Loan Facility is not subject to amortization and matures on November 18, 2024. The Term Loan Facility is secured by substantially all of the assets of Montana Renewables and a pledge of 100% of the equity interests in Montana Renewables held by Montana Holdings.
The interest rate per annum applicable to the Term Loan Facility is 8.00%. If interest on the Term Loan Facility is not paid when due on any quarterly interest payment date (each, a “Quarterly Date”), then interest for the immediately preceding quarterly period shall be deemed to have accrued in an amount equal to the product of (i) the percentage of the interest amount that was not paid in cash on the relevant Quarterly Date multiplied by (ii) 2.00% per annum above the interest rate otherwise applicable thereto, which amount, in each case, shall be added to the principal balance of the loans then outstanding under the Term Loan Facility.
Montana Renewables may voluntarily prepay the Term Loan Facility at any time, in whole or in part, in an amount (the “Applicable Price”) equal to 111% of the aggregate sum of the principal amount of the loans then outstanding and accrued and unpaid interest outstanding on such loans. Any payments of the Term Loan Facility, including payment at maturity, will be at the Applicable Price. Montana Renewables is obligated to prepay the Term Loan Facility at the Applicable Price: (1) in an amount equal to the amount of any insurance proceeds and condemnation awards in connection with any loss, damage, destruction or condemnation of any property of Montana Renewables which are not applied to rebuild, repair or otherwise restore such property or to complete the conversion of the Hydrocracker into a renewable diesel unit (the “Renewable Diesel Conversion”), (2) in an amount equal to any performance liquidated damages paid under certain material agreements of Montana Renewables which are not used or applied to (x) the payment of costs and expenses in connection with the Renewable Diesel Conversion which are incurred as a result of the event giving rise to the payment of such damages, (y) cure such non-performance or (z) complete the Renewable Diesel Conversion, (3) in full upon the bankruptcy or insolvency of Montana Renewables, (4) in full upon the occurrence of certain changes in control with respect to Montana Holdings and Montana Renewables and (5) in full upon the occurrence of certain sales of the equity interests of Montana Holdings.
Montana Renewables is subject to certain covenants under the terms of the Term Loan Facility which include, but are not limited to, commencing with the first Quarterly Date after the date that is 12 months after certain conditions are met demonstrating the completion of the Renewable Diesel Conversion (the date on which such conditions are satisfied, the “Conversion Completion Date”), the maintenance of a Consolidated EBITDA (as defined in the Oaktree Credit Agreement) for the four fiscal quarter period ending on the last day of each calendar quarter of no less than between $152.0 million to $167.0 million depending on the applicable quarter.
The Credit Facility also places restrictions on Montana Renewables and Montana Holdings with respect to formation or acquisition of future subsidiaries, additional indebtedness, liens, investments, dividends and other payments to members of Montana Renewables, repurchases or redemptions of membership interests in Montana Renewables, acquisitions, mergers, asset dispositions, entry into certain agreements, amendment, other modification, waiver or termination of, or consent with respect to, certain material agreements, amendments to certain inventory financing documents and certain revolving credit facilities of Montana Renewables, transactions with affiliates, hedging transactions, capital expenditures and other matters. In addition, Montana Holdings is subject to a passive holding company covenant that restricts Montana Holdings from engaging in activities other than owning the equity in Montana Renewables and otherwise pursuant to the Oaktree Credit Agreement.
The Oaktree Credit Agreement includes customary representations and warranties, affirmative and negative covenants, and events of default. Additionally, an event of default will occur if the Conversion Completion Date does not occur by December 31, 2022, which date may be extended under certain conditions up to February 28, 2023. If an event of default occurs and is continuing, then (1) the Oaktree Lenders having outstanding loans and commitments under the Oaktree Credit Agreement of at least 50% or more have the right to declare all outstanding loans immediately due and payable and (2) the Oaktree Lenders have the right to convert all or any part of the advances, accrued interest and other debts and obligations under the Oaktree Credit Agreement at the Applicable Price (the “Obligations”) into membership interests in Montana Holdings. If an equity financing transaction in the form of an acquisition, purchase or merger with a publicly traded special purpose acquisition company occurs which satisfies certain conditions (a “Permitted Additional Equity Raise”), then the Obligations will convert into membership interests in Montana Holdings unless the Oaktree Lenders elect to not convert their Obligations prior to the closing of such Permitted Additional Equity Raise. Upon any such conversion under the Oaktree Credit Agreement, the aggregate number of membership interests in Montana Holdings to be issued to the Oaktree Lenders shall equal the amount of the Obligations to be converted multiplied by 1.11 and then divided by the implied price per membership interest as determined by the board of managers of Montana Holdings in good faith.
The foregoing description of the Oaktree Credit Agreement does not purport to be a complete statement of the parties’ rights and obligations under the Oaktree Credit Agreement and the transactions contemplated therein, and is qualified in its entirety by reference to the Oaktree Credit Agreement, a copy of which is attached as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated by reference into this Item 1.01.
