| Item 1.01 | Entry into a Material Definitive Agreement. |
Agreement to Divest Blue Mountain Midstream
On August 23, 2020, Riviera Resources, Inc. (“Riviera” or the “Company”), through its wholly owned subsidiary Linn Energy Holdco II, LLC (“Seller”), entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Rheinbund, LLC (the “Purchaser”) and, solely for purposes of Section 11.16 thereof, Citizen Energy Operating, LLC, for the sale of all of the issued and outstanding equity interests (the “Blue Mountain Interests”) of Blue Mountain Midstream LLC (“BMM”), a Delaware limited liability company and wholly owned subsidiary of Seller (the “Blue Mountain Divestiture”), for approximately $111,000,000 (the “Purchase Price”).
The transaction is scheduled to close in the fourth quarter of 2020, subject to the satisfaction of the closing conditions contained in the Purchase Agreement. As discussed further in Item 5.07 below, the transaction may be deemed to constitute a sale of “substantially all” of the Company’s assets on a consolidated basis under Delaware law and for purposes of the Indenture (defined below).
The Purchase Price is subject to adjustments for (i) transaction expenses, (ii) indebtedness and (iii) other purchase price adjustments customary for a transaction of this type. Pursuant to the terms of the Purchase Agreement, the Purchaser is required to pay into escrow a deposit totaling $11,100,000 (the “Deposit”) on or before the first business day following the execution of the Purchase Agreement, which amount will be applied to the Purchase Price if the transaction closes.
The Seller and the Purchaser each make representations and warranties in the Purchase Agreement that are customary for a transaction of this type. The Purchase Agreement also includes customary covenants relating to the Blue Mountain Interests, the operation of BMM’s business and other matters, including, among others, covenants related to transferred employees and restrictions on the Seller’s ability to solicit competing proposals from third parties and to provide non-public information to and engage in discussions or negotiations with third parties regarding competing proposals.
The completion of the divestiture of the Blue Mountain Interests is subject to customary closing conditions including, among others, the absence of governmental restraints prohibiting the consummation of the transactions contemplated by the Purchase Agreement.
The Purchase Agreement contains customary termination rights, including, among others, the termination rights described below. Either party may terminate the Purchase Agreement if certain closing conditions have not been satisfied, or the transaction has not closed on or before November 21, 2020 (subject to customary extensions). As discussed further in Item 5.07, the Majority Stockholders (as defined below) executed and delivered a written consent authorizing and approving the Blue Mountain Divestiture on August 23, 2020.
If one or more of the closing conditions are not satisfied, or if the transaction is otherwise terminated, the Blue Mountain Divestiture may not be completed. As discussed above, the Purchaser is obligated to pay into escrow a Deposit. The Deposit is refundable only in specified circumstances if the transaction is not consummated.
If the Seller terminates the Purchase Agreement because the Purchaser failed to make true and correct representations and warranties or perform and comply with certain covenants and agreements, then the Seller will be entitled to, as liquidated damages, the entire Deposit and a cash termination fee as liquidated damages, as the Seller’s sole and exclusive remedy. If the Purchaser terminates the Purchase Agreement due to willful and intentional breach of the Purchase Agreement by the Seller, the Purchaser is entitled to recover the actual losses suffered by the Purchaser as a consequence of such termination.
There can be no assurance that the Company will consummate the Blue Mountain Divestiture on the terms or timing described or at all. Assuming the Blue Mountain Divestiture closes in accordance with the terms of the Purchase Agreement, the Company intends to use the net proceeds from the Blue Mountain Divestiture to repay total outstanding borrowings under Blue Mountain Midstream LLC’s credit facility, which were approximately $76 million as of July 31, 2020. Following repayment in full of the credit facility and subject to certain closing adjustments and fees as set forth in the Purchase Agreement, the remainder of the sale proceeds are expected to be added to cash on Riviera’s balance sheet.
