| Item 1.01 | Entry into a Material Definitive Agreement. |
Private Offering
On December 4, 2023, Kinetik Holdings Inc. (the “Company”) and a subsidiary of the Company, Kinetik Holdings LP (“Kinetik LP”), entered into a purchase agreement (the “Purchase Agreement”) by and among Kinetik LP, the Company as parent guarantor, and Wells Fargo Securities, LLC and BofA Securities, Inc., as representatives of the several initial purchasers named therein (collectively, the “Initial Purchasers”), relating to the issuance and sale (the “Notes Offering”) of $500 million aggregate principal amount of 6.625% Sustainability-Linked Senior Notes due 2028 (the “Notes”).
The Purchase Agreement contains customary representations and warranties of the parties and indemnification and contribution provisions under which the Company and Kinetik LP, on one hand, and the Initial Purchasers, on the other, have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). A copy of the Purchase Agreement is filed as Exhibit 10.1 to this report and is incorporated herein by reference. The description of the Purchase Agreement in this report is a summary and is qualified in its entirety by the terms of the Purchase Agreement.
On December 6, 2023, Kinetik LP completed the previously announced offering of the Notes, which are fully and unconditionally guaranteed by the Company. The Notes were offered to the Initial Purchasers pursuant to Rule 144A and Regulation S of the Securities Act, and may not be sold in the United States absent registration or an applicable exemption from the registration requirements. Kinetik LP used the net proceeds from the Notes Offering, together with cash on hand and borrowings under the revolving credit facility, to repay a portion of the outstanding borrowings under its term loan credit facility.
Indenture
The terms of the Notes are governed by the Indenture, dated as of December 6, 2023 (the “Indenture”), by and among Kinetik LP as the issuer, the Company as guarantor, and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The Notes will mature on December 15, 2028. Interest will accrue from December 6, 2023 and will be payable semi-annually on June 15 and December 15 of each year, commencing June 15, 2024.
The Notes are unsecured and will rank equally in right of payment with all existing and future unsubordinated indebtedness of Kinetik LP. The guarantee of the Notes by the Company will be unsecured and will rank equally with all other existing and future unsubordinated indebtedness of the Company. The Notes and the guarantee will effectively rank junior to any future secured indebtedness of Kinetik LP or the Company to the extent of the value of the assets securing such indebtedness. The Notes and the guarantee will be structurally subordinated to any indebtedness or other liabilities of Kinetik LP’s subsidiaries, which are not guarantors of the Notes.
On or after December 15, 2025, Kinetik LP may, at its option, redeem some or all of the Notes at the redemption prices specified in the Indenture. Prior to such time, Kinetik LP may, on any one or more occasions, at its option, redeem some or all of the Notes at a redemption price equal to the Make-Whole Redemption Price (as defined in the Indenture), plus accrued and unpaid interest, if any, thereon to, but excluding, the redemption date.
On or after June 15, 2027, the interest rate accruing on the Notes will be increased by an additional 0.2500% per annum unless Kinetik LP satisfies the three Sustainability Performance Targets (as defined in the Indenture), and such satisfaction is confirmed by a qualified third-party auditor or independent public accountant appointed by Kinetik LP to review its performance in relation to the Sustainability Performance Targets (the “External Verifier”). If Kinetik LP satisfies, and the External Verifier confirms Kinetik LP’s satisfaction of, one or two of the three Sustainability Performance Targets, the interest rate accruing on the Notes will be increased by an additional 0.0833% per annum for each Sustainability Performance Target for which the conditions have not been satisfied.
Upon the occurrence of certain changes in control, Kinetik LP must offer to repurchase the Notes. The Indenture contains customary events of default (each an “Event of Default”). If an Event of Default occurs and is continuing, the Trustee or the holders of not less than 50% in aggregate principal amount of the outstanding Notes may declare the unpaid principal of and accrued but unpaid interest on, all the Notes then outstanding to be due and payable. Upon such a declaration, such principal and accrued and unpaid interest will be due and payable
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