guarantees (i) rank equally in right of payment with all existing and
future senior indebtedness of such guarantor (including such guarantor’s guarantee of indebtedness under the Exit Credit Facility),
(ii) are effectively subordinated to all existing and future secured indebtedness of such guarantor, including such guarantor’s
guarantee of indebtedness under the Exit Credit Facility, to the extent of the value of the collateral of such guarantor securing such
secured indebtedness, (iii) are structurally subordinated to all indebtedness and other liabilities of any future subsidiaries of such
guarantor that do not guarantee the Notes and (iv) rank senior in right of payment to all future subordinated indebtedness of such guarantor.
Guarantees
The
Notes are guaranteed on a senior unsecured basis by each of the Issuer’s subsidiaries that guarantee the Exit Facility.
Maturity
and Interest
The
Notes will mature on May 17, 2026.
Interest
on the Notes will be payable semi-annually, on June 1 and December 1 of each year, commencing on December 1, 2021, to holders of record
on the immediately preceding May 15 or November 15, as the case may be. Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from May 17, 2021. Interest will be computed on the basis of a 360-day
year of twelve 30-day months. Gulfport will pay interest on overdue principal at 8.0% plus 1.0% per annum, and it will pay interest on
overdue installments of interest at the same rate to the extent lawful.
Covenants
Each
of the Indentures contain covenants limiting the Issuer’s and its restricted subsidiaries’ ability to (i) incur additional
debt, (ii) pay dividends or distributions in respect of certain equity interests or redeem, repurchase or retire certain equity interests
or subordinated indebtedness, (iii) make certain investments, (iv) create restrictions on distributions from restricted subsidiaries,
(v) engage in specified sales of assets, (vi) enter into certain transactions among affiliates, (vii) engage in certain lines of business,
(viii) engage in consolidations, mergers and acquisitions, (ix) create unrestricted subsidiaries and (x) incur or create liens. These
covenants contain important exceptions, limitations and qualifications. At any time that the Notes are rated investment grade, certain
covenants will be terminated and cease to apply.
Optional
Redemption
On
and after May 17, 2024, the Issuer has the right, at its option, to redeem all or a portion of the Notes, at the redemption prices, plus
accrued interest to the redemption date, if redeemed during the 12-month period commencing on May 17 of the years set forth below:
Period
|
|
Redemption
Price
|
|
2024
|
|
|
104.00
|
%
|
2025 and thereafter
|
|
|
100.00
|
%
|
At
any time prior to May 17, 2024, the Issuer has the right, at its option on one or more occasions, to redeem Notes in an aggregate principal
amount not to exceed 40% of the aggregate principal amount of the Notes issued prior to such date at a redemption price of 108.00%, plus
accrued and unpaid interest to the redemption date, using net cash proceeds from one or more equity offerings, subject to certain use
of proceeds and timing requirements.
Prior
to May 17, 2024, the Issuer also has the right, at its option, to redeem all or a portion of the Notes at a redemption price equal to
100% of the principal amount of the Notes plus the Applicable Premium (as defined in the Indentures) as of, and accrued and unpaid interest
to, the redemption date.
Change
of Control
Upon
the occurrence of a change of control, each holder of Notes shall have the right to require the Issuer to repurchase such holder’s
Notes at a purchase price in cash equal to 101% of the aggregate principal amount of such Notes, plus accrued and unpaid interest, if
any, up to the date of purchase.
Events
of Default
Each
of the Indenture also provides for customary events of default which, if certain of them occur: (i) would make all outstanding Notes
due and payable immediately; or (ii) would allow the trustee or the holders of at least 30% in aggregate principal amount of the then
outstanding Notes to declare the principal of and accrued and unpaid interest, if any, on all the Notes to be due and payable by notice
to the Issuer and, upon such declaration, such principal and accrued and unpaid interest, if any, will be due and payable immediately.
The
foregoing descriptions of each of the 1145 Indenture and the 4(a)(2) Indenture are qualified in their entirety by the full text of each
of the 1145 Indenture and the 4(a)(2) Indenture, including the applicable form of Note contained therein, which are attached as Exhibit
4.1 and Exhibit 4.2 to this Current Report, respectively, and incorporated herein by reference.
Registration
Rights Agreement
Pursuant
to the Plan, on the Effective Date, Gulfport entered into a Registration Rights Agreement (the “Registration Rights Agreement”)
with certain stockholders (the “Holders”). The Registration Rights Agreement provides resale registration rights for the
Holders’ Registrable Securities (as defined in the Registration Rights Agreement).
Pursuant
to the Registration Rights Agreement, upon a request of any Holder holding at least 10% of the Common Stock of Gulfport, Gulfport is
required to use commercially reasonable efforts to effect the registration of such Holder’s Registrable Securities and to keep
such Registration Statement (the “Registration Statement”) effective for a period of not less than 180 days (or, if sooner,
until all Registrable Securities have been sold under such Registration Statement).
In
the event that Gulfport becomes eligible (“S-3 Shelf Eligible”) to use a registration statement on Form S-3 in connection
with a secondary public offering of equity securities on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
(a “Shelf Registration Statement”) and a Shelf Registration Statement is not then effective, upon a written request from
any Holder, Gulfport must use its commercially reasonable efforts to register on a Shelf Registration Statement the offer and sale of
all or a portion of the Registrable Securities owned by such Holder. With respect to each Shelf Registration Statement, Gulfport shall
as promptly as practicable after the written request of the requesting Holder, file a Shelf Registration Statement and use its commercially
reasonable efforts to cause such Shelf Registration Statement to be declared effective as promptly as practicable, and remain effective
until the earlier of the date (x) on which all of the securities covered by such Shelf Registration Statement are no longer Registrable
Securities and (y) on which Gulfport cannot extend the effectiveness of such Shelf Registration Statement because it is no longer S-3
Shelf Eligible.
Additionally,
the Holders have customary underwritten offering and piggyback registration rights, subject to the limitations set forth in the Registration
Rights Agreement.
These
registration rights are subject to certain conditions and limitations, including the right of underwriters to limit the number of shares
to be included in a registration statement and Gulfport’s right to delay or withdraw a registration statement under certain circumstances.
Gulfport will generally pay all registration expenses in connection with its obligations under the Registration Rights Agreement, regardless
of whether a registration statement is filed or becomes effective. The registration rights granted in the Registration Rights Agreement
are subject to customary indemnification and contribution provisions, as well as customary restrictions such as blackout periods and,
if an underwritten offering is contemplated, limitations on the number of shares to be included in the underwritten offering that may
be imposed by the underwriters.
The
obligations to register shares under the Registration Rights Agreement will terminate with respect to each Holder when such Holder no
longer owns any Registrable Securities.
The
description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the
full text of the Registration Rights Agreement, which is filed as Exhibit 10.2 to this Current Report and incorporated herein by reference.
Side
Letter with Silver Point
On
the Effective Date, Gulfport entered into a cooperation agreement (the “Side Letter”) with Silver Point Capital, L.P., a
Delaware limited partnership (“Silver Point”). Pursuant to the Side Letter, from the Effective Date until the date which
Silver Point ceases to hold 20% or more of the voting power of the Common Stock, the Preferred Stock, and any other securities of Gulfport
entitled to vote in the election of directors, or securities convertible into, or exercisable or exchangeable for, such shares or other
securities, whether or not subject to the passage of time or other contingencies (the “Expiration Date”), Gulfport agreed
to (i) use all reasonable efforts to cause the election of a director designated by Silver Point (the “Silver
Point Designee”) at each annual or special meeting of the stockholders of Gulfport at which directors are to be elected, (ii) take
such action as is necessary such that the Silver Point Designee is, subject to Gulfport policies, New York Stock Exchange listing standards
and applicable law, appointed to the Compensation Committee of the Board and to any executive committee of the Board exercising substantially
all the typical authority or role of the Board that is formed on or after the Effective Date and (iii) invite one representative of Silver
Point, who will be designated by Silver Point, to attend all meetings of the Board (and any committee thereof) in a nonvoting observer
capacity and, in this respect, shall, subject to customary restrictions, give such representative copies of all notices, minutes, consents,
and other materials that it provides to its directors.
The
description of the Side Letter does not purport to be complete and is qualified in its entirety by reference to the full text of the
Side Letter, which is filed as Exhibit 10.3 to this Current Report and incorporated herein by reference.