Legacy Reserves Inc (NASDAQ: LGCY) announced in a press release early this morning, that it has reached forbearance agreements with lenders, leading to strong gains in the value of the stock. In fact, at the time of writing this article (10:22), the stock is up more than 50% and has the potential to continue upward.
LGCY Announces Forbearance Agreements
In the announcement made this morning, Legacy Reserves said that the forbearance agreements were entered into with lenders under its reserve based revolving credit facility as well as its lenders under its second lien term loan.
The loans included in the revolving credit facility came to maturity on May 31, 2019. Moreover, the company announced today that it has elected not to make interest payments on its outstanding 8% senior notes due 2020, 6.625% senior notes due 2021, and 8% convertible senior notes due 2023.
As of now, the decision by LGCY not to make interest payments is not a default. However, should payments not be made within 30 days, the event would be considered a default.
2023 (collectively, the “Unsecured Notes”). Non-payment of this interest is not an event of default under the indentures governing the Unsecured Notes, but would become an event of default if the payments are not made within 30 days.
However, there’s some good news here. Under the forbearance agreements, all lenders have agreed not to exercise any remedies available to them in any event associated with a default arising from the maturity of the revolving credit facility on May 31. Moreover, the lenders have agreed not to exercise remedies associated with LGCY not making June Interest Payments.
Legacy also said that the Second Lien Lenders have agreed to further extend the waiver of the covenant that required the company to deliver audited financial statements without a going concern or like qualification or exception. This forbearance agreement extends trhoguh June 7, 2019.
The company also reminded investors that it is currently in the process of examining strategic alternatives, including but not limited to potential mergers or the sale of the company.
Why This News Is So Exciting
At the end of the day, it’s clear that LGCY is in a bit of a financial bind. However, to remedy this issue, the company is working to find strategic alternatives that will help it get back on its feet and provide value to investors.
However, the exploration of strategic alternatives is a process that takes time, and with bills coming due, time seemed to be running out. Nonetheless, with the forbearance agreements announced today, the company has more of a runway to find partners, funding or buyers of assets or the company itself. All in all, this is great news for the company and its investors.
What We’ll Be Watching For Ahead
While the forbearance agreements announced today do give the company a bit more of a runway, they are not going to be an end-all-be-all. The company will need to find strategic alternatives. So, we’re watching the exploration process and are excited to see the result.
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What Do You Think?
Where do you think LGCY is headed moving forward? Join the discussion in the comments below!
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