Business Context and Reporting Period
Company: USA Compression Partners, LP (an emerging growth company)
Filing Type: Form 8-K (Current Report)
Date of Report: March 9, 2018
Event: Announcement of a private debt offering to fund a strategic acquisition.
Key Financial Metrics
- Debt Issuance: $725 million aggregate principal amount of 6.875% senior notes due 2026.
- Net Proceeds: Approximately $710.5 million (after discounts and commissions).
- Interest Rate: 6.875%.
- Maturity Date: 2026.
- Guarantees: Jointly and severally guaranteed on a senior unsecured basis by existing and future restricted subsidiaries.
- Revenue/Profit/Cash Flow: The filing text does not provide a clear value for these operational metrics.
Material Changes and Strategic Actions
The Partnership entered into a purchase agreement to issue the senior notes. The primary material change is the increase in long-term debt obligations to finance the acquisition of CDM Resource Management LLC and CDM Environmental & Technical Services LLC from Energy Transfer Partners, L.P. (the "CDM Acquisition").
Use of Proceeds: Net proceeds from the notes, combined with proceeds from a private placement of preferred units and borrowings under the asset-based revolving credit facility, will fund the cash purchase price for the CDM Acquisition.
Outlook, Risks, and Contingencies
- Closing Date: Expected on or about March 23, 2018, subject to customary conditions.
- Contingent Redemption: If the CDM Acquisition is not completed by April 30, 2018, or if the contribution agreement is terminated prior to that date, the Notes are subject to special mandatory redemption at 100.0% of the initial issue price plus accrued interest.
- Interim Financing: Affiliates of the Initial Purchasers have agreed to provide interim financing of $725 million if the Notes issuance is not consummated.
- Lock-Up Period: The Issuers and Guarantors agreed not to offer or sell other debt securities for 90 days following the Purchase Agreement date without consent.
- Related Parties: JPMorgan Chase Bank, N.A. acts as administrative agent under the revolving credit facility, and affiliates of Initial Purchasers are lenders and arrangers under that facility.
Investor Verification Checklist
- Confirm the closing of the $725 million note issuance on or about March 23, 2018.
- Verify the completion status of the CDM Acquisition by the April 30, 2018 deadline to avoid mandatory redemption of the notes.
- Review the terms of the private placement of preferred units and the asset-based revolving credit facility borrowings mentioned as co-funding sources.
- Assess the impact of the new 6.875% interest expense on the Partnership's future cash flows and distribution coverage.