Business Context and Reporting Period
USA Compression Partners, LP (USAC) filed a Current Report on Form 8-K dated December 8, 2021. The filing discloses the amendment and restatement of the Partnership's credit agreement to establish a new asset-based revolving credit facility.
Key Financial Metrics and Debt Structure
- Facility Size: $1.6 billion aggregate asset-based revolving credit facility.
- Maturity Date: December 8, 2026 (subject to an earlier maturity of December 31, 2025, if 6.875% senior notes due 2026 remain outstanding).
- Letters of Credit: Up to $20.0 million available.
- Incremental Capacity: Potential increase of up to $200.0 million subject to lender consent.
- Interest Rates:
- SOFR loans: SOFR plus 2.00% to 2.75% per annum.
- Base Rate loans: Alternate Base Rate plus 1.00% to 1.75% per annum.
- Commitment Fee: 0.375% per annum on unused amounts.
- Collateral: Secured by substantially all assets of the Partnership and Guarantors (excluding real property) and equity interests of U.S. restricted subsidiaries.
Material Changes and Covenants
The filing replaces the previous credit agreement with a new structure featuring specific financial maintenance covenants:
- Total Leverage Ratio:
- Not greater than 5.75:1.00 through Q2 2022.
- Not greater than 5.50:1.00 from Q3 2022 through Q3 2023.
- Not greater than 5.25:1.00 thereafter.
- Temporary increase of 0.25 allowed for quarters involving Specified Acquisitions (capped at 5.50:1.00).
- Interest Coverage Ratio: Not less than 2.50:1.00.
- Secured Leverage Ratio: Not greater than 3.00:1.00 or less than 0.00:1.00.
- Borrowing Base Calculation: Based on percentages of eligible accounts receivable (85%), compression units (up to 80% of liquidation value or 100% of book value), treating assets (similar to compression units), inventory (50%), and finished goods/heavy components (80%), less reserves.
Guidance, Outlook, and Use of Proceeds
The filing does not provide specific revenue guidance or management commentary on operational outlook. Proceeds from the facility are designated for:
- Refinancing existing indebtedness.
- Paying fees and expenses related to the agreement.
- Financing working capital needs.
- General company purposes.
Investor Verification Checklist
- Verify the outstanding balance of the 6.875% senior notes due 2026 to determine if the credit facility maturity is accelerated to December 31, 2025.
- Review the current valuation reports for compression units and treating assets to assess the actual borrowing base availability versus the $1.6 billion commitment.
- Confirm the Partnership's current Total Leverage Ratio and Interest Coverage Ratio to ensure compliance with the new covenant thresholds.
- Examine the full text of the Seventh Amended and Restated Credit Agreement (Exhibit 10.1) for specific definitions of "Specified Acquisition" and reserve calculations.