SEC Filings
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| 10-Q | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| HRG GROUP, INC. filed this Form 10-Q on 05/09/2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Six Months influenced by market conditions with widening credit spreads resulting in generally lower valuations of these fixed maturity securities. The table below summarizes Front Street’s funds withheld receivables rated by established nationally recognized statistical rating organizations in percentage terms at March 31, 2016 and September 30, 2015 (by credit rating, in millions):
Salus Asset-based loans The Company’s portfolio of asset-based loans receivable, originated by Salus and its co-lender Front Street, are included in “Investments” in the Condensed Consolidated Balance Sheets as of March 31, 2016 and September 30, 2015. See Note 5, Investments, to our Condensed Consolidated Financial Statements included in Part I - Item 1. Financial Statements for the composition of the asset-based loans portfolio by industry sector, as well as discussion and information regarding the credit quality indicators. HGI Energy Cash flows from operations are the principal sources of cash to meet Compass’ obligations, including interest payments under the Compass Credit Agreement, and to pay dividends (if any) to HGI Energy, HRG’s wholly-owned subsidiary that directly holds HRG’s interest in Compass. Compass’ budgeted capital expenditure program for the fiscal year 2016 is primarily focused on recompletion projects in North Louisiana and the Permian Basin. Compass’ program attempts to target projects expected to have high probability of success and can provide acceptable rates of return in the current commodity price environment. Other potential sources of cash include borrowings under the Compass credit facility (to the extent permitted by the Compass Credit Agreement), sales of assets and issuance of debt and/or equity in the future. There can be no assurance that such sources of cash will be available, or will be available on attractive terms, to Compass. The Compass Credit Agreement sets forth the term and conditions under which Compass is permitted to pay a cash distribution to the holders of its equity interests and provides that from and after the Optional Guarantee payment date, Compass may declare and pay a cash distribution to the extent of available cash, as defined in the Compass Credit Agreement, so long as, in each case, on the date of and after giving effect to such distributions, (i) no default exists, (ii) borrowing base usage, as defined in the Compass Credit Agreement, is not greater than 90.0%, and (iii) Compass is in compliance with the financial covenants. As of March 31, 2016, $160.0 million was drawn under the Compass Credit Agreement. The Compass Credit Agreement matures on February 14, 2018. The borrowing base under the Compass Credit Agreement is redetermined semi-annually, with Compass and the lenders having the right to request interim unscheduled redeterminations in certain circumstances. If redeterminations in future periods result in significant reductions of the borrowing base, this would adversely impact Compass’ liquidity and Compass may have to seek alternative sources of capital which may not be available on favorable terms, or at all, in which case such event could constitute an event of default under the Compass Credit Agreement. In addition, the terms of Compass’ indebtedness and recent declines in oil and gas prices may continue to adversely affect Compass’ cash flow, may further limit Compass’ business operations, may prevent Compass from remaining in compliance with the covenants in its credit facility agreement, and/or further limit Compass’ ability to pay distributions to us. Compass may also require additional equity infusions or other support in the near or long term future. In November 2015, HGI Funding provided a limited guaranty with respect to a portion of Compass’ indebtedness. HGI Funding’s limited guaranty may not be sufficient credit support for the operations of Compass, to maintain Compass’ compliance with the covenants in its credit facility agreement and/or HGI Funding may decide to withdraw (to the extent it may do so under the guaranty documents) or not to provide any other forms of credit support to Compass in the future. See Note 9, Debt to our Condensed Consolidated Financial Statements included in Part I - Item 1. Financial Statements, for a description of the amendment and consent that Compass received from its lenders under the Compass Credit Agreement on November 13, 2015, December 23, 2015 and March 29, 2016, respectively. As noted above, HRG’s and Compass’ liquidity may also be impacted by Compass’ capital needs and the ability of Compass to remain in compliance with the covenants governing its 57 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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