Archrock, Inc. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by Archrock, Inc. on December 17, 2020. The filing reports the completion of a private offering of senior notes by the Company's wholly owned subsidiaries, Archrock Partners, L.P. and Archrock Partners Finance Corp.
Key Financial Metrics
- Debt Issuance: $300,000,000 aggregate principal amount of 6.250% Senior Notes due 2028.
- Interest Rate: 6.250% per annum, payable semi-annually in arrears on April 1 and October 1, commencing April 1, 2021.
- Maturity Date: April 1, 2028.
- Security Status: Senior unsecured notes, fully and unconditionally guaranteed on a joint and several basis by Archrock, Inc. and certain subsidiaries.
- Ranking: Equal in right of payment with all existing and future senior indebtedness of the Issuers and Guarantors.
Note: This filing does not provide specific values for revenue, profit, cash flow, margins, or overall liquidity positions.
Material Changes and Terms
The issuance of the $300 million "New Notes" increases the total outstanding principal of the 6.250% Senior Notes due 2028 to $800 million when combined with the $500 million "Initial Notes" issued in December 2019. The New Notes are treated as a single class with the Initial Notes.
Redemption Provisions:
- Pre-April 1, 2023: Redeemable at 100% of principal plus a "make-whole" premium. Alternatively, up to 35% of the aggregate principal may be redeemed using equity offering proceeds at 106.250% of principal.
- Post-April 1, 2023: Redeemable at declining percentages: 103.125% in 2023, 102.083% in 2024, 101.042% in 2025, and 100.000% in 2026 and thereafter.
Guidance, Risks, and Covenants
The Indenture includes restrictive covenants limiting the Company's ability to make distributions, repurchase stock, incur additional indebtedness, create liens, sell assets, or merge, subject to exceptions. Many covenants will terminate if the Notes achieve an investment-grade rating from both Moody's and S&P Global Ratings.
Events of Default: Include failure to pay interest or principal, covenant breaches, cross-defaults, and bankruptcy/insolvency events. In the event of certain bankruptcy defaults, all Notes become immediately due.
Change of Control: If certain changes of control occur, holders may require the Partnership to repurchase the Notes at 101% of the aggregate principal amount plus accrued interest.
Investor Verification Checklist
- Verify the total outstanding debt load of $800 million for the 2028 Senior Notes series.
- Confirm the impact of the 6.250% interest rate on future cash flow obligations starting April 2021.
- Review the specific covenants in the Indenture (Exhibit 4.1) to assess restrictions on future capital allocation and M&A activity.
- Monitor credit rating actions by Moody's and S&P to determine if covenants may be released.
- Assess the Company's ability to meet the "make-whole" redemption premium if refinancing is required prior to April 2023.