| Item 1.01 | Entry into a Material Definitive Agreement |
2029 Notes Indenture
On February 2, 2024, Kodiak Gas Services, LLC, a Delaware limited liability company (the “Issuer”), issued $750,000,000 aggregate principal amount of the Issuer’s 7.250% senior notes due 2029 (the “Notes”), pursuant to an indenture, dated February 2, 2024 (the “Indenture”), by and among the Issuer, Kodiak Gas Services, Inc., a Delaware corporation (the “Parent”), certain other subsidiary guarantors party thereto (collectively with the Parent, the “Guarantors”) and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”).
Interest and Maturity
Interest on the Notes is payable semi-annually in arrears on February 15 and August 15 of each year, beginning August 15, 2024, at a rate of 7.250% per year. The Notes mature on February 15, 2029.
Special Mandatory Redemption
As previously announced, Parent, the Issuer and certain other subsidiaries of Parent have entered into an Agreement and Plan of Merger, dated as of December 19, 2023 (the “Merger Agreement”), relating to the acquisition of CSI Compressco LP and its subsidiaries (the “CSI Acquisition”). In the event that (a) the CSI Acquisition is not consummated on or prior to January 1, 2025, or (b) at any time prior to January 1, 2025, the Merger Agreement is terminated without the consummation of the CSI Acquisition, the Issuer will redeem all of the Notes at a price equal to 100% of issue price of the Notes plus accrued and unpaid interest to, but excluding, the redemption date.
Optional Redemption
At any time prior to February 15, 2026, the Issuer may, on any one or more occasions, redeem all or part of the Notes, at a redemption price equal to 100% of the principal amount of the Notes plus a “make-whole” premium plus accrued and unpaid interest, if any, to, but not including, the redemption date. At any time prior to February 15, 2026, the Issuer may also redeem up to 40% of the aggregate principal amount of the Notes with an amount of cash not greater than the net cash proceeds from one or more equity offerings, at a redemption price of 107.250% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but not including, the redemption date, as long as at least 50% of the aggregate principal amount of the Notes originally issued under the Indenture (excluding Notes held by the Parent and its subsidiaries) remains outstanding after each such redemption and the redemption occurs within 180 days after the date of the closing of such equity offering.
On or after February 15, 2026, the Issuer may, on any one or more occasions, redeem all or part of the Notes at the redemption prices set forth below, plus accrued and unpaid interest, if any, to, but not including, the redemption date, beginning on February 15 of the years indicated below:
| | | | |
Year | | Percentage | |
2026 | | | 103.625 | % |
2027 | | | 101.813 | % |
2028 and thereafter | | | 100.000 | % |
Certain Covenants
The Indenture contains covenants that limit the ability of the Parent and its restricted subsidiaries, including the Issuer, to (i) make distributions on, purchase or redeem the Parent’s equity interests or repurchase or redeem contractually subordinated indebtedness; (ii) make certain investments; (iii) incur or guarantee additional indebtedness, issue any disqualified stock, or issue other preferred securities (other than non-economic preferred securities); (iv) create or incur certain liens to secure indebtedness; (v) sell or otherwise dispose of their assets; (vi) consolidate with or merge with or into another person; (vii) enter into transactions with affiliates; and (viii) create unrestricted subsidiaries. These covenants are subject to important exceptions and qualifications. If the Notes achieve an investment grade rating from any two of Moody’s Investors Service, Inc. (“Moody’s”), S&P Global Ratings (“S&P”) and Fitch Ratings, Inc. (“Fitch”) and no default under the Indenture exists, many of the foregoing covenants will terminate.
