Item 1.01Entry Into a Materially Definitive Agreement.
On August 20, 2021, Evolve Transition Infrastructure LP (the “Partnership”), as borrower, entered into that certain Twelfth Amendment to Third Amended and Restated Credit Agreement with the guarantors party thereto (“Guarantors”), each of the lenders party thereto (each, a “Lender”), and Royal Bank of Canada (“RBC”), as administrative agent, collateral agent, and letter of credit issuer (the “Twelfth Amendment,” the Third Amended and Restated Credit Agreement, as amended prior to the effectiveness of the Twelfth Amendment, the “Existing Credit Agreement,” and, the Existing Credit Agreement, as amended by the Twelfth Amendment, the “Amended Credit Agreement”). Immediately prior to the effectiveness of the Twelfth Amendment, RBC, in its capacity as a lender under the Existing Credit Agreement, entered into that certain Assignment of Secured Indebtedness with each of the other lenders under the Existing Credit Agreement pursuant to which RBC purchased from each such other lender, all of such lender’s right, title and interest in and to the Existing Credit Agreement, including such lender’s portion of outstanding revolving loans, term loans and letter of credit participations. As a result, RBC is currently the sole Lender under the Amended Credit Agreement and will provide the entire principal amount of the Amended Credit Facilities (as defined below).
The terms of the Amended Credit Agreement provide for, among other things: (a) extension of the maturity date to September 30, 2023, (b) removal of the borrowing base, and related provisions addressing borrowing base deficiencies and recalculations, (c) a term loan facility in an aggregate principal amount of up to $65 million (the “Term Loan Facility”), (d) a revolving credit facility in an aggregate principal amount of $5 million (the “Revolving Facility” and, together with the Term Loan Facility the “Amended Credit Facilities”), (e) reduction of the Partnership’s mandatory quarterly amortizing payments of outstanding principal of term loans from $10,000,000 per quarter to (i) on September 30, 2021, an amount necessary to reduce the aggregate principal amount of term loans to $62 million, (ii) $3,000,000 per quarter commencing with the quarter ending December 31, 2021, and (iii) $2,000,000 for the quarters ending March 31, 2023 and June 30, 2023, (f) adoption of a Benchmark Replacement (as defined in the Amended Credit Agreement) or Term SOFR (as defined in the Amended Credit Agreement) as the Benchmark (as defined in the Amended Credit Agreement) upon the occurrence of certain specified transition events, (g) a new mandatory principal prepayment requirement with respect to certain types of distributions and other payments received from Carnero G&P, LLC, (h) reduction of the Partnership’s permitted maximum cash balance from $7,500,000 to $3,500,000, (i) permitted energy transition investments with the proceeds of capital contributions and certain equity issuances, and (j) removal of certain representations, warranties, covenants, reporting requirements and agreements of the Partnership and the Guarantors related to oil and gas properties and interests owned by the Guarantors.
In addition, pursuant to the Twelfth Amendment, SEP Holdings IV, LLC, a wholly-owned subsidiary of the Partnership, was released as a guarantor under the Amended Credit Agreement.
The terms of the Twelfth Amendment also provide for the ability of the Partnership to implement additional amendments, supplements and other modifications to the Amended Credit Agreement upon achieving certain specified milestone events, which include (a) the closing of certain acquisition and transaction opportunities or (b) the making of certain energy transition investments or realization of other improvements to the Partnership’s midstream business that result in free cash flow projections of the Partnership and the Guarantors rising above certain levels for the immediately succeeding three-year period. If the Partnership achieves a specified milestone event and complies with certain other conditions precedent under the Twelfth Amendment, then the parties agree to implement amendments to the Amended Credit Agreement as described in Exhibit C to the Twelfth Amendment.
The foregoing description of the Twelfth Amendment does not purport to be complete and is qualified in its entirety by the full text of the Twelfth Amendment, a copy of which is filed as Exhibit 10.1 hereto and incorporated herein by reference.