| Item 1.01 | Entry into a Material Definitive Agreement. |
On August 7, 2018, Matador Resources Company (the “Company”) and certain of its subsidiaries (the “Guarantors”) entered into a purchase agreement with Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”), as representative of the several initial purchasers named therein (collectively, the “Initial Purchasers”), pursuant to which the Company agreed to issue and sell $750,000,000 in aggregate principal amount of the Company’s 5.875% Senior Notes due 2026 (the “Notes”). On August 21, 2018, the Company received net proceeds from the issuance and sale of the Notes of $740,000,000, after deducting the Initial Purchasers’ discounts and estimated offering expenses.
Indenture
On August 21, 2018, the Company entered into an Indenture (the “Indenture”) among the Company, the Guarantors and Wells Fargo Bank, National Association, as trustee, governing the terms of the Notes.
Interest and Maturity
The Notes will mature on September 15, 2026, and interest is payable on the Notes semiannually in arrears on each March 15 and September 15. The first interest payment date for the Notes will be March 15, 2019. The Notes are guaranteed on a senior unsecured basis by the Guarantors.
Optional Redemption
At any time prior to September 15, 2021, the Company may redeem up to 35% in aggregate principal amount of Notes at a redemption price of 105.875% of the principal amount thereof, plus accrued and unpaid interest to the redemption date, in an amount not greater than the net proceeds of certain equity offerings so long as the redemption occurs within 180 days of completing such equity offering and at least 65% of the aggregate principal amount of the Notes remains outstanding after such redemption.
In addition, at any time prior to September 15, 2021, the Company may redeem all or part of the Notes for cash at a redemption price equal to 100% of their principal amount plus an applicable make-whole premium and accrued and unpaid interest. On and after September 15, 2021, the Company may redeem all or a part of the Notes at redemption prices (expressed as percentages of principal amount) equal to (i) 104.406% for the twelve-month period beginning on September 15, 2021; (ii) 102.938% for the twelve-month period beginning on September 15, 2022; (iii) 101.469% for the twelve-month period beginning on September 15, 2023; and (iv) 100.000% on September 15, 2024 and at any time thereafter, plus accrued and unpaid interest to the applicable redemption date.
Change of Control
Upon the occurrence of a Change of Control (as defined in the Indenture), unless the Company has exercised its optional redemption right in respect of the Notes, the holders of the Notes will have the right to require the Company to repurchase all or a portion of the Notes at a price equal to 101% of the aggregate principal amount of the Notes, plus any accrued and unpaid interest to the date of purchase.
Certain Covenants
The Indenture restricts the Company’s ability and the ability of certain of its subsidiaries to: (i) incur or guarantee additional debt or issue certain types of preferred stock; (ii) pay dividends on capital stock or redeem, repurchase or retire its capital stock or subordinated indebtedness; (iii) transfer or sell assets; (iv) make certain investments; (v) create certain liens; (vi) enter into agreements that restrict dividends or other payments from its Restricted Subsidiaries (as defined in the Indenture) to the Company; (vii) consolidate, merge or transfer all or substantially all of its assets; (viii) enter into transactions with affiliates; and (ix) create unrestricted subsidiaries. These covenants are subject to a number of important exceptions and qualifications. At any time when the Notes are rated investment grade by both Moody’s Investors Service, Inc. and S&P Global Ratings, many of these covenants will terminate.
