SandRidge prices upsized offering of $1.25B of senior secured notes

SandRidge Energy Inc. (NYSE: SD) has priced its private offering of $1 billion in aggregate principal amount of senior secured notes due 2020. The offering size was increased to $1.25 billion from $1 billion. 

The notes will bear interest at a rate of 8.75% per annum and will be issued at par. The notes will be secured on a second lien priority basis and guaranteed by each of the company's subsidiaries that guarantee the company's revolving credit facility.

The issuance of the notes and the effectiveness of the company's revised fully committed $500 million borrowing base first-lien revolving credit facility, which are mutually conditioned on each other, are expected to close on June 10.

The company intends to use a portion of the net proceeds from this offering to repay all borrowings under its existing revolving credit facility and for general corporate purposes.

Regarding the offering, Global Hunter Securities commented, “SD has priced $1.25B of senior secured notes due 2020 at par with a coupon of 8.75%. In conjunction with the offering, SD's borrowing base is revised to $500 MM from $900 MM. The additional liquidity gives SD more running room as the fall borrowing base redetermination approaches, and the 2020 maturity gives SD additional time for oil prices to recover.

"Liquidity improves to $1.4 B, but the new notes will carry an interest burden of ~$100 MM/year. Immediate use of proceeds is to repay SD's draw on its borrowing base ($175 MM at 3/31), and we think excess liquidity could be used to repurchase other outstanding debt, which is currently trading at a meaningful discount.”

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