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Item 1.01
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Entry into a Material Definitive Agreement.
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As previously announced in its Current Report on Form 8-K filed on November 15, 2018, Advanced Emissions Solutions, Inc. ("ADES" or the "Company") and Apollo Credit Strategies Master Fund Ltd and Apollo A-N Credit Fund (Delaware) L.P. (collectively "Apollo”), affiliates of a beneficial owner of greater than five percent of the Company's common stock, executed a commitment letter pursuant to which Apollo offered to provide funding in the form of a $70 million term loan (the “Term Loan”). This financing was provided to fund the Company's acquisition (the "Carbon Solutions Acquisition") of 100% of the equity interests of ADA Carbon Solutions, LLC ("Carbon Solutions") pursuant to the previously announced Purchase and Sale Agreement dated as of November 15, 2018 (the "Purchase Agreement").
On
December 7, 2018
, ADES, certain of its subsidiaries as guarantors, The Bank of New York Mellon as administrative agent, and Apollo entered into the Term Loan upon execution of a Term Loan and Security Agreement (the "Loan Agreement"). The Term Loan has a term of 36 months and bears interest at a rate equal to 3-month LIBOR (subject to a 1.5% floor) + 4.75% per annum, which shall be payable quarterly in arrears. Quarterly principal payments of $6 million will be required beginning on March 1, 2019. ADES will be able to prepay the Term Loan at any time without penalty.
The Term Loan is secured by substantially all of the assets of ADES and its subsidiaries (including those acquired in the Carbon Solutions Acquisition), including the cash flows from Tinuum Group LLC and Tinuum Services LLC (collectively, the "Tinuum Entities"), but excluding ADES’ equity interests in the Tinuum entities. The Loan Agreement includes, among others, the following covenants: (1) Beginning December 31, 2018 and as of the end of each fiscal quarter thereafter, the Company must maintain a minimum cash balance of $5.0 million and shall not permit "expected future net cash flows from the refined coal business" (as defined in the Loan Agreement) to be less than 1.75 times the principal amount of the Term Loan then outstanding; (2) Beginning in January 2019, annual collective dividends and buybacks of Company shares in an aggregate amount, not to exceed $30 million, shall be permitted so long as (a) no default or event of default exists under the Loan Agreement and (b) expected future net cash flows from the refined coal business as of the end of the most recent fiscal quarter exceed $100 million.
Additionally, on
December 7, 2018
, ADES, ADA-ES, Inc. ("ADA"), a Colorado corporation and wholly-owned subsidiary of ADES, and CoBiz Bank, d/b/a Colorado Business Bank, entered into the Thirteenth Amendment (the "Thirteenth Amendment") of the 2013 Loan and Security Agreement (the "Line of Credit").
The Thirteenth Amendment provides, among other things, for ADA to be able to enter into the Loan Agreement as a guarantor so long as the principal amount of the Term Loan does not exceed $70 million. Additionally, the financial covenants in the Line of Credit were amended and restated to be consistent with the aforementioned Term Loan covenants.
The foregoing descriptions of the Loan Agreement and the Thirteenth Amendment do not purport to be complete and are qualified in their entirety by reference, respectively, to the full text of the Loan Agreement and the Thirteenth Amendment, which are filed as Exhibits 10.1 and 10.2, respectively, to this Current Report on Form 8-K.
On December 13, 2018, ADES issued a press release announcing the closing of the Carbon Solutions Acquisition and Loan Agreement. A copy of the press release is included as Exhibit 99.1 to this report.