Item 1.01 - Entry into a Material Definitive Agreement.
Amendments to Note Purchase Agreement, the 2017 Securities Purchase Agreement
and the 2018 Securities Purchase Agreement.
On July 9, 2020, Carbon California Company, LLC ("Carbon California") (a
majority-owned subsidiary of Carbon Energy Corporation ("Carbon" or the
"Company"), a Delaware corporation), entered into (i) Amendment No. 4 to its
existing Senior Secured Note Credit Facility with two institutional investors
(Prudential Insurance Company of America and Prudential Insurance Legacy Company
of New Jersey) (the "NPA Amendment No. 4"), (ii) Amendment No. 5 to its existing
2017 Securities Purchase Agreement with two other institutional investors
(Prudential Capital Energy Partners, L.P. and Prudential Capital Energy Partners
Management Fund, L.P.) (the "2017 SPA Amendment No. 5") and (iii) Amendment No.
3 to its existing 2018 Securities Purchase Agreement with Prudential Capital
Energy Partners, L.P. and Prudential Capital Energy Partners Management Fund,
L.P. (the "2018 SPA Amendment No. 3" and together with the NPA Amendment No. 4
and 2017 SPA Amendment No. 5, the "Amendments"). Pursuant to the Amendments,
Carbon California and the counterparties (x) agreed to amend certain provisions
of existing Senior Secured Note Credit Facility and each of the Securities
Purchase Agreements (described below) and (ii) the lenders under the Senior
Secured Note Credit Facility provided limited waivers of noncompliance with
certain covenants under the Senior Secured Note Credit Facility (also described
below).
Pursuant to NPA Amendment No. 4, the parties agreed to amend (i) the Total
Leverage Ratio (i.e., the ratio of total indebtedness of Carbon California to
its EBITDA for the period of four fiscal quarters most recently ended) for
(a) fiscal quarters ending on June 30, 2020 through December 31, 2020 to be not
greater than 6.00 to 1.00 and (b) for fiscal quarters ending on March 31, 2021
and at all times thereafter to be not greater than 4.00 to 1.00, (ii) the Senior
Leverage Ratio (i.e., the ratio of indebtedness evidenced by the Notes issued to
Carbon California under the Senior Secured Note Credit Facility to its EBITDA
for the period of four fiscal quarters most recently ended) for (a) fiscal
quarters ending on June 30, 2020 through December 31, 2020 to be not greater
than 4.50 to 1.00 and (b) for fiscal quarters ending on March 31, 2021 and at
all times thereafter to be not greater than 3.00 to 1.00 and (iii) the Interest
Coverage Ratio (i.e., the ratio of Carbon California's EBITDA for the period of
four fiscal quarters most recently ended to the aggregate amount of its payments
in cash of interest with respect to its aggregate indebtedness for such period)
for (a) fiscal quarters ending on June 30, 2020 through December 31, 2020 to be
not less than 1.65 to 1.00 and (b) for fiscal quarters ending on March 31, 2021
and at all times thereafter to be not less than 2.00 to 1.00. In connection with
NPA Amendment No. 4, the lenders provided limited waivers of the Borrower's
noncompliance (xi) with the Total Leverage Ratio for the quarter ended March 31,
2020 and (xii) with its obligation to pay interest at the default rate after
March 31, 2020.
Pursuant to each of the 2017 SPA Amendment No. 5 and the 2018 SPA Amendment No.
3, the parties agreed that all of the interest due and payable by Carbon
California pursuant to each Note issues under either the 2017 SPA or the 2018
SPA on May 15, 2020, August 15, 2020 and November 15, 2020 would be paid in kind
and added to the outstanding principal amount of each such Note. The parties
further agreed to amend (i) the Total Leverage Ratio for (a) fiscal quarters
ending on June 30, 2020 through December 31, 2020 to be not greater than 6.90 to
1.00 and (b) for fiscal quarters ending on March 31, 2021 and at all times
thereafter to be not greater than 4.60 to 1.00, (ii) the Senior Leverage Ratio
for (a) fiscal quarters ending on June 30, 2020 through December 31, 2020 to be
not greater than 5.18 to 1.00 and (b) for fiscal quarters ending on March 31,
2021 and at all times thereafter to be not greater than 3.45 to 1.00 and
(iii) the Interest Coverage Ratio for (a) fiscal quarters ending on June 30,
2020 through December 31, 2020 to be not less than 1.40 to 1.00 and (b) for
fiscal quarters ending on March 31, 2021 and at all times thereafter to be not
less than 1.60 to 1.00.
The above description of the terms of the Amendments does not purport to be
complete and is qualified in its entirety by the full text of the Amendments.
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