ITEM 1.01Entry into a Material Definitive Agreement
Credit Agreement
On March 9, 2020, Alliance Resource Partners, L.P. (the "Partnership") and its wholly-owned subsidiary Alliance Resource Operating Partners, L.P. (the "Intermediate Partnership") entered into a Fifth Amended and Restated Credit Agreement (the "Credit Agreement") with various financial institutions, including JPMorgan Chase Bank, N.A. as administrative agent (the "Administrative Agent"). The Credit Agreement provides for a $537.75 million revolving credit facility, reducing to $459.5 million on May 23, 2021, including a sublimit of $125 million for the issuance of letters of credit and a sublimit of $15.0 million for swingline borrowings (the "Revolving Credit Facility"), with a termination date of March 9, 2024, at which time the aggregate outstanding principal amount of all Revolving Credit Facility advances are required to be repaid in full. The Credit Facility replaces the $494.75 million revolving credit facility extended to the Intermediate Partnership under its Fourth Amended and Restated Credit Agreement, dated as of January 27, 2017, by various banks and other lenders, including JPMorgan Chase Bank, N.A. as administrative agent, that would have expired on May 23, 2021.
The Credit Agreement is guaranteed by the Partnership and certain of the Intermediate Partnership's material direct and indirect subsidiaries (the "Subsidiary Guarantors") and is secured by substantially all of the assets of the Subsidiary Guarantors, with some exceptions. The Credit Agreement is not secured by the assets of the Partnership's or the Intermediate Partnership's oil & gas subsidiaries, Alliance Minerals, LLC and Alliance Royalty, LLC, or their direct and indirect subsidiaries, collectively the "Unrestricted Subsidiaries". Borrowings under the Revolving Credit Facility bear interest, at our option, at either (i) the Base Rate at the greater of three benchmarks or (ii) a Eurodollar Rate, plus margins for (i) or (ii), as applicable, that fluctuate depending upon the ratio of Consolidated Debt to Consolidated Cash Flow (each as defined in the Credit Agreement).
The applicable margin for Revolving Credit Facility Advances is determined by reference to the Consolidated Debt to Consolidated Cash Flow Ratio (as such term is defined in the Credit Agreement) of the Intermediate Partnership as set forth below:
Consolidated Debt to Consolidated Cash Flow Ratio | Base Rate Advances | Eurodollar Rate Advances |
Level I 1.50:1.0 or greater | 1.850% | 2.850% |
Level II 1.00:1.0 or greater, but less than 1.50:1.0 | 1.600% | 2.600% |
Level III 0.50:1.0 or greater, but less than 1.00:1.0 | 1.350% | 2.350% |
Level IV less than 0.50:1.0 | 1.000% | 2.000% |
The Credit Agreement also provides for other fees, including an annual commitment fee of 0.35% on the undrawn portion of the Revolving Credit Facility and a fee with respect to the available amount under outstanding letters of credit.
The Credit Agreement contains various restrictions affecting the Intermediate Partnership and its material subsidiaries that are not Unrestricted Subsidiaries (the “Restricted Subsidiaries”), including, among other things, restrictions on incurrence of additional indebtedness and liens, sale of assets, investments, mergers and consolidations and transactions with affiliates including value transfers to Unrestricted Subsidiaries. In each case, these restrictions are subject to various exceptions. In addition, the restrictions apply to the payment of cash distributions if such payment would result in a certain fixed charge coverage ratio (as defined in the Credit Agreement). The Credit Agreement requires us to maintain (a) a debt to cash flow ratio of not more than 2.5 to 1.0, (b) a cash flow to interest expense ratio of not less than 3.0 to 1.0 and (c) a first lien debt to cash flow ratio of not more than 1.5 to 1.0, in each case, during the four most recently ended fiscal quarters.
