| Debt | 12. Debt Secured Multiple Draw Debtor in Possession Credit Agreement In connection with the Chapter 11 Cases, on March 12, 2015, the Company entered into a Secured Multiple Draw Debtor in Possession Credit Agreement (the “DIP Credit Agreement”), among the Company, as borrower, the direct and indirect subsidiaries of the Company party thereto from time to time, as guarantors, Wilmington Savings Funds Society, FSB, as administrative agent, and collateral agent and the lenders from time to time party thereto. On April 17, 2015, the Bankruptcy Court entered an order (the “Final DIP Order”) authorizing the Debtors to borrow in an aggregate principal amount of up to $78.0 million (the “DIP Facility”) under the DIP Credit Agreement. As of June 30, 2015, $50.7 million was outstanding, which was funded pursuant to the Bankruptcy Court’s order on March 12, 2015 granting interim approval of the DIP Facility and subsequent order on April 17, 2015, granting final approval of the DIP Facility. The Company will pay interest on the principal outstanding balance under the DIP Facility on a monthly basis at a rate of 12.0% per annum, 6.0% to be paid in cash and 6.0% to be paid in kind. Upon occurrence of certain triggering events set forth in the Original Term Sheet, all interest under the DIP Facility will be paid in cash. Such triggering events occur if: (1) the loans under the DIP Facility are repaid in their entirety in cash or (2) the loans under the DIP Facility are repaid, or are required to be repaid, prior to the scheduled maturity date under the DIP Facility (including by voluntary prepayment, mandatory prepayment, upon acceleration or otherwise). The obligations under the DIP Credit Agreement are guaranteed by the Company’s subsidiaries and secured by a continuing security interest in all of Company’s property and assets (subject only to a carve-out, the liens existing on the Petition Date and adequate protection liens) in accordance with section 364(c)(2) of the Bankruptcy Code, including (i) a perfected first-priority security interest in the collateral that is not otherwise encumbered as of the Petition Date (subordinate only to adequate protection liens granted in respect of the secured bank debt), (ii) a perfected junior security interest in all collateral that are subject to valid and perfected liens in existence as of the Petition Date or to valid liens in existence as of the Petition Date and perfected subsequent to the Petition Date as permitted by subsection 546(b) of the Bankruptcy Code, and (iii) a perfected first-priority senior, priming, security interest in the collateral junior only to a carve-out, the permitted liens, the liens securing the secured bank debt and the adequate protection liens granted in respect of the secured bank debt. Except to the extent set forth in the DIP Credit Agreement and any Bankruptcy Court orders entered or to be entered in connection therewith, the liens securing the Company’s secured bank debt shall be senior in priority to the liens securing the Company’s obligations under the DIP Credit Agreement. The Company anticipates using the proceeds of the DIP Facility primarily for (1) purposes permitted by orders of the Bankruptcy Court, including ongoing debtor-in-possession working capital purposes, (2) the payment of fees, costs and expenses, and (3) other general corporate purposes, in each case, only to the extent permitted under applicable law, under or as permitted by the DIP Credit Agreement, the orders of the Bankruptcy Court, and in accordance with the approved budget. The DIP Credit Agreement contains certain customary and industry/Company-specific representations, covenants, indemnifications and events of default. Events of default include, but are not limited to, payment defaults, covenant defaults and certain bankruptcy-related defaults. The financial and non-financial covenants include, but are not limited to, the covenant testing the Reserve Tail (as defined in the DIP Credit Agreement), the prohibited variance covenant testing the “Total Operating Disbursements”, “Total Ounces of Gold Sold”, “Total Ounces of Gold Equivalent Sold” and “Total Monthly Ounces of Gold Produced” line items on the approved budget, and the covenant on the Hycroft Demonstration Plant (as defined in the DIP Credit Agreement). The Reserve Tail covenant requires the Company to maintain a minimum Reserve Tail of at least 600,000 ounces of gold equivalent on the end of each quarter falling after the closing of the DIP Credit Agreement. The Total Operating Disbursements covenant requires the Company to make disbursements in accordance with a budget approved by the lenders under the DIP Facility (generally subject to a 10% permitted variance over budget). The Total Ounces of Gold Sold, Total Ounces of Gold Equivalent Sold and Total Monthly Ounces of Gold Produced covenants require the Company to sell or produce minimum amounts of gold or equivalent ounces (generally subject to a 10% permitted variance under budget). The Hycroft Demonstration Plant covenant requires the Company to construct and operate a temporary demonstration plant related to the sulfide mill expansion project at the Company’s Hycroft Mine. As discussed in Note 3 - Chapter 11 Bankruptcy Filing, the Company was not able to comply with several of the covenants in the DIP Credit Agreement. However, the Company has obtained waivers from the majority DIP lenders, for certain defaults or anticipated defaults, in connection with the Current and Anticipated Waivers (the “Retractable Waivers”). In addition, the majority DIP lenders have agreed to waive, but subject to the retraction, termination and/or withdrawal of such waiver upon notice by the majority DIP lenders, any prospective default, in connection with, among other things, the Company’s failure (x) to deliver any update to the approved budget solely as a result of the delayed approval by the majority DIP lenders of such update and (y) to meet the “Total Ounces Gold Sold Covenant,” the “Total Ounces Gold Equivalent Sold Covenant” and “Total Monthly Gold Produced Covenant” with respect to the test periods beyond those covered by the Current and Anticipated Waivers. If the Company is unable to comply with, or obtain a waiver from the majority DIP lenders of, any of the other covenants contained in the DIP Credit Agreement, or the majority DIP lenders retract any of the Retractable Waivers, there could be a default under the terms of such agreement, which could result in an acceleration of repayment and prevent the Company from borrowing additional funds under the DIP Credit Agreement. The Company is dependent on a financial restructuring to have any possibility to continue as a going concern. If the Company is unable to maintain compliance with the covenants (or obtain waivers for non-compliance) contained in the DIP Credit Agreement the Company’s ability to successfully recapitalize its balance sheet and emerge from bankruptcy significantly decreases and may not be possible. The Initial Consenting Noteholders, and/or certain affiliates, and/or related funds or vehicles of the Initial Consenting Noteholders have agreed to provide a backstop to the commitments in respect of the DIP Facility to the extent there is a shortfall (in such capacity, collectively, the “Backstop DIP Lenders”) in exchange for the put option payments described below and in the Original Term Sheet. Each of the Backstop DIP Lenders shall receive its pro rata portion of a non-refundable backstop put option payment of $2.34 million ( 3.0% of the $78.0 million commitment under the DIP Facility) payable in the form of the new second lien convertible term loan credit facility described above or, subject to the conditions set forth in the Original Term Sheet, in cash. In addition, the Company paid to the lenders under the DIP Facility a non-refundable upfront cash put option payment on a pro rata basis in the aggregate amount of $0.78 million ( 1.0% of the $78.0 million commitment under the DIP Facility) upon the initial funding of the DIP Facility on March 12, 2015. The Company shall also pay to lenders under the DIP Facility a non-refundable upfront put option payment payable in the aggregate amount of $3.12 million ( 4.0% of the $78.0 million commitment under the DIP Facility) in the form of the new second lien convertible term loans or, subject to certain conditions set forth in the Original Term Sheet, in cash. The maturity date of the DIP Credit Agreement is March 12, 2016, one year from the March 12, 2015, execution of the DIP Credit Agreement. The DIP Credit Agreement and DIP Facility shall terminate upon the earlier to occur of (a) the date of acceleration of the term loans under the DIP Credit Agreement and the termination of the commitment available under the DIP Facility upon an event of default, (b) the date of consummation of any sale of all or substantially all of the assets of the Company pursuant to Bankruptcy Code section 363, (c) the effective date of the Amended Reorganization Plan and (d) March 12, 2016. As outlined in the Amended Disclosure Statement the DIP Facility, pursuant to the Amended and Restated Restructuring Support Agreement, is to be satisfied in cash upon the effective date of the Amended Reorganization Plan. On July 23, 2015, the Debtors obtained an Exit Facility Commitment Letter from the Exit Facility Lenders to secure the financing necessary for the consummation of the Amended Restructuring Transaction contemplated under the Amended and Restated Restructuring Support Agreement and the Amended Reorganization Plan. Pursuant to the Exit Facility Commitment Letter, and subject to the terms and conditions thereof, the Exit Facility Lenders have agreed to the purchase of new second lien convertible debt (the “New Second Lien Convertible Notes”) in the reorganized Company in an amount such that the initial principal amount of the New Second Lien Convertible Notes will not exceed $80 million . In consideration for the Company’s right to call the commitments of the Exit Facility Lenders to purchase the New Second Lien Convertible Notes, the Company shall be required to make a non-refundable put option payment to the Exit Facility Lenders equal to $5 million (the “Exit Facility Put Option Payment”). The Debtors shall satisfy their obligation to pay the Exit Facility Put Option Payment on the effective date of the Amended Reorganization Plan through the issuance of New Second Lien Convertible Notes. The New Second Lien Convertible Notes will mature on the date that is 5 years after the effective date of the Amended Reorganization Plan and bear interest at a rate of 15% per annum, payable in kind on a quarterly basis. The New Second Lien Convertible Notes (including all principal (including all interest that has been added to the principal of the New Second Lien Convertible Notes) and all accrued and unpaid interest) shall be convertible at an initial conversion price that is equal to the equity value of a share of new common stock as of the effective date of the Amended Reorganization Plan, as determined by the Company and the Exit Facility Lenders, subject to anti-dilution protection. At any time and from time to time, each holder of New Second Lien Convertible Notes shall have the right to convert all or any portion of the New Second Lien Convertible Notes (including all principal (including all interest that has been added to the principal of the New Second Lien Convertible Notes) and all accrued and unpaid interest) at such holder’s option into a number of shares of new common stock equal to the amount of New Second Lien Convertible Notes being converted by such holder (including all principal (including all interest that has been added to the principal of the New Second Lien Convertible Notes) and all accrued and unpaid interest being converted), divided by the conversion price then in effect. If (a) any Debtor enters into an agreement (including, without limitation, any agreement in principle, letter of intent, memorandum of understanding or definitive agreement) with respect to any alternative transaction, (b) the Bankruptcy Court approves or authorizes any alternative transaction with respect to any of the Debtors or (c) any Debtor consummates any alternative transaction, in any such case described in clause (a), clause (b) or clause (c) of this paragraph, at any time (x) prior to the termination of the Exit Facility Commitment Letter in accordance with the terms thereof or (y) within twelve (12) months following the termination of the Exit Facility Commitment Letter, then the Debtors will pay to the Exit Facility Lenders liquidated damages in cash in the aggregate amount of $3 million. The Exit Facility Commitment Letter may be terminated upon the occurrence of certain events and certain breaches by the parties under the Exit Facility Commitment Letter. Debt Covenants In addition to those which are contained in the DIP Credit Agreement (discussed above), the Company’s debt agreements entered into prior to the Petition Date (collectively the “Pre-Petition Debt Agreements”) contain representations and warranties, events of default, and covenants that are customary for agreements of such types. The Company’s Pre-Petition Debt Agreements contain cross-default and cross-acceleration clauses, which mean that an event of default or covenant violation under any of the Company’s debt agreements may result in the acceleration of substantially all of its outstanding debt. The commencement of the Chapter 11 Cases discussed in Note 3 - Chapter 11 Bankruptcy Filing constituted an event of default under the Company’s Pre-Petition Debt Agreements and, accordingly, as of June 30, 2015 and December 31, 2014 , the Company has classified its debt balances within Debt, current and Liabilities subject to compromise . Debt Balances The following table summarizes the components of debt (in thousands): Description Stated Maturity June 30, 2015 December 31, 2014 Debt, current: Capital lease and term loan obligations 2015 to December 2020 $ 6,593 $ 146,489 (1) Revolving Credit Agreement April 2016 64,950 31,000 DIP Credit Agreement Variable - See terms above 50,706 — 8.75% Senior Notes (2) June 2019 — 344,800 Term and Security Deposit loan 2015 to March 2022 — 17,974 (3) $ 122,249 $ 540,263 Liabilities subject to compromise: 8.75% Senior Notes (2) June 2019 $ 316,640 $ — Capital lease and term loan obligations 2015 to March 2022 118,984 — Term and Security Deposit Loan 2015 to March 2022 17,974 (3) — $ 453,598 $ — (1) Includes borrowings of $10.2 million as of December 31, 2014 for mine equipment included in Assets held for sale . (2) Prior to the event of default, effective interest rate of 8.375% after cross currency swap. See Note 20 - Derivative Instruments for additional detail. (3) E ntire borrowing is attributable to the third rope shovel. Debt, Current Revolving Credit Agreement In May 2014, the Company entered into the Revolver which amended and restated the December 2013 Second Amended and Restated Credit Agreement (the “Previous Revolver”). The Revolver was collateralized by substantially all of the Company’s assets and, as such, this balance is excluded from Liabilities subject to compromise . Prior amounts available to the Company under the Revolver were determined by a Borrowing Base (as defined in the Revolver) that made up to $75.0 million available to the Company depending upon 80% of the net realizable value of the gold and silver in the Company’s ore on leach pads, in-process, and finished goods inventories less estimated remaining processing and selling costs. As of June 30, 2015 , the Revolver balance was $65.0 million , which resulted from the full $75.0 million of capacity being drawn or committed through letters of credit as of the Petition Date and subsequently reduced by the $10.0 million in restricted cash collateral held (and realized) by the lenders to the Revolver (as discussed in Note 9 - Restricted Cash ). Borrowings under the Revolver bear interest per annum at either LIBOR plus 4.5% or at an Alternate Base Rate, as defined in the Revolver, plus 3.5% . Financial letters of credit and non-financial letters of credit bear interest per annum at 4.50% and 2.70% , respectively. In December 2013, when the Company entered into the Previous Revolver, which amended and restated the October 2012 Amended and Restated Credit Agreement (the “2012 Revolver”), two lenders under the 2012 Revolver exited the credit facility. These two lenders were holders of a portion of the Notes cross currency swap which, in December 2013, ceased being collateralized by the security they held as lenders to the 2012 Revolver. As a result, the Company was required to fully collateralize any mark-to-market liability position for 22% of the cross currency swap, which was the portion held by these two lenders, with cash, letters of credit, or a combination of the two. As of the Petition Date, the Company had remitted $3.6 million of cash and issued $18.5 million of financial letters of credit to collateralize the mark-to-market liability position of 22% of the cross currency swap which was realized by counterparties as discussed in Note 3 - Chapter 11 Bankruptcy Filing and Note 20 - Derivative Instruments . Debt Subject to Compromise Capital Lease and Term Loan Obligations The Company’s capital lease and term loan obligations are for the purchase of mining equipment, bear interest at rates between 4% - 7% per annum, and primarily carry 60 - 84 -month terms. As discussed in Note 3 - Chapter 11 Bankruptcy Filing, the Company ceased paying principal and interest on the Delinquent Capital Leases after June 28, 2015 and does not expect to make further payments during the Chapter 11 Cases on these obligations. As there is uncertainty surrounding the value that a third-party may attribute to the underlying security on these Delinquent Capital Leases, they have been classified as Liabilities subject to compromise . The Company continues to make payments on a few of the capital lease obligations, including three dozers, two graders, and an excavator (the “Current Lease Obligations”) and intends to continue to do so. The Current Lease Obligations are classified as Debt - current. The following is a summary of the stated scheduled future minimum payments under both the Delinquent Capital Leases and the Current Lease Obligations as of June 30, 2015 (in thousands): Minimum Lease Payments Fiscal Year Current Lease Obligations Delinquent Capital Leases 2015 $ 2,334 $ 31,724 2016 3,453 40,404 2017 1,147 31,844 2018 — 11,898 2019 — 8,578 Thereafter — 6,673 Less: interest (341 ) (12,137 ) Net minimum capital lease payments 6,593 118,984 Senior Notes In May 2012, the Company issued CDN $400.0 million of uncollateralized Notes which pay interest semi-annually at the rate of 8.75% per annum. Concurrent with the issuance of the Notes, the Company entered into a cross currency swap agreement based upon a notional amount of $400.4 million (the gross proceeds to the Company from the issuance) which fixed the interest rate at 8.375% prior to the event of default and early termination of the cross currency swap described in Note 20 - Derivative Instruments . The Notes balance was $316.6 million based upon the U.S. dollar to Canadian dollar exchange rate on the Petition Date, decreasing from the December 31, 2014 balance of $344.8 million which resulted in a $28.2 million gain (included in Other, net ) during the six months ended June 30, 2015 . The Notes, which are unsecured, are guaranteed by most of the Company’s currently wholly-owned subsidiaries, including Hycroft Resources & Development Inc., which owns the Hycroft Mine and produces gold and silver, and are included within Liabilities subject to compromise . Term and Security Deposit Loan Agreement In March 2013, the Company entered into a Term and Security Deposit Loan Agreement (the “Loan Agreement”) related to the purchase of three electric rope shovels. Under the Loan Agreement, the Company was made available up to $60.0 million ( $20.0 million for each shovel) for scheduled advance security deposit payments pursuant to purchase agreements for the electric rope shovels and up to $90.0 million ( $30.0 million for each shovel) in term loan financing to fund the purchase of the electric rope shovels once commissioned at the Hycroft Mine. Under the Loan Agreement, as electric rope shovels were commissioned, amounts previously advanced to the Company for security deposits, together with the remaining purchase price of each electric rope shovel, were converted to term loan obligations. During 2013, the Company commissioned two (of the three) electric rope shovels and, as such, amounts borrowed for these two shovels are included in capital lease and term loan obligations. Advances for security deposits under the Loan Agreement bear an interest rate determined by an applicable rate plus the three month LIBOR, which approximated 4.7% at June 30, 2015 , although the Company ceased recording interest on this obligation on the Petition Date, as noted below. The two executed term loan obligations for the commissioned shovels carry seven year terms and bear interest at a fixed rate of approximately 5.7% . The $18.0 million of outstanding principal for the Loan Agreement relates to advances for the purchase of the third electric rope shovel (which is included in Plant, Equipment, and Mine Development, Net ). Although borrowings under the Loan Agreement are secured by the third electric rope shovel, the Company (1) believes the value attributable by a third-party to the third electric rope shovel may be less than the outstanding principal and accrued interest of $1.6 million (which indicates this liability is under-secured) and (2) expects to compromise on this agreement during the bankruptcy process and, accordingly, this obligation is included within Liabilities subject to compromise . Interest Expense and Interest Payable Effective as of the Petition Date, the Company ceased recording interest expense on certain outstanding pre-petition debt classified within Liabilities subject to compromise as interest owed after the Petition Date on such obligations is not expected to be paid during the Chapter 11 Cases and is not expected to be an allowed claim. During each of the three and six months ended June 30, 2015 , contractual interest expense which would have been accrued absent the Chapter 11 Cases, but has not been recorded in these Condensed Consolidated Financial Statements, totaled approximately $8.4 million and $10.5 million for the Notes and $0.3 million and $0.4 million for the Loan Agreement (for the third electric rope shovel), respectively. The following table summarizes the components of recorded interest expense (in thousands): Three months ended June 30, Six months ended June 30, 2015 2014 2015 2014 8.75% Senior Notes (1) $ — $ 8,360 $ 4,667 $ 16,629 Capital lease and term loan obligations 1,644 2,275 3,290 3,819 DIP Credit Agreement interest and issuance costs 1,190 — 2,242 — Revolver interest and standby fees 728 313 1,425 516 Amortization of debt issuance costs 226 675 815 1,308 Term and Security Deposit loan — 224 177 445 Other interest expense 580 123 625 282 Capitalized interest — (641 ) — (5,883 ) $ 4,368 $ 11,329 $ 13,241 $ 17,116 (1) Prior to the event of default, effective interest rate of 8.375% after cross currency swap. See Note 20 - Derivative Instruments for additional detail. The following table summarizes the components of interest payable (in thousands): Description June 30, 2015 Interest payable: Revolving Credit Agreement $ 801 Liabilities subject to compromise: 8.75% Senior Notes $ 7,515 Term and Security Deposit loan 1,621 $ 9,136 |
