ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
Credit Agreement
On January 13, 2023, Alliance Coal, LLC ("Alliance Coal"), as borrower, entered into a Credit Agreement (the "Credit Agreement") with various financial institutions, including PNC Bank, National Association as administrative agent (the "Administrative Agent"). Alliance Coal is a wholly-owned subsidiary of Alliance Resource Partners, L.P. (the "Partnership"). The Credit Agreement provides for a $425 million revolving credit facility, including a sublimit of $15.0 million for swingline borrowings, and permits the issuance of letters of credit of up to the full amount of $425 million (the "Revolving Credit Facility"), and a term loan in an aggregate principal amount of $75 million (the "Term Loan"). The Credit Agreement matures on March 9, 2027, at which time the aggregate outstanding principal amount of all Revolving Credit Facility advances and all Term Loan advances are required to be repaid in full. The Credit Agreement will instead mature on January 30, 2025, if on that date our 7.500% Senior Notes due May 1, 2025, or certain refinancings thereof, are still outstanding and Alliance Coal does not on that date have liquidity of at least $200 million. Interest is payable no less frequently than quarterly, with principal of the Term Loan due in quarterly installments equal to 6.25% of the original principal amount of the Term Loan beginning with the quarter ending June 30, 2023 and the balance payable at maturity. The Credit Facility replaces the $459.5 million revolving credit facility extended to Alliance Resource Operating Partners, L.P. (“AROP”) under its Fifth Amended and Restated Credit Agreement, dated as of March 9, 2020 that would have expired on March 9, 2024.
The Credit Agreement is guaranteed by the Partnership, AROP, UC Coal, LLC, UC Mining, LLC, UC Processing, LLC, MGP II, LLC and most of Alliance Coal’s direct and indirect subsidiaries (the "Subsidiary Guarantors"). The Credit Agreement is also secured by the seven active coal mines and related support facilities, substantially all the personal property of Alliance Coal, the Subsidiary Guarantors, UC Coal, LLC, UC Mining, LLC and UC Processing, LLC as well as the limited liability company ownership interests in Alliance Coal, AROP Funding, LLC, and UC Coal, LLC.
Borrowings under the Credit Agreement bear interest, at our option, at either (i) an adjusted one-month, three-month or six-month term rate based on the secured overnight financing rate published by the Federal Reserve Bank of New York, plus the applicable margin or (ii) the Base Rate (“Base Rate”) plus the applicable margin. The Base Rate is the highest of (i) the Overnight Bank Funding Rate plus 0.50%, (ii) the Administrative Agent’s prime rate, and (iii) the Daily Simple SOFR plus 100 basis points. The applicable margin for borrowings under the Credit Agreement are determined by reference to the Consolidated Debt to Consolidated Cash Flow Ratio (as such term is defined in the Credit Agreement) of Alliance Coal as set forth below:
Consolidated Debt to
Consolidated Cash Flow Ratio | Base Rate Advances | Term SOFR Rate Advances / Daily SOFR Advances
/ Letter of Credit Fees |
|---|
Level I
Greater than or equal to 1.00:1.00 | 2.50% | 3.50% |
Level II
Less than 1.00:1.00 but greater than or equal to 0.50:1.00 | 2.25% | 3.25% |
Level III
Less than 0.50:1.00 | 2.00% | 3.00% |
The Credit Agreement also provides for other fees, including an annual commitment fee of 0.50% on the undrawn portion of the Revolving Credit Facility and a fee with respect to the available amount under outstanding letters of credit.
The Credit Agreement contains various restrictions affecting Alliance Coal and its subsidiaries, including, among other things, restrictions on incurrence of additional indebtedness and liens, sale of assets, investments, mergers and consolidations and transactions with affiliates. In each case, these restrictions are subject to various exceptions. In addition, the restrictions apply to the payment of cash distributions if such payment would result in a certain fixed charge coverage ratio (as determined in the Credit Agreement) or in Alliance Coal having liquidity of less than $200 million. The Credit
