TXCO Resources Announces a Covenant Violation
28 February 2009 - 8:05AM
Business Wire
TXCO Resources Inc. (Nasdaq:TXCO) today announced that on
February 26, 2009, in connection with the preparation of its 2008
financial statements, the Company determined that it was in
violation of the current ratio covenant (the �Current Ratio
Covenant�) in its Amended and Restated Credit Agreement, dated
April 2, 2007 and as further amended on July 25, 2007, and Amended
and Restated Term Loan Agreement, dated July 25, 2007
(collectively, the �Credit Facilities�), each with Bank of
Montreal, as lender and administrative agent, and the other lenders
party thereto (collectively, the �Lenders�). The Company believes
it is meeting all other covenant requirements under the Credit
Facilities.
The Company is continuing discussions with the Lenders regarding
a waiver of the Current Ratio Covenant and other arrangements
whereby the Lenders would refrain from exercising their rights
under the Credit Facilities as a result of the above default. There
can be no assurance that the Company will be able to obtain a
waiver of the Current Ratio Covenant or obtain other relief from
the Lenders.
Under the terms of the Company�s Certificate of Designations,
Preferences and Rights of Series D Convertible Preferred Stock and
Certificate of Designations, Preferences and Rights of Series E
Convertible Preferred Stock (collectively, the �Certificate of
Designations�), the above default could result in the holders of
the Company�s Series�D and Series E Convertible Preferred Stock
(collectively, the �Preferred Stock�) having a redemption right.
However, under the terms of the Certificate of Designations, this
redemption right is suspended until all of the Company�s
obligations under the Credit Facilities have been satisfied.
The Company continues the strategic alternatives review
announced earlier this month. Goldman, Sachs & Co. serves as
TXCO�s financial advisor.
The foregoing summaries of the terms of the Credit Facilities
and Certificate of Designations do not purport to be complete and
are qualified in their entirety by reference to the complete text
of the Credit Facilities and the Certificate of Designations.
Release of earnings will be postponed until filing of the
Company�s 2008 Form 10-K with a conference call to follow.
Conference call details will be announced later.
About TXCO Resources
TXCO Resources is an independent oil and gas enterprise with
interests in the Maverick Basin, the onshore Gulf Coast region and
the Marfa Basin of Texas, and the Midcontinent region of western
Oklahoma. It has a consistent record of long-term growth in its
proved oil and gas reserves, leasehold acreage position, production
and cash flow through its established exploration and development
programs. TXCO�s business strategy is to build shareholder value by
acquiring undeveloped mineral interests and internally developing a
multi-year drilling inventory through the use of advanced
technologies, such as 3-D seismic and horizontal drilling. It
accounts for its oil and gas operations under the successful
efforts method of accounting and trades its common stock on
Nasdaq�s Global Select Market under the symbol �TXCO.� Additional
information, including recent regulatory filings and investor
presentations, is available at the Company�s Web site,
www.txco.com.
Forward-Looking
Statements
Statements in this press release that are not historical,
including statements regarding TXCO�s or management�s intentions,
hopes, beliefs, expectations, representations, projections,
estimations, plans or predictions of the future, are
forward-looking statements and are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Such statements include those relating to waivers or other relief
from TXCO lenders, estimated financial results, bank credit and
working capital availability, expected prices, production volumes,
well test results, reserve levels and number of drilling locations
expected, drilling plans, including the timing, category, number,
depth, cost and/or success of wells to be drilled, expected
geological formations or the availability of specific services,
equipment or technologies. It is important to note that actual
results may differ materially from the results predicted in any
such forward-looking statements. Investors are cautioned that all
forward-looking statements involve risks and uncertainty, including
without limitation, the costs and accidental risk inherent in
exploring and developing new oil and natural gas reserves, the
price for which such reserves can be sold, environmental concerns
affecting the drilling of oil and natural gas wells, impairment of
oil and gas properties due to depletion or other causes, the
uncertainties inherent in estimating quantities of proved reserves
and cash flows, as well as general market conditions, competition
and pricing. TXCO undertakes no obligation to revise or update any
forward-looking statements, or to make any other forward-looking
statements, whether as a result of new information, future events
or otherwise. More information about potential factors that could
affect TXCO�s operating and financial results is included in TXCO's
annual report on Form 10-K for the year ended December 31, 2007,
and its Form 10-Q for the quarter ended September 30, 2008. These
reports and all previously filed documents are on file at the
Securities and Exchange Commission and can be viewed on TXCO's Web
site at www.txco.com. Copies are available from TXCO without
charge.
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