the London interbank market LIBO Rate or a rate based on the greater o - PDF document

1 the London interbank market (‘‘LIBO Rate
the London interbank market (‘‘LIBO Rate’’), or a rate based on the greater of the prime rate announced by the global administrative agent or the federal funds rate plus 1  2 of 1%. Loans under the Canadian Credit Facility will bear interest at a rate that may be based on the base rate announced by the Canadian administrative agent, the LIBO Rate, a rate based on the greater of the rate for U.S. dollar denominated loans made by the Canadian administrative agent and the federal funds rate plus 1  2 of 1%, or a banker’s acceptance rate. The Credit Facilities include various covenants and restrictive provisions that place limitations on certain types of activities, including restrictions or requirements with respect to additional debt, liens, asset sales, hedging activities, investments, dividends, mergers, and acquisitions, and also include financial covenants. If we were to fail to perform our obligations under these covenants or other covenants and obligations, it could cause an event of default and the Credit Facilities could be terminated and amounts outstanding could be declared immediately due and payable by the lenders, subject to notice and cure periods in certain cases. Such events of default include non-payment, breach of warranty, non-performance of financial covenants, default on other indebtedness, certain pension plan events, certain adverse judgments, change of control, a failure of the liens securing the Credit Facilities, and an event of default under the Canadian Credit Facility. In addition, bankruptcy and insolvency events with respect to Forest or certain of its subsidiaries will result in an automatic acceleration of the indebtedness under the Credit Facilities. An acceleration of our indebtedness under the Credit Facilities could in turn result in an event of default under the indentures for our senior notes, which in turn could result in the acceleration of the senior notes. For example, the indentures for our 8% senior notes due 2011 and our 7 3  4 % senior notes due 2014 include as events of default, among others, a default on indebtedness that results in the acceleration of indebtedness in an amount greater than $10 million; each of the indentures for our 8 1  2 % senior notes due 2014 and our 7 1  4 % senior notes due 2019 include a similar event of default if the amount involved is greater than $25 million. The Credit Facilities are collateralized by a portion of our assets. We are required to mortgage and grant a security interest in the greater of 75% of the present value of our consolidated proved oil and gas properties, or 1.875 multiplied by the allocated U.S. borrowing base. We also have pledged the stock of several subsidiaries to the lenders to secure the Credit Facilities. Under certain circumstances, we could be obligated to pledge additional assets as collateral. If Forest’s corporate credit ratings assigned by Moody’s and S&P improve and meet pre-established levels, the collateral requirements would not apply and, at our request, the banks would release their liens and security interests on our properties. In addition to these collateral requirements, one of our subsidiaries, Forest Oil Permian Corporation, is a subsidiary guarantor of the Credit Facilities. The lending group under our U.S. Credit Facility includes the following institutions: JPMorgan Chase Bank, N.A. (‘‘JPMorgan Chase’’), Bank of America, N.A. (‘‘Bank of America’’), Citibank, N.A. (‘‘Citibank’’), BNP Paribas, BMO Capital Markets Financing, Inc. (‘‘BMO’’), Credit Suisse, Cayman Islands Branch (‘‘Credit Suisse’’), Deutsche Bank AG New York Branch (‘‘Deutsche Bank’’), U.S. Bank National Association, The Bank of Nova Scotia (‘‘Bank of Nova Scotia’’), Fortis Capital Corp. (‘‘Fortis’’), Bank of Scotland plc, UBS Loan Finance LLC, Compass Bank, Wells Fargo Bank, N.A. (‘‘Wells Fargo’’), Mizuho Corporate Bank, Ltd., Toronto Dominion (Texas) LLC, Barclays Bank PLC (‘‘Barclays’’), Bank of Oklahoma N.A., Export Development Canada, Guaranty Bank and Trust Company, Union Bank of California, N.A., and ABN Amro Bank N.V. The lenders under our Canadian Credit Facility include: JPMorgan Chase Bank, N.A., Toronto Branch (‘‘JPM Toronto’’, with JPMorgan Chase, collectively ‘‘JPMorgan’’), Bank of Montreal, The Toronto-Dominion Bank (together with Toronto Dominion (Texas) LLC, ‘‘Toronto Dominion’’), Bank of America, N.A., Canada Branch, and Citibank, N.A., Canadian Branch. Of the $1.8 billion total commitments under the Credit Facilities, JPMorgan, Bank of America, BNP Paribas, Credit Suisse, Deutsche Bank, Bank of Nova Scotia, Toronto Dominion, and Wells Fargo hold approximately 62% of the total commitments, with each of 47