Sundance Energy Inc. warned in a Form 10-Q that there is substantial doubt about the Company’s ability to continue as a going concern within the next twelve months. The Company highlighted that the requirement for Sundance to comply with the June 30, 2020 Asset Coverage Ratio covenant was removed from the Term Loan agreement; “however it is unlikely that the Company would have been able to meet the covenant as of June 30, 2020.” At September 30, 2020, the Company was in breach of the Total Debt to EBITDA Ratio, as well as the Current Ratio under the Revolving Facility, as a result of reclassifying it outstanding debt from long-term to current, “which is an event of default and allows the lenders to call the Company’s Revolving Facility and Term Loan (due to cross-default provisions) to be immediately due and payable.”
Additionally, given the recent decline and continued volatility of commodity prices combined with a scaled back development program, the Company believes “it is probable it will not meet the Asset Coverage Ratio covenant, Total Debt to EBITDA Ratio covenant and Current Ratio covenant and potentially other covenants in its credit facilities at measurement dates during the next 12 months.”
Sundance also warned that it “may be subject to United States Bankruptcy Court proceedings in the near future, which would pose significant risks to our business and to our investors.”
If the Company is unable to complete a restructuring on satisfactory terms, “we may choose to pursue a filing under Chapter 11.”
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