Item 1.01 Entry into a Material Definitive Agreement.
Second Lien Term Loan Agreement
On April 12, 2017, Emerge Energy Services LP (the Partnership) entered into a new $40.0 million second lien senior secured term loan facility with the Partnerships wholly owned subsidiaries Emerge Energy Services Operating LLC and Superior Silica Sands LLC, as borrowers (the Borrowers) and U.S. Bank National Association as disbursing agent and collateral agent (the Second Lien Term Loan Agreement). The Second Lien Term Loan Agreement matures on April 12, 2022. Proceeds of the new term credit facility will be used to (i) pay down a portion of the Partnerships existing revolving credit facility, (ii) fund the acquisition referred to in Item 7.01 below, (iii) pay fees and expenses incurred in connection with the new term credit facility and (iv) for general business purposes. Substantially all of the Partnerships assets are pledged as collateral on a second lien basis under the Second Lien Term Loan Agreement.
The Second Lien Term Loan Agreement contains various covenants and restrictive provisions and also requires the maintenance of certain financial covenants as follows:
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beginning with the fiscal quarter ending March 31, 2018, an interest coverage ratio of not less than 1.70:1.00 increasing quarterly thereafter to 2.55:1.00 for the fiscal quarter ending March 31, 2019 and thereafter;
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beginning with the fiscal quarter ending June 30, 2017, a minimum EBITDA of not less than $637,500 for such fiscal quarter, increasing quarterly to $50,000,000 for the four fiscal quarter period ending June 30, 2019 and thereafter; and
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minimum excess availability of at least $12,750,000 so long as the Revolving Credit Agreement (as defined below) remains in effect;
Loans under the Second Lien Term Loan Agreement will bear interest at the Partnerships option at either the base rate plus 9.00%; or LIBOR plus 10.00%.
The foregoing description of the Second Lien Term Loan Agreement is not complete and is qualified in its entirety by reference to the full text of the Second Lien Term Loan Agreement, which is attached as Exhibit 10.1 to this Current Report on Form 8-K and incorporated in this Item 1.01 by reference.
Amendment to Revolving Credit Agreement
On April 12, 2017, the Partnership entered into Amendment No. 12 (the Amendment) to the amended and restated revolving credit and security agreement, dated as of June 27, 2014 (as amended by the Amendment, the Revolving Credit Agreement), among the Partnership, as parent guarantor, the Borrowers, as borrowers, PNC Bank, National Association, as administrative agent and collateral agent, and the other lenders party thereto. The Amendment amended the Revolving Credit Agreement to permit the Partnership and the Borrowers to enter into the Second Lien Term Loan Agreement and to reduce the revolving credit facility to $190,000,000, and further reduce the revolving credit facility on a quarterly basis to $125,000,000 for the quarter beginning January 1, 2019.
The foregoing description of the Amendment is not complete and is qualified in its entirety by reference to the full text of the Amendment, which is attached as Exhibit 10.2 to this Current Report on Form 8-K and incorporated in this Item 1.01 by reference.