| Item 1.01 | Entry into a Material Definitive Agreement. |
Amended and Restated Senior Secured Credit Agreement
On December 14, 2018, U.S. Well Services, LLC (the “Borrow”), a subsidiary of U.S. Well Services, Inc. (the “Company”), entered into that certain Third Amendment (the “Amendment”) to that certain Amended and Restated Senior Secured Credit Agreement, dated February 2, 2017, by and among the Borrower, USWS Holdings LLC, as guarantor (“Holdings”), the Company, as guarantor, the lenders from time to time party thereto, and U.S. Bank National Association, as administrative agent (the “First Lien Administrative Agent”) (as amended by (i) that certain First Amendment, dated as of June 13, 2017, (ii) that certain Second Amendment, dated as of November 19, 2018 and (iii) the Amendment, the “First Lien Credit Agreement”). The Amendment, among other things, extends the maturity date from February 2, 2020 through May 31, 2020 and permits the Borrower to incur the debt under the Second Lien Credit Agreement (as defined, and discussed further, below).
The prompt payment and performance of the Obligations under the Loan Documents (each as defined in the First Lien Credit Agreement) are guaranteed by the Company, Holdings and each Loan Party’s (as defined in the First Lien Credit Agreement) subsidiaries (other than the Borrower).
Voluntary prepayments on the loans and voluntary reductions of unfunded commitments under the First Lien Credit Agreement are permissible without penalty, subject to certain conditions pertaining to minimum notice and minimum reduction amounts. In addition, the First Lien Credit Agreement requires that a mandatory prepayment in respect of the loans be made by the Borrower at any time that the Revolving Outstandings exceed the aggregate Revolving Commitments (each as defined in the First Lien Credit Agreement) of all of the lenders, to the full extent of any such excess.
The First Lien Credit Agreement contains various affirmative and negative covenants, including financial covenants requiring the Borrower to maintain (x) a total leverage ratio of (i) 2.0 to 1.0 as of the last day of the fiscal quarter ending March 31, 2019, (ii) of 2.0 to 1.0 as of the last day of the fiscal quarter ending June 30, 2019, (iii) 1.8 to 1.0 as of the last day of the fiscal quarter ending September 30, 2019, (iv) 1.6 to 1.0 as of the last day of the fiscal quarter ending December 31, 2019, and (v) 1.3 to 1.0 as of the last day of the fiscal quarter ending March 31, 2020, and (y) a fixed charge coverage ratio that is no less than 1.0 to 1.0 as of the last day of any fiscal quarter. The total leverage ratio is the ratio of the Borrower’s Consolidated Total Debt at such time to its Consolidated Adjusted EBITDA for the four fiscal quarters most recently ended, each as defined in the First Lien Credit Agreement. The fixed charge coverage ratio is the ratio of the Loan Parties’ Consolidated Adjusted EBITDA minus its Consolidated Maintenance Capital Expenditures made or incurred, in each case during the period of twelve consecutive months then ending (unless Annualized in accordance with the definition thereof), to Fixed Charges for the period of twelve consecutive months then ending, each as defined in the First Lien Credit Agreement.
The negative covenants in the First Lien Credit Agreement include, among other things, limitations (each of which is subject to certain exceptions) on the ability of the Loan Parties and their subsidiaries to incur debt, grant liens, enter into transactions resulting in fundamental changes (such as mergers or sales of all or substantially all of the assets of a Loan Party) and asset sales or other types of dispositions, restrict subsidiary dividends or other subsidiary distributions, enter into transactions with affiliates and swap counterparties, make investments and restricted payments permit subsidiaries to provide guarantees to other material debt, and enter into leases and sale and lease back arrangements.
The First Lien Credit Agreement also contains events of default (subject to grace periods, as appropriate) including among others: nonpayment of principal, interest or fees; breach of the financial, affirmative or negative covenants; inaccuracy of the representations or warranties in any material respect; payment default on, or acceleration of, other material indebtedness; bankruptcy or insolvency; material unsatisfied judgments; certain ERISA violations; invalidity or unenforceability of the First Lien Credit Agreement or other documents associated with the First Lien Credit Agreement; and a change of control.
On December 14, 2018, the First Lien Administrative Agent and the Second Lien Administrative Agent (as defined below) entered into an intercreditor agreement in order to, among other things, set forth their respective rights, obligations and remedies with respect to the collateral security.
In connection with the entrance into the Amendment, the Company repurchased from one of the lenders 824,916 shares of Class A common stock of the Company, 609,423 shares of Class B common stock of the Company and 609,423 common units of Holdings for approximately $11.5 million.
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