Item 1.01 Entry into a Material Definitive Agreement.
On January 17, 2023, Nine Energy Service, Inc. (the "Company") and certain of
its subsidiaries entered into the First Amendment to Credit Agreement (the "ABL
Facility Amendment") with JPMorgan Chase Bank, N.A., as administrative agent
(the "Administrative Agent"), and the lender parties thereto (the "Lenders"),
which amends certain terms of the Credit Agreement, dated as of October 25,
2018, which governs the Company's asset-based revolving credit facility (the
"ABL Facility" and, as amended by the ABL Facility Amendment, the "Amended ABL
Facility"). The ABL Facility Amendment will become effective on the date on
which conditions contained therein are satisfied (the "Effective Date"),
including the consummation of the Company's underwritten public offering of
300,000 units (the "Units"), each of which consists of $1,000 principal amount
of senior secured notes (the "Notes") and five shares of the Company's common
stock.
Pursuant to the ABL Facility Amendment, the maturity date of the ABL Facility
will be extended from October 25, 2023 to the fourth anniversary of the
Effective Date. In addition, the ABL Facility Amendment, among other changes,
will revise the terms of the ABL Facility as follows: (a) provide for the
ability for the Company to incur the Notes, (b) decrease the size of the ABL
Facility from $200.0 million to $150.0 million, subject to the borrowing base,
(c) change the interest rate benchmark from LIBOR to Term SOFR with a 10 basis
point spread adjustment and increase pricing from the existing range of 1.75% to
2.25% to a range of 2.00% to 2.50%, in each case depending on the Company's
leverage ratio, (d) modify the financial covenant, enhanced reporting and cash
dominion triggers in the ABL Facility from the existing minimum availability
threshold of the greater of $18.75 million and 12.5% of the loan limit to a
minimum availability threshold of (i) $12.5 million from the Effective Date
until May 31, 2023 and (ii) the greater of $17.5 million and 12.5% of the loan
limit thereafter, (e) implement an anti-cash hoarding mechanic set at a level of
$17.5 million to be tested as a condition to each borrowing, (f) decrease the
Canadian tranche sub-limit from $25.0 million to $5.0 million, (g) decrease the
letter of credit sub-limit from $50.0 million to $10.0 million, (h) increase the
intercompany debt capacity for loans to foreign subsidiaries from an existing
total of up to $10.0 million to a total of up to $25.0 million and (i) make
satisfaction of the Payment Conditions (as defined in the ABL Facility
Amendment) a condition to the mandatory excess cash flow offer mechanic
contemplated by the Notes in addition to a condition to voluntary payments of
Notes debt. Under the Amended ABL Facility, the Payment Conditions in summary
are (A) no default or event of default on a pro forma basis and (B) immediately
after and at all times and at all times during the 30 days prior, on a pro forma
basis, (1) (x) availability under the Amended ABL Facility shall not be less
than the greater of 15% of the loan limit and $22.5 million and (y) the fixed
charge coverage ratio shall be at least 1.00 to 1.00 or (2) availability under
the Amended ABL Facility shall not be less than the greater of 20% of the loan
limit and $30.0 million.
The foregoing description of the ABL Facility Amendment is not complete and is
qualified in its entirety by reference to the ABL Facility Amendment, a copy of
which is filed herewith as Exhibit 10.1 and is incorporated herein by reference.
Certain of the lenders party to the ABL Facility Amendment and/or their
affiliates have engaged, and may in the future engage, in investment banking,
commercial banking and other financial advisory and commercial dealings with the
Company and its affiliates in the ordinary course of business. In particular,
J.P. Morgan Securities LLC, an affiliate of JPMorgan Chase Bank, N.A., is a
joint-book running manager of the Units offering.
The foregoing contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking statements are
those that do not state historical facts and are, therefore, inherently subject
to risks and uncertainties. Forward-looking statements also include statements
that refer to or are based on uncertain events or assumptions. The
forward-looking statements included herein, such as those regarding the
Company's Units offering and the effectiveness of the ABL Facility Amendment,
are based on current expectations and entail various risks and uncertainties,
many of which are beyond the Company's control, including those relating to
industry and market conditions, that could cause actual results to differ
materially from those forward-looking statements. Readers are cautioned not to
place undue reliance on forward-looking statements, which speak only as of the
date hereof, and, except as required by law, the Company undertakes no
obligation to update those statements or to publicly announce the results of any
revisions to any of those statements to reflect future events or developments.
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Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
No. Description
10.1 First Amendment to Credit Agreement, dated as of January 17, 2023,
among Nine Energy Service, Inc., Nine Energy Canada Inc., the
guarantors party thereto, the lenders party thereto and JPMorgan Chase
Bank, N.A., as administrative agent.
104 Cover Page Interactive Data File. The cover page XBRL tags are
embedded within the inline XBRL document (contained in Exhibit 101).
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