Item 1.01 Entry into a Material Definitive Agreement.
Private Offering
On December 19, 2023, Kinetik Holdings LP (“Kinetik LP”), a Delaware limited liability company and subsidiary of Kinetik Holdings Inc., a Delaware corporation (the “Company”), issued $300 million aggregate principal amount of its 6.625% Sustainability-Linked Senior Notes due 2028 (the “New Notes”), which are fully and unconditionally guaranteed by the Company. The New Notes were priced at 100.500% of par and issued as additional notes pursuant to the Indenture (as defined below), pursuant to which Kinetik LP has previously issued $500 million aggregate principal amount of its 6.625% Sustainability-Linked Senior Notes due 2028 (the “Existing Notes” and, together with the New Notes, the “Notes”). The New Notes and the Existing Notes will be treated as a single series of securities under the Indenture and will vote together as a single class, and the New Notes will have substantially identical terms, other than the issue date and issue price, as the Existing Notes. Additional information regarding the Notes and the Indenture, pursuant to which such Notes were issued, is set forth below. The Notes were offered pursuant to Rule 144A and Regulation S of the Securities Act of 1933, as amended, and may not be sold in the United States absent registration or an applicable exemption from the registration requirements. Kinetik LP intends to use the net proceeds from the issuance of the New Notes to repay a portion of the outstanding borrowings under its term loan credit facility.
Indenture
The terms of the Notes are governed by the Indenture, dated as of December 6, 2023 (the “Indenture”), by and among Kinetik LP as the issuer, the Company as guarantor, and U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The Notes will mature on December 15, 2028. Interest will accrue from December 6, 2023 and will be payable semi-annually on June 15 and December 15 of each year, commencing June 15, 2024.
The Notes are unsecured and rank equally in right of payment with all existing and future unsubordinated indebtedness of Kinetik LP. The guarantee of the Notes by the Company is unsecured and ranks equally with all other existing and future unsubordinated indebtedness of the Company. The Notes and the guarantee effectively rank junior to any future secured indebtedness of Kinetik LP or the Company to the extent of the value of the assets securing such indebtedness. The Notes and the guarantee are structurally subordinated to any indebtedness or other liabilities of Kinetik LP’s subsidiaries, which are not guarantors of the Notes.
On or after December 15, 2025, Kinetik LP may, at its option, redeem some or all of the Notes at the redemption prices specified in the Indenture. Prior to such time, Kinetik LP may, on any one or more occasions, at its option, redeem some or all of the Notes at a redemption price equal to the Make-Whole Redemption Price (as defined in the Indenture), plus accrued and unpaid interest, if any, thereon to, but excluding, the redemption date.
On or after June 15, 2027, the interest rate accruing on the Notes will be increased by an additional 0.2500% per annum unless Kinetik LP satisfies the three Sustainability Performance Targets (as defined in the Indenture), and such satisfaction is confirmed by a qualified third-party auditor or independent public accountant appointed by Kinetik LP to review its performance in relation to the Sustainability Performance Targets (the “External Verifier”). If Kinetik LP satisfies, and the External Verifier confirms Kinetik LP’s satisfaction of, one or two of the three Sustainability Performance Targets, the interest rate accruing on the Notes will be increased by an additional 0.0833% per annum for each Sustainability Performance Target for which the conditions have not been satisfied.
Upon the occurrence of certain changes in control, Kinetik LP must offer to repurchase the Notes. The Indenture contains customary events of default (each an “Event of Default”). If an Event of Default occurs and is continuing, the Trustee or the holders of not less than 50% in aggregate principal amount of the outstanding Notes may declare the unpaid principal of and accrued but unpaid interest on, all the Notes then outstanding to be due and payable. Upon such a declaration, such principal and accrued and unpaid interest will be due and payable immediately. If an Event of Default relating to certain events of bankruptcy or insolvency of Kinetik LP occurs, the principal of and accrued but unpaid interest on, all the Notes will become immediately due and payable without any declaration or other act on the part of the Trustee or any holders of the Notes. Under certain circumstances, the holders of a majority in principal amount of the outstanding Notes may rescind any such acceleration with respect to the Notes and its consequences.
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