Quest Resource Corp. has chosen Guggenheim Capital Markets to lead its new $200 million credit instead of a traditional bank because the boutique was able to put together a new deal faster than other financial institutions it approached. Guggenheim Corporate Funding, a subsidiary of Guggenheim Capital Markets, led Quest Resource's new $200 million credit facility, which was completed at the same time as the closing of a private sale of common stock.
The deal consists of a five-year, $50 million revolver; a five-year, $50 million first-lien term loan; and a six-year, $100 million second-lien term loan. The revolving credit facility is priced at LIBOR plus 1 3 /4%. The first lien and second lien are priced at LIBOR plus 3 1/4% and LIBOR plus 6%, respectively. The credit facility replaces a $20 million revolver and a $124 million term loan, both priced LIBOR plus 5%. UBS was the lead on the previous credit line.
David Grose, cfo of Quest Resources, said Guggenheim was able to put a deal together in time for an equity offering, which the company wanted to close at the same time as the new credit. "Timeliness is everything to us," said Grose. "Some banks take forever to do due diligence." Guggenheim wrapped the deal up in two weeks. Grose said that Guggenheim also offered the best price, but added that all banks it approached offered similar pricing. Guggenheim's ability to do the deal quickly was the deal cincher for the company.
Quest Resource can borrow under the first-lien term loan at any time within 90 days after the closing. The revolving credit facility will be available to the company after it fully draws the first-lien term loan. The second-lien term loan has a 3% pre-payment premium, which decreases 1% each year. It may not be prepaid before Nov. 14, 2006. After Nov. 14, 2009, the company may repay the second-lien term loan at any time without any premium or penalty.
Quest Resource, a natural gas company, used the proceeds from the second-lien loan to refinance its subsidiary Quest Cherokee's credit agreement, to repay promissory notes owed by Quest Cherokee to Cherokee Energy Partners and to buy certain Quest Cherokee units owned by Cherokee Energy Partners. Proceeds from the first-lien and revolving credit facility will be used to fund the company's drilling program and construction projects.