CORRAL PETROLEUM HOLDINGS AB (PUBL) - Preem

amounts remain outstanding under the Senior Secured Notes, interest on the Subordinated Notes is payable through theissuance of Additional Subordinated Notes at 10.5% per annum in a principal amount equal to such interest amount.Preem and Former Corral Petroleum Holdings, as original borrower and guarantor, entered into the 2008 CreditFacility pursuant to a Facilities Agreement dated September 17, 2008, among Merchant Banking, SkandinaviskaEnskilda Banken AB (publ), Handelsbanken Capital Markets, Svenska Handelsbanken (AB) (publ), as mandated leadarrangers, certain financial institutions, as lenders, Merchant Banking, Skandinaviska Enskilda Banken AB (publ), asfacility and security agent, Skandinaviska Enskilda Banken AB (publ) as factoring bank, and Svenska HandelsbankenAB (publ) as issuing bank. Following the merger of Former Corral Petroleum Holdings into Preem on October 30, 2008,Preem assumed all the assets and liabilities of Former Corral Petroleum Holdings. The 2008 Credit Facility providesPreem with a SEK 7,200 million term loan and multi-currency revolving facility comprised of a SEK 5,200 million termloan facility and a SEK 2,000 million multi-currency revolving facility and $1,783 million (or the equivalent thereof inother currencies) of revolving credit and term loan facilities comprised of a $433.1 million multi-currency term loanfacility and a $1,350 million (as amended) multi-currency revolving credit loan. Loans under the revolving creditfacilities may be used to finance eligible inventories and eligible trade receivables, for repayment of pre-existing debt orfor general corporate purposes. The proceeds of the loans under the term loan facility were used to repay outstandingdebt including the facility agreement dated June 16, 2006 between Preem and Former Corral Petroleum Holdings, asborrowers, and Skandinaviska Enskilda Banken AB (publ), as facility agent, as amended (the “2006 Credit Facility”).On April 8, 2009 Preem entered into the First Supplemental Agreement to the 2008 Credit Facility as aconsequence of the oil price market volatility; in particular, the sharp drop in the price of Dated Brent crude oil after thefirst draw down of the 2008 Credit Facility in September 2008. As a result of this drop, Preem experienced a liquiditysqueeze. The decrease in the borrowing base, which is linked to the value of inventory, substantially reduced theavailability under Facility A of the 2008 Credit Facility. It was clear to management that Preem could be, as of year end2008, in breach of its net debt/equity covenants under the 2008 Credit Facility through the reduced equity of the business.Accordingly, Preem began negotiations with the Facility Agent under the 2008 Credit Facility with regard to certainwaivers and amendments. See “Description of Certain Indebtedness—2008 Credit Facility.”On January 25, 2010 Preem entered into the Second Supplemental Agreement to the 2008 Credit Facility and onApril 14, 2010 Preem entered into the Third Supplemental Agreement to the 2008 Credit Facility as a consequence of theongoing deterioration in refining margins, and the consequent impact on the earnings and cash flows of its business. Itwas clear to Preem’s management that Preem could be, as of year end 2009, in breach of one or more of its financialcovenants under the 2008 Credit Facility, and that it was prudent to seek additional operational headroom than wasprovided by the financial covenants in the 2008 Credit Facility, for the remainder of the term of the 2008 Credit Facility.Accordingly, Preem negotiated with the lenders under the 2008 Credit Facility for certain further waivers andamendments as set out in the Second Supplemental Agreement and as effected by the Third Supplemental Agreement.Ranking of our indebtedness. The following table shows the breakdown of our the total indebtedness as ofDecember 31, 2010.December 31, 2010Borrower Current debt Long-term debt Total debt(in millions SEK)Corral Petroleum Holdings ..................................................................... 3,947 1,012 4,959Structurally senior debtPreem...................................................................................................... 9,671 — 9,671Subsidiaries of Preem ............................................................................. — — —Total....................................................................................................... 13,618 1,012 14,630Long-Term Financial Obligations and Other Commercial CommitmentsThe following table summarizes the contractual principal maturities of our long-term debt, including our currentportion, and our minimum payments required under our lease obligations and purchase obligations, each as of December31, 2010.Payments due by periodContractual ObligationsTotalLess than1 year 1-3 years 3-5 yearsMore than5 years(in millions SEK)Other long-term debt obligations........................................... — — — — —Operating lease obligations.................................................... 504 86 214 143 612008 Credit Facility ............................................................... 9,671 9,671 — — —Senior Secured Notes............................................................. 4,959 3,947 — 1,012 —Total...................................................................................... 15,134 13,704 214 1,155 6128