Long-term Borrowings |
3 Months Ended |
|---|---|
Mar. 31, 2019 | |
| Debt Disclosure [Abstract] | |
| Long-term Borrowings |
NOTE 9 — LONG-TERM BORROWINGS
On September 28, 2018 (the “Closing Date”), Tellurian Production Holdings LLC (“Production Holdings”), our wholly owned subsidiary, entered into a three-year senior secured term loan credit agreement (the “Term Loan”) in an aggregate principal amount of $60.0 million at a price of 99% of par, resulting in an original issue discount of $0.6 million. Fees of $2.6 million were capitalized as deferred financing costs. The discount and fees are being amortized over the term of the Term Loan on a straight-line basis. At March 31, 2019, the outstanding principal amount of the Term Loan was $60.0 million and the unamortized discount and deferred financing costs were $2.7 million.
Our use of proceeds from the Term Loan is predominantly restricted to capital expenditures associated with certain development and drilling activities and fees related to the transaction itself and is presented within non-current restricted cash on our Condensed Consolidated Balance Sheets. At March 31, 2019, unused proceeds from the Term Loan classified as non-current restricted cash were $27.8 million.
We have the right, but not the obligation, to make voluntary principal payments starting six months following the Closing Date in a minimum amount of $5 million or any integral multiples of $1 million in excess thereof. If no voluntary principal payments are made, the principal amount, together with any accrued interest, is payable at the maturity date of September 28, 2021.
The Term Loan can be terminated early with an early termination payment equal to the outstanding principal plus accrued interest. If the Term Loan is terminated within 12 months of the Closing Date, an early termination fee equal to 1% of the outstanding principal is required. Amounts borrowed under the Term Loan bear interest at a variable rate (three-month LIBOR) plus an applicable margin. The applicable margin is 5% through the end of the first year following the Closing Date, 7% through the end of the second year following the Closing Date and 8% thereafter. For the three months ended March 31, 2019, our total interest expense associated with the Term Loan was $1.2 million.
Guarantors and Covenants
Amounts borrowed under the Term Loan are guaranteed by Tellurian Inc. and each of Production Holdings’ subsidiaries. The Term Loan is collateralized by a first priority lien on all assets of Production Holdings and its subsidiaries, including domestic properties described in Note 2, Property, Plant and Equipment. The Term Loan contains specific financial covenants and as of March 31, 2019, we remained in compliance with such covenants under the Term Loan. For details of hedging transactions, as at and for the period ended March 31, 2019, entered into as required by the Term Loan, refer to Note 8, Financial Instruments.
Fair Value
As of March 31, 2019, the carrying value of the Term Loan approximated fair value. The Term Loan is a Level 3 instrument in the fair value hierarchy. The Level 3 estimated fair value approximates the carrying value because the interest rates are variable and reflective of market rates, and the debt may be repaid, in full or in part, at any time with minimum penalty.
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