APA » Topics » Debt

This excerpt taken from the APA 10-K filed Mar 1, 2007.
We exited 2006 with a debt-to-capitalization ratio of approximately 22 percent, compared to 17 percent at the end of 2005. Yearend 2006 outstanding current and long-term debt totaled $3.8 billion, $1.6 billion higher than yearend 2005. The increase was associated with the issuance of commercial paper in conjunction with $2.4 billion of acquisitions. The Company’s outstanding debt consisted of notes and debentures maturing in the years 2007 through 2096. Approximately $1.8 billion of our total debt is due in 2007. This debt consists of $1.6 billion of commercial paper, that was subsequently reduced with $1.5 billion of long-term debt issued in January 2007, and $170 million of Apache Finance Australia 6.5-percent notes and various money market lines of credit in Argentina and the U.S. The $1.6 billion of commercial paper is fully supported by available borrowing capacity under committed credit facilities which expire in 2011. An additional $100 million in debt matures in 2009 with the remaining $1.9 billion maturing thereafter.
On January 26, 2007, the Company issued $500 million principal amount, $499.5 million net of discount, of senior unsecured 5.625-percent notes maturing January 15, 2017. The Company also issued $1.0 billion principal amount, $993 million net of discount, of senior unsecured 6.0-percent notes maturing January 15, 2037. The notes are redeemable, as a whole or in part, at Apache’s option, subject to a make-whole premium. The proceeds were used to repay a portion of the Company’s outstanding commercial paper and for general corporate purposes. Please refer to Note 5 Debt, Subsequent Debt of Item 15 in this Form 10-K.
In May 2006, the Company amended its existing five-year revolving U.S. credit facility which was scheduled to mature on May 28, 2009. The amendment: (a) extended the maturity to May 28, 2011, (b) increased the size of the facility from $750 million to $1.5 billion, and (c) reduced the facility fees from .08 percent to .06 percent and reduced the margin over LIBOR on loans from .27 percent to .19 percent. The lenders also extended the maturity dates of the $150 million Canadian facility, the $150 million Australian facility and $385 million of the $450 million U.S. credit facility, for an additional year to May 12, 2011 from May 12, 2010. The Company also increased commercial paper availability to $1.95 billion from $1.20 billion.
By yearend 2006, the Company extended the maturity of another $50 million of commitments under the $450 million U.S. credit facility for an additional year. As a result, $435 million will mature on May 12, 2011, and $15 million will mature on May 12, 2010.
The financial covenants of the credit facilities require the Company to maintain a debt-to-capitalization ratio of not greater than 60 percent at the end of any fiscal quarter. The negative covenants include restrictions on the Company’s ability to create liens and security interests on our assets, with exceptions for liens typically arising in the oil and gas industry, purchase money liens and liens arising as a matter of law, such as tax and mechanics liens. The Company may incur liens on assets located in the U.S., Canada and Australia of up to five percent of the Company’s consolidated assets. There are no restrictions on incurring liens in countries other than the U.S., Canada and Australia. There are also restrictions on Apache’s ability to merge with another entity, unless the Company is the surviving entity, and a restriction on our ability to guarantee debt of entities not within our consolidated group.
There are no clauses in the facilities that permit the lenders to accelerate payments or refuse to lend based on unspecified material adverse changes (MAC clauses). The credit facility agreements do not have drawdown restrictions or prepayment obligations in the event of a decline in credit ratings. However, the agreements allow the lenders to accelerate payments and terminate lending commitments if Apache Corporation, or any of its U.S., Canadian and Australian subsidiaries, defaults on any direct payment obligation in excess of $100 million or has any unpaid, non-appealable judgment against it in excess of $100 million. The Company was in compliance with the terms of the credit facilities as of December 31, 2006.



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