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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): August 31, 2006
CRIMSON EXPLORATION INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 000-21644 20-3037840
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
480 N. Sam Houston Parkway E., Suite 300, Houston Texas 77060
(Address of Principal Executive Offices)
(281) 820-1919
(Registrant's telephone number, including area code)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 14d-2(b))
[] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Item 1.01 Entry into a Material Definitive Agreement.
Effective August 31, 2006, Crimson Exploration Inc. (the "Company") entered
into a $150 million subordinate credit facility with Wells Fargo Energy Capital,
Inc. (the "Subordinate Credit Agreement"). Initial availability under the
Subordinate Credit Agreement is $15 million. No borrowings under the Subordinate
Credit Agreement were made at closing. The Subordinate Credit Agreement is
attached as Exhibit 10.1, and the press release announcing the Subordinate
Credit Agreement is attached as Exhibit 99.1, and each is hereby incorporated
herein by reference.
The facility will be secured on a subordinated basis by a lien on all the
assets of the Company and its subsidiaries, as well as a security interest in
the stock of all the Company's subsidiaries. The obligations under the
Subordinate Credit Agreement will be subordinate and junior to those under the
Company's senior secured revolving credit facility with Wells Fargo Bank, N.A.
(the "Senior Credit Agreement").
The Subordinate Credit Agreement has a term of three-and-a-half years, and
all principal amounts, together with all accrued and unpaid interest, will be
due and payable in full on February 28, 2010. Proceeds from extensions of credit
under the facility will be for acquisitions of oil and gas properties and for
general corporate purposes.
Advances under the facility will be in the form of either base rate loans
or Eurodollar loans. The interest rate on the base rate loans fluctuates based
upon the higher of (1) the lender's "prime rate" and (2) the Federal Funds rate,
plus a margin of 0.50%, plus a margin of 3.75%. The interest rate on the
Eurodollar loans fluctuates based upon the rate at which Eurodollar deposits in
the London Interbank market ("Libor") are quoted for the maturity selected, plus
a margin of 5.25%. Eurodollar loans of one, three and six months may be selected
by the Company. A commitment fee of 0.50% on the unused portion of the borrowing
base will accrue, and be payable quarterly in arrears. Repayments made during
the first twelve months of the term of the Subordinate Credit Agreement will be
subject to a 1% prepayment penalty. Once repaid, amounts under the Subordinate
Credit Agreement may not be re-borrowed.
Under the Subordinate Credit Agreement, borrowings are at the discretion of
the Company. However, once the Company's outstanding balance under the Senior
Credit Agreement reaches $10 million, the Company's next $10 million in
borrowings must be funded under the Subordinate Credit Agreement.
The Subordinate Credit Agreement includes usual and customary affirmative
covenants for credit facilities of this type and size, as well as customary
negative covenants, including, among others, limitations on liens, hedging,
mergers, asset sales or dispositions, payments of dividends, incurrence of
additional indebtedness, certain leases and investments outside of the ordinary
course of business. The Subordinate Credit Agreement also requires the Company
to maintain a ratio of current assets to current liabilities of at least 0.85 to
1.0, an interest coverage ratio of EBITDAX (earnings before interest, taxes,
depreciation and amortization and exploration expense) to cash interest expense
of 2.55 to 1.0 and a tangible net worth of at least $45 million, subject to
adjustment based on future results of operations and any sales of equity
securities. EBITDAX and tangible net worth are calculated without consideration
of unrealized gains and losses related to stock derivatives accounted for under
variable accounting rules or to commodity hedges. Generally, the restrictive
covenants are either no more restrictive or slightly less restrictive than those
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provided for in the Senior Credit Agreement. One additional covenant provided
for specifically in the Subordinate Credit Agreement is an asset coverage test
whereby the Company must maintain a ratio of total proved reserves, defined as
Total Proved PW10%, to total debt committed under the Subordinate Credit
Agreement and the Senior Credit Agreement of 1.50 to 1.00. At least 60% of Total
Proved PW10% must consist of proved developed producing reserves.
In connection with the Subordinate Credit Agreement, the Company amended
its Senior Credit Agreement, primarily to provide for the Subordinate Credit
Agreement but also to provide for a redetermined borrowing base of $25 million
and to extend the maturity date of the facility to August 31, 2009. The
amendment to the Senior Credit Agreement is attached as Exhibit 10.2, and the
press release announcing the amendment to the Senior Credit Agreement is
attached as Exhibit 99.1, and each is hereby incorporated herein by reference.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation Under
an Off-Balance Sheet Arrangement of a Registrant
See Item 1.01 of this Current Report on Form 8-K, which Items are
incorporated herein by this reference, for a description of the Subordinate
Credit Agreement.
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Item 9.01 Financial Statements and Exhibits.
Exhibits
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Exhibit Description
Number
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10.1 Subordinate Credit Agreement, dated as of August 31, 2006, among
Crimson Exploration Inc., Wells Fargo Energy Capital, Inc., as
agent and a lender, and each lender from time to time party
thereto.
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10.2 Second Amendment to Credit Agreement, dated as of August 31,
2006, among Crimson Exploration Inc., Crimson Exploration
Operating, Inc. LTW Pipeline Co., and Wells Fargo Bank, N.A.
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99.1 Press Release dated September 6, 2006.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
CRIMSON EXPLORATION INC.
Date: September 6, 2006 /s/ E. Joseph Grady
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E. Joseph Grady
Senior Vice President and Chief
Financial Officer
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Exhibit Index
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Exhibit Description
Number
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10.1 Subordinate Credit Agreement, dated as of August 31, 2006, among
Crimson Exploration Inc., Wells Fargo Energy Capital, Inc., as
agent and a lender, and each lender from time to time party
thereto.
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10.2 Second Amendment to Credit Agreement, dated as of August 31,
2006, among Crimson Exploration Inc., Crimson Exploration
Operating, Inc. LTW Pipeline Co., and Wells Fargo Bank, N.A.
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99.1 Press Release dated September 6, 2006.
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