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Item 1.01.
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Entry into a Material Definitive Agreement.
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As previously disclosed, on September 29, 2020, Summit Midstream Partners Holdings, LLC, a Delaware limited liability company (“SMP Holdings”), and Summit Midstream Partners, LLC, a Delaware limited liability company (“Summit Investments”), subsidiaries of Summit Midstream Partners, LP, a Delaware limited partnership (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”) with respect to a consensual debt discharge and Term Loan restructuring transaction (the “TL Restructuring”). In addition to the ad hoc group of Term Loan Lenders, each of the other Term Loan Lenders either became party to the TSA (thereby becoming a Directing Lender as defined therein) or otherwise provided its consent to the TL Restructuring.
On November 17, 2020 (the “Closing Date”), the TL Restructuring closed, all claims under the Term Loan (the “Term Loan Claims”), including the approximately $155.2 million in principal amount outstanding and all accrued interest thereon under the Term Loan were satisfied and the Term Loan was fully discharged and ceased to exist.
Notice of Default and Strict Foreclosure
On November 16, 2020, the Directing Lenders directed the Term Loan Agent to deliver a notice of default and acceleration (the “Notice of Default”) to SMP Holdings, indicating that a default occurred as a result of SMP Holdings’ failure to pay the amortization payment due on September 30, 2020, as required under Section 2.07(a) of the Term Loan. The Notice of Default declared that the obligations under the Term Loan, totaling approximately $157.6 million, were immediately due and payable. The delivery of the Notice of Default was contemplated by the TSA.
As a result of SMP Holdings’ failure to pay the amounts due upon such acceleration, pursuant to the terms of the TSA and the Strict Foreclosure Agreement, dated as of the Closing Date, between SMP Holdings, Summit Investments and the Term Loan Agent (the “Strict Foreclosure Agreement”), the Directing Lenders directed the Term Loan Agent to execute a strict foreclosure (the “Strict Foreclosure”) on behalf of the Term Loan Lenders on the 2,306,972 common units representing limited partner interests in the Partnership (34,604,581 common units prior to the Partnership’s 1-for-15 reverse unit split on its common units, effective November 9, 2020) held by SMP Holdings and pledged as collateral under the Term Loan (the “Specified Collateral”). Pursuant to the Strict Foreclosure Agreement, on the Closing Date, SMP Holdings and Summit Investments entered into a General Assignment and Bill of Sale, pursuant to which, under Article 9 of the Uniform Commercial Code, SMP Holdings and Summit Investments assigned, transferred and conveyed to the Term Loan Lenders all of their rights and interest in the Specified Collateral.
Pursuant to the Strict Foreclosure, on the Closing Date, the Specified Collateral was distributed to each of the respective Term Loan Lenders on a pro rata basis. In addition, pursuant to the TSA, SMP Holdings paid to each of the Term Loan Lenders its pro rata share of a consent premium of $20.0 million in cash (the “Consent Premium”) and additional consideration of $6.5 million in cash (the “Additional Consideration”). The Specified Collateral, Consent Premium and Additional Consideration were paid to the Term Loan Lenders in full satisfaction of all of SMP Holdings’ obligations under the Term Loan. In exchange, all Term Loan Claims, as well as any claims arising under the DPPO (as defined below), were satisfied, the non-economic general partner interest was released from the collateral package under the Term Loan, and the Term Loan was fully discharged and ceased to exist.
Also on the Closing Date, in connection with the consummation of the TL Restructuring, SMP Holdings, Summit Investments, the Term Loan Agent and the Term Loan Lenders entered into a Mutual Release Agreement (the “Mutual Release”), pursuant to which the parties provided customary mutual releases of all Term Loan Claims, the TL Restructuring, the DPPO and any actions related thereto.
The foregoing descriptions of the Strict Foreclosure Agreement, the General Assignment and Bill of Sale and the Mutual Release do not purport to be complete and are qualified in their entirety by reference to the Strict Foreclosure Agreement, the General Assignment and Bill of Sale and the Mutual Release, copies of which are attached hereto as Exhibits 10.1, 10.2 and 10.3, respectively, and are incorporated herein by reference.