| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant |
On December 8, 2021, USA Compression Partners, LP (the “Partnership”), as borrower, USAC OpCo 2, LLC, USAC Leasing 2, LLC, USA Compression Partners, LLC, USAC Leasing, LLC, CDM Resource Management LLC, CDM Environmental & Technical Services LLC and USA Compression Finance Corp. (collectively, the “Guarantors”), as guarantors, JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), and the lenders party thereto amended and restated the Partnership’s sixth amended and restated credit agreement (as amended and restated on December 8, 2021, the “Amended and Restated Credit Agreement”). The Amended and Restated Credit Agreement matures on December 8, 2026, except that if any portion of the Partnership’s existing 6.875% senior notes due 2026 are outstanding on December 31, 2025, the Amended and Restated Credit Agreement will mature on December 31, 2025.
The Amended and Restated Credit Agreement provides for an asset-based revolving credit facility to be made available to the Partnership in an aggregate amount of $1.6 billion. The Partnership’s obligations under the Amended and Restated Credit Agreement will be guaranteed by the Guarantors. In addition, the Partnership’s obligations under the Amended and Restated Credit Agreement will be secured by: (1) substantially all of the Partnership’s assets and substantially all of the assets of the Guarantors, excluding real property and other customary exclusions; and (2) all of the equity interests of the Partnership’s U.S. restricted subsidiaries (subject to customary exceptions).
The Partnership will have the ability to request the issuance of letters of credit under the Amended and Restated Credit Agreement in an aggregate amount of up to $20.0 million. Subject to certain conditions, at the Partnership’s request and with the consent of the participating lenders, the total commitments under the Amended and Restated Credit Agreement may be increased from time to time by an aggregate amount of up to $200.0 million.
The borrowing base under the Amended and Restated Credit Agreement will equal: (1) 85% of the Partnership’s and the subsidiary guarantors’ eligible accounts receivable; plus (2) the product of (a) the lesser of (i) 80% of the aggregate net orderly liquidation value of the Loan Parties’ compression units (determined by reference to the current valuation report) over the aggregate net book value of the Loan Parties’ compression units as reflected in the Loan Parties’ quarterly financial statements as of the valuation date of the current valuation report or (ii) 100%, and (b) the book value of the Loan Parties’ eligible compression units; plus (3) the product of (a) the lesser of (i) 80% of the aggregate net orderly liquidation value of the Loan Parties’ treating assets (determined by reference to the current valuation report) over the aggregate net book value of the Loan Parties’ treating assets as reflected in the Loan Parties’ quarterly financial statements as of the valuation date of the current valuation report or (ii) 100%, and (b) the book value of the Loan Parties’ eligible treating assets; plus (4) 50% of the Loan Parties’ eligible inventory (excluding eligible compression units, eligible finished goods inventory, eligible treating assets and eligible heavy component inventory), valued at the lower of cost or market value, determined on a first-in-first-out basis; plus (5) 80% of the Loan Parties’ eligible finished goods inventory and eligible heavy component inventory valued at cost (excluding tooling and set-up costs, sales taxes and other soft costs), determined on a first-in-first-out basis; less (6) reserves established by the Administrative Agent in its permitted discretion.
Borrowings under the Amended and Restated Credit Agreement will bear interest at a per annum interest rate equal to, at the Partnership’s option, either the Alternate Base Rate or SOFR plus the applicable margin. “Alternate Base Rate” means the greatest of (1) the prime rate, (2) the federal funds effective rate plus 0.50% and (3) one-month SOFR rate plus 1.00%. The applicable margin for borrowings varies (a) in the case of SOFR loans, from 2.00% to 2.75% per annum and (b) in the case of Base Rate loans, from 1.00% to 1.75% per annum, and will be determined based on a total leverage ratio pricing grid. In addition, the Borrower is required to pay commitment fees based on the daily unused amount of the Amended and Restated Credit Agreement in an amount per annum equal to 0.375%. Amounts borrowed and repaid under the Amended and Restated Credit Agreement may be re-borrowed, subject to borrowing base availability.
The Amended and Restated Credit Agreement contains various covenants with which the Partnership and its restricted subsidiaries must comply, including, but not limited to, limitations on the incurrence of indebtedness, investments, liens on assets, repurchasing equity and making distributions, transactions with affiliates, mergers, consolidations, dispositions of assets and other provisions customary in similar types of agreements. The Partnership must also maintain, on a consolidated basis, as of the last day of each fiscal quarter a Total Leverage Ratio (as defined in the Amended and Restated Credit Agreement) of not greater than 5.75:1.00 through the second fiscal quarter of 2022; 5.50:1.00 from the third fiscal quarter of 2022 through the third fiscal quarter of 2023; and 5.25:1.00 thereafter (except that the Partnership may increase the applicable Total Leverage Ratio by 0.25 for any fiscal quarter during which a Specified Acquisition (as defined in the Amended and Restated Credit Agreement) occurs and the following two fiscal quarters, but in no event shall the maximum Total Leverage Ratio exceed 5.50:1.00 for any fiscal quarter as a result of such increase), an Interest Coverage Ratio (as defined in the Amended and Restated Credit Agreement) of not less than 2.50:1.00 and a Secured Leverage Ratio (as defined in the Amended and Restated Credit Agreement) of not greater than 3.00:1.00 or less than 0.00:1.00. The Amended and Restated Credit Agreement also contains various customary representations and warranties, affirmative covenants and events of default.
