Item 1.01.
Entry Into a Material Definitive Agreement.
On February 23, 2018 (the Amendment No. 1 Effective Date), Archrock Partners, L.P. (the Partnership, we or us), Archrock Partners Finance Corp. (Archrock Partners Finance), our wholly owned subsidiary, and Archrock Partners Leasing LLC (Archrock Partners Leasing), our indirect wholly owned subsidiary, as Guarantors, and Archrock Partners Operating LLC (APLP Operating), our wholly owned subsidiary, as Borrower, entered into an Amendment No. 1 to Credit Agreement (Amendment No. 1), which amends that certain Credit Agreement, dated as of March 30, 2017 (as amended, the Credit Agreement), among us, Archrock Partners Finance, Archrock Partners Leasing, APLP Operating, JPMorgan Chase Bank, N.A., as administrative agent for the lenders thereunder (in such capacity, the Administrative Agent), and the lenders party thereto.
Pursuant to Amendment No. 1, on the Amendment No. 1 Effective Date, we (a) increased the maximum Total Leverage Ratio (as defined in the Credit Agreement) to 5.95 to 1.00 through the fourth quarter of 2018, (b) increased the maximum Total Leverage Ratio to 5.75 to 1.00 through the fourth quarter of 2019, and (c) increased the maximum Total Leverage Ratio to 5.50 to 1.00 through the second quarter of 2020, with the maximum Total Leverage Ratio returning to 5.25 to 1.00 for each quarter thereafter, subject to a temporary step-up to 5.50 to 1.00 for the quarter in which a specified acquisition occurs and the two quarters thereafter.
Amendment No. 1 also contains certain amendments to the Credit Agreement that will become effective only upon the consummation of the previously announced merger (the Merger) of Amethyst Merger Sub, LLC with and into us pursuant to that certain Agreement and Plan of Merger (the Original Merger Agreement), dated as of January 1, 2018, by and among Archrock, Inc. (Archrock), Archrock GP LLC, Archrock General Partner, L.P., and us, as amended by that certain Amendment No. 1 to Agreement and Plan of Merger, dated as of January 11, 2018, by and among the parties to the Original Merger Agreement and Amethyst Merger Sub, LLC. Effective upon the Merger and upon satisfaction of the other conditions precedent set forth in Amendment No. 1, under and in connection with Amendment No. 1, the following will occur (among other things):
(i)
Each of Archrock, AROC Corp., AROC Services GP LLC, AROC Services LP LLC, Archrock Services Leasing LLC, Archrock GP LP LLC, and Archrock MLP LP LLC (each, an Additional Party) will be added as a guarantor under the Credit Agreement through an Omnibus Joinder Agreement;
(ii)
Each Additional Party will pledge substantially all of its assets to the Administrative Agent as security for the payment and performance of the Secured Obligations (as defined in the Credit Agreement) through a Security Agreement Supplement;
(iii)
Archrock will be added as Parent under the Credit Agreement;
(iv)
Archrock Services, L.P. will be added as a Borrower and as an Administrative Borrower to act on behalf of all other Borrowers under the Credit Agreement;
(v)
The aggregate revolving commitment under the Credit Agreement will be increased from $1,100,000,000 to $1,250,000,000;
(vi)
The amount available for incremental increases to the commitments under the Credit Agreement will be increased by $250,000,000;
(vii)
The definition of Borrowing Base in the Credit Agreement will be amended to include certain assets of Archrock Services, L.P. and its subsidiaries;
(viii)
Basket sizes under certain covenants will be increased, including in covenants limiting our ability to make investments, incur debt, make restricted payments, incur liens, and make asset dispositions; and
(ix)
Reference to the existing Cash Management Agreement with Archrock will be deleted and such agreement shall be terminated.
Effective upon the completion of the Merger and the other conditions precedent specified in Amendment No. 1, the aggregate amount of the commitments under the Credit Agreement will be increased to $1,250,000,000 and each Additional Party will become obligated as a guarantor under the Credit Agreement and grant a security interest in substantially all of its assets to the Administrative Agent pursuant to the Security Agreement Supplement.
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the Partnerships unitholders for their consideration.
In connection with the proposed transaction, on February 5, 2018, Archrock filed with the SEC a registration statement on Form S-4, including a joint proxy statement/prospectus of Archrock and Archrock Partners. INVESTORS AND SECURITY HOLDERS OF ARCHROCK AND ARCHROCK PARTNERS ARE ADVISED TO CAREFULLY READ THE REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTION, THE PARTIES TO THE TRANSACTION AND THE RISKS ASSOCIATED WITH THE TRANSACTION. A definitive joint proxy statement/prospectus will be sent to security holders of Archrock and Archrock Partners in connection with the Archrock shareholder meeting and the Archrock Partners unitholder meeting. Investors and security holders may obtain a free copy of the joint proxy statement/prospectus (when available) and other relevant documents filed by Archrock and Archrock Partners with the SEC from the SECs website at www.sec.gov. Security holders and other interested parties will also be able to obtain, without charge, a copy of the joint proxy statement/prospectus and other relevant documents (when available) from www.archrock.com under the tab Investors and then under the heading SEC Filings. Security holders may also read and copy any reports, statements and other information filed with the SEC at the SEC public reference room at 100 F Street N.E., Room 1580, Washington D.C. 20549. Please call the SEC at (800) 732-0330 or visit the SECs website for further information on its public reference room.
Participants in the Solicitation
Archrock, the Partnership and their respective directors, executive officers and certain other members of management may be deemed to be participants in the solicitation of proxies from their respective security holders with respect to the transaction. Information about these persons is set forth in Archrocks proxy statement relating to its 2017 Annual Meeting of Stockholders, which was filed with the SEC on March 14, 2017, and the Partnership Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on February 22, 2018, and subsequent statements of changes in beneficial ownership on file with the SEC. Security holders and investors may obtain additional information regarding the interests of such persons, which may be different than those of the respective companies security holders generally, by reading the joint proxy statement/prospectus and other relevant documents regarding the transaction, which will be filed with the SEC.
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