Essential Energy Services Announces Extension and Amendment of Its Credit Facility

CALGARY, Alberta, July 09, 2020 (GLOBE NEWSWIRE) -- Essential Energy Services Ltd. (TSX: ESN) (“Essential” or the “Company”) announces it has entered into an amending agreement to its June 26, 2018 credit facility agreement (together the “Amended Credit Facility”) with a syndicate of lenders comprised of National Bank of Canada, ATB Financial and Canadian Western Bank. The Amended Credit Facility provides Essential an extension of the maturity date of the revolving secured credit facility to June 30, 2022 along with revisions to certain terms and conditions.

Primary Amendments
The primary changes in the Amended Credit Facility include, among others:

• a decrease in the commitment from $50 million to $25 million. The maximum amount that can be drawn is decreased to $15 million during the covenant relief period, as described below;
• creation of a covenant relief period, as described below;
• the equity cure provision has been removed; and
• Essential cannot distribute cash in the form of dividends or implement a normal course issuer bid.

Covenant Relief Period
The covenant relief period is available until December 31, 2021 (the “Covenant Relief Period”) and provides for:

• the amount that can be drawn under the Amended Credit Facility during the Covenant Relief Period is the lesser of $15 million and the borrowing base, as described below;
• the funded debt to capitalization ratio cannot exceed 20%;
• the funded debt to bank EBITDA ratio and the fixed charge coverage ratio covenants will not be tested; and
• addition of a minimum trailing 12-month bank EBITDA covenant of negative $10 million.

Bank EBITDA is calculated net of lease expense related to IFRS 16. The covenant calculation terms are as defined in the Amended Credit Facility.

Essential has the option to terminate the Covenant Relief Period prior to December 31, 2021 and revert to three of the financial covenants in place prior to the amendment, as outlined below.

Borrowing Base
During the Covenant Relief Period, advances under the Amended Credit Facility will be limited to the lesser of $15 million and a borrowing base that is calculated as the aggregate of a percentage of accounts receivable, inventory and certain fixed assets less priority payables.

After the Covenant Relief Period, advances under the Amended Credit Facility will be limited to the lesser of $25 million and a borrowing base that is calculated as the aggregate of a percentage of accounts receivable, inventory and a broader group of fixed assets less priority payables.