Item 1.01 - Entry into a Material Definitive Agreement
On December 23, 2022, Altus Power, Inc. (“Altus Power” or the “Company”), through its subsidiary, APA Finance II, LLC (the “Borrower”), has entered into a Financing Agreement, dated December 23, 2022, among the Borrower, KeyBanc Capital Markets Inc., KeyBank National Association, the Huntington National Bank and the lenders party thereto (the “Financing Agreement”) for a term loan facility for approximately $125.7 million (the “term Loan”) and letters of credit for approximately $15.6 million (the “Letters of Credit”). This Financing Agreement refinanced and upsized the existing term loan facilities that the Company assumed in connection with the previously announced purchase of the portfolio of operating solar projects previously owned by D.E. Shaw Renewables Investments, L.L.C., through its subsidiaries, DESRI II Acquisition Holdings, LLC and DESRI V Acquisition Holdings, LLC.
The Term Loan, which matures on the fifth anniversary of the closing date of the Financing Agreement, bears interest at the following rates per annum, based upon whether the loan is (1) a Base Rate Loan or (2) a SOFR Loan (each, as defined in the Financing Agreement):
(1) An annual rate equal to the greatest of:
(a) the interest rate established from time to time by the administrative agent as the administrative agent’s prime rate in effect on such day;
(b) the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding business day by the Federal Reserve Bank of New York for such day plus 0.50% per annum; and
(c) the greater of (i) the sum of (x) Daily Simple SOFR (as defined in the Financing Agreement) and (y) 0.10% and (ii) 1.00%;
plus, in each case, an applicable margin of (A) from the closing date of the Financing Agreement and until the fourth anniversary of such closing date, 0.375% per annum and (B) from the fourth anniversary of the Closing Date and thereafter, 0.50% per annum; or
(2) The greater of (i) the sum of (x) Daily Simple SOFR (as defined in the Financing Agreement) and (y) 0.10% and (ii) 1.00% plus, in each case, an applicable margin of (A) from the closing date of the Financing Agreement and until the fourth anniversary of such closing date, 1.375% per annum and (B) from the fourth anniversary of such closing date and thereafter, 1.50% per annum.
The Letters of Credit accrue interest on the unpaid principal amount of each borrowing from the date of the drawing made under any Letter of Credit until (a) such obligation is repaid or (b) the maturity of such borrowing. Interest thereunder accrues from the date of the drawing at a rate, based upon whether the loan is (1) a Base Rate Loan or (2) a SOFR Loan (each, as defined in the Financing Agreement) equal to the interest rate applicable to the Term Loan.
Under the Financing Agreement, borrowings under the Term Loan may be used by the Borrower to repay the existing debt of DESRI II Acquisition Holdings, LLC and DESRI V Acquisition Holdings, LLC and to pay transaction costs, fees, and expenses related to the Financing Agreement or expenses and third party fees related to the certain specified projects. Prepayments may be made under the Financing Agreement without premium or penalty, and repayments are otherwise payable when due, subject to certain exceptions.
The Financing Agreement provides for customary covenants, representations and warranties, and events of default, including failure by the Borrower to make payments on any loan when due and payable, failure in the payment of any interest, fees or other monetary obligations for five business days, violation and failure to cure breach of certain covenants and representations and warranties, and entry of one or more final judgment or orders over certain thresholds against the Borrower and/or other loan parties.
The Financing Agreement requires the Borrower to maintain a minimum debt service reserve requirement of, as of a given date, the amount of debt service due and payable to Lenders over the following six-month period. The minimum requirement is determined with reference to the Debt Service Coverage Ratio and Borrower is required to provide accounting to Lenders to support the achievement of such minimum requirement in order to continue to make distributions from its revenue account.
The Financing Agreement also provides that on any Distribution Date (i.e. a period of 10-20 Business Days after the end of Borrower’s fiscal quarter), the debt service coverage ratio shall be at least 1.20:1.00. If this threshold is nott met, then the Borrower may only distribute into a reserve account.
In the event of default, lenders may declare and make all sums of accrued and outstanding principal of the loans and accrued but unpaid interest and all other immediately due and payable. In such event, the default interest rate is the rate that would otherwise be applicable plus 2.00%.
The foregoing description of the Financing Agreement does not purport to be complete and is qualified in its entirety by reference to the full and complete terms of the Financing Agreement, a copy of which is filed herewith as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.