| Item 1.01. | Entry Into a Material Definitive Agreement. |
On January 22, 2024, Kodiak Gas Services, Inc. (the “Company”), its indirect, wholly owned subsidiary Kodiak Gas Services, LLC (“Kodiak Services” and, together with the Company, the “Borrowers”) and certain other subsidiaries of the Company entered into the Third Amendment to Fourth Amended and Restated Credit Agreement (the “Third Amendment”), which amends the Fourth Amended and Restated Credit Agreement, dated as of March 22, 2023 (as amended by the First Amendment to Fourth Amended and Restated Credit Agreement dated as of May 31, 2023 and the Second Amendment to Fourth Amended and Restated Credit Agreement dated as of June 27, 2023, the “Existing ABL Credit Agreement” and as further amended by the Third Amendment, the “ABL Credit Agreement” and the revolving-asset backed loan credit facility governed by the ABL Credit Agreement, the “ABL Facility”) by and among the Borrowers, certain subsidiaries of the Company, certain financial institutions as lenders and JPMorgan Chase Bank, N.A., as administrative agent (in such capacity, the “Administrative Agent”).
The Third Amendment, among other things, amended certain provisions of the Existing ABL Credit Agreement (i) to accommodate the consummation of the transactions contemplated by the Agreement and Plan of Merger, dated as of December 19, 2023, by and among the Borrowers, Kick Stock Merger Sub, LLC, Kick GP Merger Sub, LLC, Kick LP Merger Sub, LLC, CSI Compressco LP and CSI Compressco GP LLC (the “Merger Agreement”) and (ii) to account for the Company’s organizational structure after giving effect to the transactions contemplated by the Merger Agreement.
In addition, the Third Amendment amended the Existing ABL Credit Agreement to (i) increase the maximum secured leverage ratio (calculated based on the ratio of Senior Secured Debt to EBITDA, each as defined in the ABL Credit Agreement), which will begin to be tested after we issue any unsecured indebtedness, to (x) 3.75 to 1.00 for the first four fiscal quarters after we issue any unsecured indebtedness and (y) 3.25 to 1.00 for each fiscal quarter thereafter, (ii) modify the triggers for commencing a “cash dominion” period (i.e., a period when the Administrative Agent applies proceeds in our deposit accounts to reduce borrowings under the ABL Facility) such that a “cash dominion” period will commence when availability under the ABL Facility is less than $125 million for five consecutive business days or if certain types of events of default occur (although this change will effectively be unwound if the mergers provided for in the Merger Agreement do not occur on or prior to the Reversion Date (as defined in the ABL Credit Agreement)), (iii) include customary provisions relating to the designation of “unrestricted subsidiaries” (i.e., subsidiaries that are not required to become loan parties or be bound by the covenants contained in the ABL Credit Agreement), (iv) provide that only material domestic restricted subsidiaries are required to become guarantors and collateral grantors under the ABL Facility and (v) permit the Company and its restricted subsidiaries to incur additional indebtedness and liens and to make additional investments, dividends, distributions, redemptions and dispositions.
The foregoing description of the Third Amendment does not purport to be complete and is qualified in its entirety by the full text of the Third Amendment, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated into this Item 1.01 by reference.
| Item 2.03 | Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant |
The information required by Item 2.03 is included in Item 1.01 above and is incorporated into this Item 2.03 by reference.
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