ARCHROCK,INC. (NYSE:AROC) Files An 8-K Entry into a Material Definitive Agreement

ARCHROCK,INC. (NYSE:AROC) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement.

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On April26, 2018, at effective time of the Merger (the “Effective Time”), Archrock entered into an Omnibus Joinder Agreement, dated as of April26, 2018 (the “Joinder Agreement”), with Archrock Services, L.P., a Delaware limited partnership (“ASLP”), AROC Corp., a Delaware corporation (“AROC Corp.”), AROC Services GP LLC, a Delaware limited liability company (“AROC Services GP”), AROC Services LP LLC, a Delaware limited liability company (“AROC Services LP”), Archrock Services Leasing LLC, a Delaware limited liability company (“Archrock Services Leasing”), Archrock GP LP LLC, a Delaware limited liability company (“Archrock GP LP”), Archrock MLP LP LLC, a Delaware limited liability company (“Archrock MLP”), and the Administrative Agent (as defined below) and the lenders party thereto.

to the Joinder Agreement: (i)Archrock was added as Parent under, and as defined in, that certain Credit Agreement, dated as of March30, 2017 (the “Original Credit Agreement”), as amended by Amendment No.1 thereto, dated as of February23, 2018 (“Amendment No.1 to Credit Agreement” and, together with the Original Credit Agreement, the “Credit Agreement”), by and among the Partnership, Archrock Partners Finance Corp., a Delaware corporation, and Archrock Partners Leasing LLC, a Delaware limited liability company, as guarantors, Archrock Partners Operating LLC, a Delaware limited liability company (“Operating LLC”), as borrower, JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), (ii)Archrock and AROC Corp., AROC Services GP, AROC Services LP, Archrock Services Leasing, Archrock GP LP, and Archrock MLP, each subsidiaries of Archrock, were added as guarantors under the Credit Agreement, and (iii)ASLP was added as a borrower and as the administrative borrower under the Credit Agreement (the “Administrative Borrower”). ASLP and Operating LLC are hereinafter referred to as the “Borrowers.”

The Credit Agreement provides for an asset-based revolving credit facility available to the Borrowers in an aggregate amount of $1.25 billion (the “Credit Facility”). The Credit Facility will mature on March30, 2022, except that if as of December2, 2020 any portion of the Partnership’s existing Senior Notes due April2021 are outstanding on such date, then the Credit Facility will instead mature on December2, 2020. The Borrowers’ obligations under the Credit Facility will be guaranteed by Archrock and all of its Significant Domestic Subsidiaries (as defined in the Credit Agreement). In addition, the Borrowers’ obligations under the Credit Facility will be secured by (1)substantially all of Archrock’s assets and substantially all of the assets of the Borrowers and Archrock’s Significant Domestic Subsidiaries, excluding real property and other customary exclusions, and (2)all of the equity interests of Archrock’s U.S. restricted subsidiaries (subject to customary exceptions) and 65% of the voting equity interests in certain of Archrock’s first-tier foreign subsidiaries to an Amendment and Supplement to Pledge and Security Agreement (“Security Agreement Supplement”).

The Borrowers will have the ability to request the issuance of letters of credit under the Credit Facility in an aggregate amount of up to $50 million. Subject to certain conditions, at the Borrowers’ request and with the consent of the participating lenders, the total commitments under the Credit Facility may be increased from time to time by an aggregate amount of up to $250 million.

The borrowing base under the Credit Facility will equal (a)85% of eligible accounts receivable of ASLP and each subsidiary of ASLP that is a guarantor (collectively, the “Borrowing Base Parties”), plus (b)the product of 85% multiplied by the net orderly liquidation value percentage identified in the most recent inventory appraisal ordered by the Administrative Agent multiplied by the Borrowing Base Parties’ eligible inventory (valued at the lower of cost or net realizable value), plus (c)the lesser of (i)95% of the net book value of the Borrowing Base Parties’ eligible compression units (with depreciation calculated in accordance with GAAP as in effect on the closing date of the Credit Agreement) and (ii)the product of 80% multiplied by the net orderly liquidation value percentage identified in the most recent appraisal ordered by the Administrative Agent multiplied by the net book value of the Borrowing Base Parties’ eligible compression units (with depreciation calculated in accordance with GAAP as in effect on the closing date of the Credit Agreement), plus (d)80% of the net book value of the Borrowing Base Parties’ eligible new compression units (with depreciation calculated in accordance with GAAP as in effect on the closing date of the Credit Agreement), less (e)reserves established by the Administrative Agent in its permitted discretion.

Borrowings under the Credit Facility will bear interest at a per annum interest rate equal to, at the Administrative Borrower’s option, either the Alternate Base Rate or LIBOR plus the applicable margin. “Alternate Base Rate” means the greatest of (a)the prime rate, (b)the federal funds effective rate plus 0.50% and (c)one-month LIBOR plus 1.00%. The applicable margin for borrowings varies (i)in the case of LIBOR loans, from 2.00% to 3.25% per annum and (ii)in the case of Base Rate loans, from 1.00% to 2.25% per annum, and will be determined based on a total leverage ratio pricing grid. In addition, the Borrowers are required to pay commitment fees based on the daily unused amount of the Credit Facility in an amount per annum equal to an applicable percentage, which ranges from 0.375% to 0.50% and is determined based on a total leverage ratio pricing grid. Amounts borrowed and repaid under the Credit Facility may be re-borrowed, subject to Borrowing Base availability.

The Credit Agreement contains various covenants with which Archrock, the Borrowers and their respective restricted subsidiaries must comply, including, but not limited to, limitations on the incurrence of indebtedness, investments, liens on assets, repurchasing equity and making distributions, transactions with affiliates, mergers, consolidations, dispositions of assets and other provisions customary in similar types of agreements. Archrock must also maintain, on a consolidated basis, as of the last day of each period of four consecutive fiscal quarters a Total Leverage Ratio (as defined in the Credit Agreement) of not greater than 5.95:1.00 through the fourth fiscal quarter of 2018; 5.75:1.00 from the first fiscal quarter of 2019 through the fourth fiscal quarter of 2019; 5.50:1.00 in the first and second fiscal quarters of 2020, and 5.25:1.00 thereafter (except that the Total Leverage Ratio for any fiscal quarter ending after June30, 2020 during which a Specified Acquisition (as defined in the Credit Agreement) occurs and the following two fiscal quarters shall instead not be greater than 5.50:1.00), an Interest Coverage Ratio (as defined in the Credit Agreement) of not less than 2.50:1.00 and a Senior Secured Leverage Ratio (as defined in the Credit Agreement) of not greater than 3.50:1.00. The Credit Agreement also contains various customary representations and warranties, affirmative covenants and events of default.

Proceeds under the Credit Facility have been used to repay in full the obligations under that certain Credit Agreement, dated July10, 2015 (as amended, the “Prior Credit Agreement”), among Archrock, as parent, ASLP, as borrower, Wells Fargo Bank, National Association, as administrative agent, and the lenders from time to time party thereto, and commitments under the Prior Credit Agreement have been terminated. The Borrowers may also use proceeds under the Credit Facility to pay fees and expenses in connection with the Credit Agreement, finance working capital needs, for general company purposes and for any other purpose not prohibited by the terms of the Credit Agreement.

The foregoing description of the Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Original Credit Agreement, which is filed as Exhibit10.1 to the Partnership’s Current Report on Form8-K filed the Securities and Exchange Commission (the “SEC”) on April5, 2017, and Amendment No.1 to Credit Agreement, which is filed as Exhibit10.1 to the Partnership’s Current Report on Form8-K filed the SEC on February28, 2018, each of which is incorporated herein by reference.

The foregoing description of the Joinder Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Joinder Agreement, a copy of which is filed as Exhibit10.3 to this Current Report on Form8-K, and is incorporated herein by reference.

The foregoing description of the Security Supplement Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Security Supplement Agreement, a copy of which is filed as Exhibit10.4 to this Current Report on Form8-K, and is incorporated herein by reference.

Item 1.02 Termination of a Material Definitive Agreement.

In connection with the transactions described in Item 1.01 above, on April26, 2018, Archrock paid in full all outstanding obligations under the Prior Credit Agreement. The Prior Credit Agreement and the description thereof are incorporated by reference to Archrock’s Current Report on Form8-K filed on July16, 2015 and Exhibit10.2 thereto. The First Amendment to the Prior Credit Agreement, dated October5, 2015, is incorporated by reference to Exhibit10.4 of Archrock’s Current Report on Form8-K filed on October6, 2015. The Second Amendment, Consent and Waiver to the Prior Credit Agreement, dated May10, 2016, is incorporated by reference to Exhibit10.1 of Archrock’s Current Report on Form8-K filed on May11, 2016. The Third Amendment, Consent and Waiver to the Prior Credit Agreement, dated July21, 2016, is incorporated by reference to Exhibit10.1 of Archrock’s Current Report on Form8-K filed on July26, 2016. The Fourth Amendment, Consent and Waiver to the Prior Credit Agreement, dated September21, 2016, is incorporated by reference to Exhibit10.1 of Archrock’s Current Report on Form8-K filed on September22, 2016. The Fifth Amendment, Consent and Waiver to the Prior Credit Agreement, dated December9, 2016, is incorporated by reference to Exhibit10.1 of Archrock’s Current Report on Form8-K filed on December12, 2016.

Item 2.01 Completion of Acquisition or Disposition of Assets.

The disclosure set forth under “Introductory Note” above is incorporated in this Item 2.01 by reference.

to the Merger Agreement, at the Effective Time, each outstanding Common Unit was converted into the right to receive 1.40 shares of common stock of Archrock, par value $0.01 per share (“Archrock Common Stock” and such amount, the “Merger Consideration”), other than Common Units that were owned immediately prior to the Effective Time of the Merger by Archrock or its subsidiaries, which remain outstanding, unaffected by the Merger. No fractional shares of Archrock Common Stock will be issued in the Merger; instead, all fractions of Archrock Common Stock to which a holder of Common Units otherwise would have been entitled will be aggregated and the resulting fraction will be rounded up to the nearest whole share of Archrock Common Stock. In connection with the Merger, all of the Partnership’s incentive distribution rights, which were owned indirectly by Archrock, were canceled and cease to exist.

At the Effective Time, each award of phantom units of the Partnership (“Partnership Phantom Units”) (whether vested or unvested) that was outstanding as of immediately prior to the Effective Time was assumed by Archrock and converted into an award of restricted stock units of Archrock (“Archrock RSUs”) granted under Archrock’s 2013 Stock Incentive Plan representing a number of shares of Archrock Common Stock equal to (i)the number of Partnership Phantom Units subject to such award as of immediately prior to the Effective Time, multiplied by (ii)1.40, rounded down to the nearest whole Archrock RSU. Each such award of Archrock RSUs shall be subject to the same vesting, forfeiture and other terms and conditions (including form(s)of payment and distribution equivalent rights, if any) applicable to the converted award of Partnership Phantom Units as of immediately prior to the Effective Time.

to the Merger Agreement, Archrock issued approximately 57.8 million shares of Archrock Common Stock to the holders of Common Units (other than Archrock and its subsidiaries) as the Merger Consideration as described above.

The description of the Merger Agreement in this Current Report on Form8-K does not purport to be complete and is qualified in its entirety by reference to the full text of the Original Merger Agreement, which is filed as Exhibit2.1 to Archrock’s Current Report on Form8-K filed the SEC on January2, 2018, and Amendment No.1 to Merger Agreement, a copy of which is attached as Exhibit2.2 to Archrock’s Current Report on Form8-K filed on January16, 2018, each of which is incorporated herein by reference.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The description of Amendment No.1 to Credit Agreement contained in Item 1.01 of this Current Report on Form8-K is incorporated by reference into this Item 2.03.

Item 7.01 Regulation FD Disclosure.

On April26, 2018, Archrock and the Partnership issued a joint press release announcing the completion of the Merger. A copy of the press release is attached as Exhibit99.1 to this Current Report on Form8-K and is incorporated herein by reference.

The information furnished to this Item 7.01, including Exhibit 99.1, shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and will not be incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference.

Item 9.01 Financial Statements and Exhibits.

(d)Exhibits

Exhibit Number

Description

2.1*

Agreement and Plan of Merger, dated as of January1, 2018, by and among Archrock,Inc., Archrock GP LLC, Archrock General Partner, L.P. and Archrock Partners, L.P., incorporated by reference to Exhibit2.1 of Archrock’s Current Report on Form8-K filed on January2, 2018.

2.2

Amendment No.1 to Agreement and Plan of Merger, dated as of January11, 2018, by and among Archrock,Inc., Archrock GP LLC, Archrock General Partner, L.P., Archrock Partners, L.P. and Amethyst Merger Sub LLC, incorporated by reference to Exhibit2.2 of Archrock’s Current Report on Form8-K filed on January16, 2018.

10.1

Credit Agreement, dated as of March30, 2017, among Archrock Partners Operating LLC, as Borrower, the other Loan Parties party thereto, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent for the Lenders, as an Issuing Bank and as Swingline Lender, incorporated by reference to Exhibit10.1 to the Partnership’s Current Report on Form8-K filed on April5, 2017.

10.2

Amendment No.1 to Credit Agreement, dated as of February23, 2018, by and among Archrock Partners, L.P., the other Loan Parties thereto, the Lenders thereto, and JPMorgan Chase Bank, N.A., as the Administrative Agent, incorporated by reference to Exhibit10.1 to the Partnership’s Current Report on Form8-K filed on February28, 2018.

10.3

Omnibus Joinder Agreement, dated as of April26, 2018, by and among Archrock,Inc., Archrock Services, L.P., AROC Corp., AROC Services GP LLC, AROC Services LP LLC, Archrock Services Leasing LLC, Archrock GP LP LLC, and Archrock MLP LP LLC and acknowledged and accepted by JPMorgan Chase Bank, N.A., as the Administrative Agent.

10.4

Amendment and Supplement to Pledge and Security Agreement dated as of April26, 2018, by and among Archrock Partners Operating LLC, Archrock Partners, L.P., Archrock Partners Finance Corp., Archrock Partners Leasing LLC, Archrock,Inc., Archrock Services, L.P., AROC Corp., AROC Services GP LLC, AROC Services LP LLC, Archrock Services Leasing LLC, Archrock GP LP LLC, Archrock MLP LP LLC and JPMorgan Chase Bank, N.A., as the Administrative Agent.

99.1

Press Release dated April26, 2018.

*

The schedules have been omitted to Item 601(b)(2)of Regulation S-K and will be provided to the SEC upon request.


Archrock, Inc. Exhibit
EX-10.3 2 a18-12182_2ex10d3.htm EX-10.3 Exhibit 10.3   EXECUTION VERSION   OMNIBUS JOINDER AGREEMENT   THIS OMNIBUS JOINDER AGREEMENT (this “Agreement”),…
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About ARCHROCK,INC. (NYSE:AROC)

Archrock, Inc., formerly Exterran Holdings, Inc., is a natural gas contract operations services company. The Company also provides natural gas compression services to customers in the oil and natural gas industry throughout the United States and supplies aftermarket services to customers that own compression equipment in the United States. The Company’s segments include contract operations and aftermarket services. The contract operations segment primarily provides natural gas compression services to meet specific customer requirements. The aftermarket services segment sells parts and components, and provides operation, maintenance, overhaul and reconfiguration services to customers having compression and oilfield power generation equipment. The Company also has equity interest in Archrock Partners, L.P. (the Partnership), a master limited partnership that provides natural gas contract operations services to customers throughout the United States.

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