Saratoga Resources Inc. (NYSE MKT: SARA) has entered into a first lien forbearance agreement with all of the holders of notes in the amount of $54.6 million issued under that certain indenture dated as of Nov. 22, 2013, by and among the company and its subsidiaries and The Bank of New York Mellon Trust Company NA, as trustee; and a second lien forbearance agreement with 75% or more of the holders of notes in the amount of $125.2 million issued under that certain Indenture dated as of July 12, 2011, as supplemented or amended, by and among the company and its subsidiaries and The Bank of New York Mellon Trust Company NA, as trustee.
Pursuant to the terms of the first lien forbearance agreement, the holders of the first lien notes will forbear from exercising any rights or remedies that the first lien lenders or the first lien trustee may have against the company under the first lien indenture until the earlier of March 16, or the occurrence of an event of default within the meaning of the first lien forbearance agreement.
Under the terms of the first lien forbearance agreement, Saratoga will pay, by Feb. 2, the accrued and unpaid interest, with interest at the default rate, originally scheduled to be paid on Dec. 31, 2014.
The second lien forbearance agreement is substantially identical to the first lien forbearance agreement except that Saratoga is not required under the second lien forbearance agreement to pay, during the forbearance period, the scheduled Jan. 1 interest payment.
Under the second lien indenture, action by holders of at least 25% in aggregate principal amount of the second lien notes is required to declare the notes due and payable under the second lien indenture. The second lien forbearance agreement has been executed by holders of more than 75% in principal amount of the second lien notes. Those holders have agreed that they will not take any steps to enforce any rights of the second lien trustee or the second lien lenders during the forbearance period.
The interest payments scheduled to be made on Dec. 31, 2014, with respect to the first lien notes, and Jan. 1, with respect to the second lien notes, were not made on those dates. However, the interest payments are not in default under the applicable indentures until 30 days after the scheduled payment dates.
With the steep drop in oil prices over recent months, Saratoga is focused on implementing cost reductions to support operations pending a rebound in prices. Cost savings have already been realized through such efforts, with further cuts targeted. The company is focused on working with its lenders to address operational and liquidity concerns with a view to improving profitability and ultimately repaying its outstanding notes.