Item 1.01.
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Entry into a Material Definitive Agreement.
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On September 29, 2020, Summit Midstream Partners Holdings, LLC (“SMP Holdings”) and Summit Midstream Partners, LLC (“Summit Investments”), subsidiaries of Summit Midstream Partners, LP (the “Partnership”), and, for limited purposes, the Partnership, entered into a Transaction Support Agreement (the “TSA”) with an ad hoc group of SMP Holdings’ lenders under the Term Loan Agreement, dated as of March 21, 2017 (the “Term Loan”), among SMP Holdings, as borrower, the lenders party thereto (the “Term Loan Lenders”) and Credit Suisse AG, Cayman Islands Branch, as Administrative Agent and Collateral Agent (the “Term Loan Agent”). The TSA sets forth the terms agreed between SMP Holdings, the beneficial owners of approximately 66% of the aggregate principal amount of claims under the Term Loan (the “Term Loan Claims”) that initially signed the TSA (the “Initial Directing Lenders”) and any other Term Loan Lender that becomes a party to the TSA via joinder as described below (together with the Initial Directing Lenders, the “Directing Lenders”) with respect to a consensual debt discharge and Term Loan restructuring transaction (the “TL Restructuring”). As described further below, at the closing of the TL Restructuring and pursuant to the terms of the TSA and the Strict Foreclosure Agreement (as defined below), all Term Loan Claims, including the approximately $155.2 million in principal amount outstanding under the Term Loan, will be satisfied, and the Term Loan will be fully repaid and will cease to exist.
The TL Restructuring will occur concurrently with the execution of the definitive documentation to fully settle (the “DPPO settlement”) the $180.75 million deferred purchase price obligation (the “DPPO”) that the Partnership owes to SMP Holdings under the Contribution Agreement, dated as of February 25, 2016, as amended by and between the Partnership and SMP Holdings. In connection with the DPPO settlement, the Partnership will make cash payments to SMP Holdings of $20.0 million (the “Consent Premium”) and $6.5 million (the “Additional Consideration” and the payments of such Consent Premium and Additional Consideration, the “Partnership Contribution”).
On the closing date of the TL Restructuring (the “Closing Date”), pursuant to the terms of the TSA and the Strict Foreclosure Agreement between SMP Holdings and the Term Loan Agent (the “Strict Foreclosure Agreement”), the Directing Lenders, as Required Lenders under the Term Loan, will direct the Term Loan Agent to execute a strict foreclosure (the “Strict Foreclosure”) on behalf of the Term Loan Lenders on the 34,604,581 common units representing limited partner interests in the Partnership currently held by SMP Holdings and pledged as collateral under the Term Loan (the “Specified Collateral”), which shall be distributed to the respective Term Loan Lenders on a pro rata basis. In addition to the Strict Foreclosure, pursuant to the TSA, SMP Holdings will pay (i) to each of the Directing Lenders and Transaction Consenting Lenders (as defined in the TSA), its pro rata share of the Consent Premium and (ii) to each of the Term Loan Lenders, its pro rata share of the Additional Consideration. In exchange, all Term Loan Claims, as well as any claims arising under the DPPO, will be satisfied, the non-economic general partner interest will be released from the collateral package under the Term Loan, and the Term Loan will be fully repaid and will cease to exist.
Until October 14, 2020, or such later date (the “Solicitation Period”) as agreed to by SMP Holdings and the Requisite Directing Lenders (as defined in the TSA), each Term Loan Lender may execute a joinder agreement to become a Directing Lender or execute a consent agreement (the “Consent Agreement”) to become a Transaction Consenting Lender and, in either case, receive its pro rata share of the Consent Premium in addition to its pro rata share of the Additional Consideration. The Solicitation Period may also be extended by up to 5 business days in the discretion of the Requisite Directing Lenders.
The TSA contains certain covenants on the part of each of SMP Holdings and the Directing Lenders, including, among other things, (i) limitations on SMP Holdings’ and the Directing Lenders’ ability to pursue alternative transactions, (ii) commitments by the Directing Lenders to support, and at SMP Holdings’ sole expense, take all commercially reasonable actions necessary or reasonably requested by SMP Holdings to facilitate the consummation of the TL Restructuring in accordance with the terms, conditions and applicable deadlines set forth in the TSA, (iii) commitments by the Directing Lenders to not exercise any right to enforce, collect or recover any of the Term Loan Claims against SMP Holdings other than in accordance with the TSA, (iv) commitments by the Directing Lenders to execute and deliver the Strict Foreclosure Direction (as defined in the TSA) to the Term Loan Agent consistent with the terms of the TSA, and (v) commitments of SMP Holdings and the Directing Lenders to negotiate in good faith to finalize the documents and agreements governing the TL Restructuring. The TSA also