Item
1.01
|
Entry
into a Material Definitive Agreement.
|
Financing
Agreement
On
December 27, 2017, Rhino Energy LLC (“
Rhino Energy
”), a wholly-owned subsidiaries of Rhino Resource Partners
LP (the “
Partnership
’), certain of Rhino Energy’s subsidiaries identified as Borrowers (together with
Rhino Energy, the “
Borrowers
”), the Partnership and certain other Rhino Energy subsidiaries identified as Guarantors
(together with the Partnership, the “
Guarantors
”), entered into a Financing Agreement (the “
Financing
Agreement
”) with Cortland Capital Market Services LLC, as Collateral Agent and Administrative agent, CB Agent Services
LLC, as Origination Agent and the parties identified as Lenders therein (the
Lenders
”), pursuant to which Lenders
have agreed to provide Borrowers with a multi-draw term loan in the aggregate principal amount of $80,000,000, subject to the
terms and conditions set forth in the Financing Agreement. The total principal amount is divided into a $40,000,000 commitment,
the conditions for which were satisfied at the execution of the Financing Agreement (the “
Effective Date Term Loan Commitment
”)
and an additional $40,000,000 commitment that is contingent upon the satisfaction of certain conditions precedent specified in
the Financing Agreement (“
Delayed Draw Term Loan Commitment
”). Loans made pursuant to the Financing Agreement
will be secured by substantially all of the Borrowers’ and Guarantors’ assets.
Loans
made pursuant to Financing Agreement will, at Rhino Energy’s option, either be “Reference Rate Loans” or “LIBOR
Rate Loans.” Reference Rate Loans bear interest at the greatest of (a) 4.25% per annum, (b) the Federal Funds Rate plus
0.50% per annum, (c) the LIBOR Rate (as defined below, calculated on a one-month basis) plus 1.00% per annum or (d) the Prime
Rate (as published in the Wall Street Journal) or if no such rate is published, the interest rate published by the Federal Reserve
Board as the “bank prime loan” rate or similar rate quoted therein, in each case, plus an applicable margin of 9.00%
per annum (or 12.00% per annum if Rhino Energy has elected to capitalize an interest payment pursuant to the PIK Option, as described
below. LIBOR Rate Loans bear interest at the greater of (x) the LIBOR for such interest period divided by 100% minus the maximum
percentage prescribed by the Federal Reserve for determining the reserve requirements in effect with respect to eurocurrency liabilities
for any Lender, if any, and (y) 1.00%, in each case, plus 10.00% per annum (or 13.00% per annum if the Borrowers have elected
to have elected to capitalize an interest payment pursuant to the PIK Option). Interest payments are due on a monthly basis for
Reference Rate Loans and one-, two- or three-month periods, at Rhino Energy’s option, for LIBOR Rate Loans. If there is
no event of default occurring or continuing, Rhino Energy may elect to defer payment on interest accruing at 6.00% per annum by
capitalizing and adding such interest payment to the principal amount of the applicable term loan (the “
PIK Option
”).
Commencing
December 31, 2018, the principal for each loan made under the Financing Agreement will be payable on a quarterly basis in an amount
equal to $375,000 per quarter, with all remaining unpaid principal and accrued and unpaid interest due on December 27, 2020. In
addition, the Borrowers must make certain prepayments over the term of any loans outstanding, including: (i) the payment of 25%
of Excess Cash Flow (as that term is defined in the Financing Agreement) of the Partnership and its subsidiaries for each fiscal
year, commencing with respect to the year ending December 31, 2019, (ii) subject to certain exceptions, the payment of 100% of
the net cash proceeds from the dispositions of certain assets, the incurrence of certain indebtedness or receipts of cash outside
of the ordinary course of business, and (iii) the payment of the excess of the outstanding principal amount of term loans outstanding
over the amount of the Collateral Coverage Amount (as that term is defined in the Financing Agreement). In addition, the Lenders
are entitled to certain fees, including 1.50% per annum of the unused Delayed Draw Term Loan Commitment for as long as such commitment
exists, (ii) for the 12-month period following the execution of the Financing Agreement, a make-whole amount equal to the interest
and unused Delayed Draw Term Loan Commitment fees that would have been payable but for the occurrence of certain events, including
among others, bankruptcy proceedings or the termination of the Financing Agreement by Rhino Energy, and (iii) audit and collateral
monitoring fees and origination and exit fees.
The
Financing Agreement requires the Borrowers and Guarantor to comply with several affirmative covenants at any time loans are outstanding,
including, among others: (i) the requirement to deliver monthly, quarterly and annual financial statements, (ii) the requirement
to periodically deliver certificates indicating, among other things, (a) compliance with terms of Financing Agreement and ancillary
loan documents, (b) inventory, accounts payable, sales and production numbers, (c) the calculation of the Collateral Coverage
Amount (as that term is defined in the Financing Agreement), (d) projections for the Partnership and its subsidiaries and (e)
coal reserve amounts; (ii) the requirement to notify the Administrative Agent of certain events, including events of default under
the Financing Agreement, dispositions, entry into material contracts, (iii) the requirement to maintain insurance, obtain permits,
and comply with environmental and reclamation laws (iv) the requirement to sell up to $5.0 million of shares in Mammoth Energy
Securities, Inc. and use the net proceeds therefrom to prepay outstanding term loans and (v) establish and maintain cash management
services and establish a cash management account and deliver a control agreement with respect to such account to the Collateral
Agent. The Financing Agreement also contains negative covenants that restrict the Borrowers and Guarantors ability to, among other
things: (i) incur liens or additional indebtedness or make investments or restricted payments, (ii) liquidate or merge with another
entity, or dispose of assets, (iii) change the nature of their respective businesses; (iii) make capital expenditures in excess,
or, with respect to maintenance capital expenditures, lower than, specified amounts, (iv) incur restrictions on the payment of
dividends, (v) prepay or modify the terms of other indebtedness, (vi) permit the Collateral Coverage Amount to be less than the
outstanding principal amount of the loans outstanding under the Financing Agreement or (vii) permit the trailing six month Fixed
Charge Coverage Ratio of the Partnership and its subsidiaries to be less than 1.20 to 1.00 commencing with the six-month period
ending June 30, 2018.
The
Financing Agreement contains customary events of default, following which the Collateral Agent may, at the request of lenders,
terminate or reduce all commitments and accelerate the maturity of all outstanding loans to be become due and payable immediately
together with accrued and unpaid interest thereon and exercise any such other rights as specified under the Financing Agreement
and ancillary loan documents.
The
foregoing description of the Financing Agreement does not purport to be complete and is qualified in its entirety by reference
to the complete text of the Financing Agreement, a copy of which is filed as Exhibit 10.1 to this Current Report and is incorporated
herein by reference.