Item
1.01. Entry into a Material Definitive
Agreement.
Indenture and the Notes
On February 4,
2021, NGL Energy Operating LLC (“Operating LLC”) and NGL Energy Finance Corp. (“Finance Corp.” and, together
with Operating LLC, the “Issuers”), each a wholly owned subsidiary of NGL Energy Partners LP (the “Partnership”),
closed the previously announced private offering (the “Notes Offering”) of $2.05 billion in aggregate principal amount
of 7.500% senior secured notes due 2026 (the “Notes”). The Notes were issued pursuant to an indenture dated February
4, 2021 (the “Indenture”), among the Issuers, the guarantors party thereto (the “Guarantors”) and U.S.
Bank National Association, as trustee and notes collateral agent. Net proceeds of the issuance of the Notes (along with borrowings
under the Partnership’s new ABL Facility (as defined below)) were used to (i) repay all outstanding borrowings under and
terminate the Partnership’s amended and restated credit agreement dated February 14, 2017 (as amended, the “Existing
Credit Agreement”), (ii) repay all outstanding borrowings under and terminate the Partnership’s $250.0 million term
credit agreement dated July 2, 2019 (as amended, the “Term Credit Agreement”) and (iii) pay fees and expenses in connection
therewith as well as fees and expenses in connection with the issuance of the Notes and entering into the ABL Facility. Interest
is payable on the Notes on February 1 and August 1 of each year, beginning on August 1, 2021, and the Notes mature on February
1, 2026.
The Indenture and
the Notes provide, among other things, that the Notes are the Issuers’ senior secured obligations. The Notes are guaranteed
on a senior secured basis by the Guarantors and will also be guaranteed by certain future subsidiaries of the Partnership. The
Notes and the guarantees are secured by first-priority liens on the Notes Priority Collateral (as defined in the Indenture) (which
generally includes substantially all of the Issuers’ and the Guarantors’ assets other than the ABL Priority Collateral
(as defined in the Indenture)) and by second-priority liens on the ABL Priority Collateral (which generally includes substantially
all of the Issuers’ and the Guarantors’ accounts receivable, inventory, pledged deposit accounts, cash and cash equivalents,
renewable energy tax credits and related assets), in each case, subject to certain exceptions and permitted liens as described
in the Indenture.
The Indenture contains
covenants that, among other things, limit the Partnership and the Issuers’ ability and the ability of its restricted subsidiaries
to: pay distributions or make other restricted payments or repurchase stock; incur or guarantee additional indebtedness or issue
disqualified stock or certain preferred stock; make certain investments; create or incur liens; sell assets; enter into restrictions
affecting the ability of restricted subsidiaries to make distributions, make loans or advances or transfer assets to the Guarantors
(including the Partnership); enter into certain transactions with the Issuers’ affiliates; designate restricted subsidiaries
as unrestricted subsidiaries; and merge, consolidate or transfer or sell all or substantially all of the Issuers’ or the
Guarantors’ assets (including the Partnership’s). The Indenture specifically restricts the Partnership’s ability
to pay distributions until the Total Leverage Ratio (as defined in the Indenture) for the most recently ended four full fiscal
quarters at the time of such distribution is not greater than 4.75 to 1.00. While the Partnership cannot predict when it will be
able to satisfy the distribution restrictions, they are not expected to be satisfied in the near term. These covenants are subject
to a number of important exceptions and qualifications.
The Issuers, at
their option, may redeem some or all of the Notes at any time on or after February 1, 2023 at the redemption prices specified in
the Indenture. Prior to such time, the Issuers, at their option, may redeem up to 40% of the aggregate principal amount of the
Notes with an amount of cash not greater than the net cash proceeds from certain equity offerings at the redemption price specified
in the Indenture. In addition, before February 1, 2023, the Issuers may redeem some or all of the Notes at a redemption price equal
to 100% of the aggregate principal amount of the Notes redeemed, plus the applicable premium as specified in the Indenture and
accrued and unpaid interest, if any, to, but not including, the redemption date. If the Issuers or the Partnership experience certain
kinds of change of control trigger events, the Issuers will be required to offer to repurchase the Notes at 101% of the aggregate
principal amount of the Notes repurchased plus accrued and unpaid interest on the Notes repurchased to, but not including, the
date of purchase.
The Indenture contains
other customary terms, events of default and covenants.
The Notes and the
related guarantees were offered and sold in a private offering that was exempt from the registration requirements of the Securities
Act of 1933, as amended (the “Securities Act”). The Notes and the related guarantees were offered only to persons reasonably
believed to be qualified institutional buyers in reliance on Rule 144A under the Securities Act and to non-U.S. persons outside
the United States pursuant to Regulation S under the Securities Act. The Notes and the related guarantees have not been and will
not be registered under the Securities Act, any state securities laws or the securities laws of any other jurisdiction. Unless
so registered, the Notes and the related guarantees may not be offered or sold in the United States except pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities or
blue sky laws.
The above description
of the Indenture and the Notes is a summary only and is subject to, and qualified entirely by, the Indenture and the Notes, which
are filed as Exhibits 4.1 and 4.2, respectively, to this Current Report on Form 8-K (this “Form 8-K”) and incorporated
herein by reference.
New Credit Agreement and the ABL
Facility
On February 4,
2021, the Partnership entered into a new credit agreement, dated February 4, 2021 (the “New Credit Agreement”), by
and among Operating LLC, the Partnership, JPMorgan Chase Bank, N.A., as administrative agent, collateral agent and an issuing lender,
and certain other financial institutions party thereto as lenders and issuing lenders, consisting of a $500.0 million asset based
revolving credit facility (the “ABL Facility”) subject to a borrowing base, with a sub-limit of $200.0 million for
letters of credit (the “ABL Facility”). The borrowing base is initially $500.0 million. Operating LLC is the borrower
under the ABL Facility, and the Partnership, Finance Corp. and certain of the Partnership’s direct and indirect wholly-owned
subsidiaries are the guarantors under the ABL Facility.
The ABL Facility
is scheduled to mature at the earliest of (a) February 4, 2026 and (b) 91 days prior to the earliest maturity date in respect of
any indebtedness of the Partnership, Operating LLC or any of its restricted subsidiaries in an aggregate principal amount of $50.0
million or greater if such indebtedness is outstanding at such time, subject to certain exceptions. Amounts borrowed and repaid
under the ABL Facility bear interest at a LIBOR-based rate (with such customary provisions under the ABL Facility providing for
the replacement of LIBOR with any successor rate) or an alternate base rate, in each case plus an applicable borrowing margin based
on the Partnership’s fixed charge coverage ratio. The applicable margin for alternate base rate loans varies from 1.50% to
2.00% and the applicable margin for LIBOR-based loans varies from 2.50% to 3.00%, in each case, depending on the Partnership’s
fixed charge coverage ratio. In addition, a commitment fee will be charged and payable quarterly in arrears based on the average
daily unused portion of the revolving commitments under the ABL Facility. Such commitment fee will be 0.50% per year, subject to
a reduction to 0.375% in the event the Partnership’s fixed charge coverage ratio is greater than 1.75 to 1.00.
The ABL Facility
requires that certain of the Partnership’s subsidiaries that the Partnership may form or acquire in the future provide a
guarantee of, and also grant a lien on their assets to secure, the obligations owing in respect of the ABL Facility. Borrowings
under the ABL Facility may vary from time to time depending on the Partnership’s cash needs and borrowing base.
The New Credit
Agreement contains various affirmative and negative covenants, including financial reporting requirements and limitations on indebtedness,
liens, mergers, consolidations, liquidations and dissolutions, sales of assets, distributions and other restricted payments, investments
(including acquisitions) and transactions with affiliates. The New Credit Agreement contains, as the only financial covenant, a
minimum fixed charge ratio financial covenant that is tested based on the financial statements for the most recently ended fiscal
quarter upon the occurrence and during the continuation of a Cash Dominion Event (as defined in the New Credit Agreement).
The ABL Facility
has no scheduled amortization or scheduled commitment reductions. In the event that the aggregate extensions of credit under the
ABL Facility exceed the borrowing base in effect at such time, the excess amount of such extensions of credit must be mandatorily
repaid or letters of credit cash collateralized. Following the occurrence of certain asset sales and receipt by the Partnership
or any of the guarantors of the ABL Facility of any proceeds in respected thereof, outstanding balances under the ABL Facility
will be required to be mandatorily prepaid with such net proceeds from such asset sales, subject to reinvestment and senior debt
prepayment rights. The ABL Facility has mandatory prepayment provisions for (a) the receipt of proceeds from the issuances of any
indebtedness not permitted under the ABL Facility, (b) while any loans are outstanding under the ABL Facility, if aggregate “excess
cash” (as defined in the ABL Facility) exceeds $25.0 million and (c) in certain other circumstances.
Events of default
under the ABL Facility are customary for facilities of this type including, among other things, the failure to pay principal, interest
or fees, the failure to observe or perform any material covenant contained in the ABL Facility, material misrepresentation under
or in connection with the ABL Facility, cross-default to certain material indebtedness, entry of judgments in a material amount,
a change of control and the institution of any bankruptcy or insolvency proceedings.
All of the obligations
under the ABL Facility are secured by first-priority liens on the ABL Priority Collateral (as defined in the new Credit Agreement)
(which generally includes substantially all of the Issuers’ and the Guarantors’ accounts receivable, inventory, pledged
deposit accounts, cash and cash equivalents, renewable energy tax credits and related assets) and by second-priority liens on the
Notes Priority Collateral (as defined in the New Credit Agreement) (which generally includes substantially all of the Issuers’
and the Guarantors’ assets other than the ABL Priority Collateral), in each case, subject to certain exceptions and permitted
liens as described in the Indenture.
The
following financial institutions party to the New Credit Agreement served as a lender and/or agent under the Existing Credit Agreement:
JPMorgan Chase Bank, N.A., Wells Fargo Bank, National Association, Toronto-Dominion Bank, New York Branch, Royal Bank of
Canada and Barclays Bank PLC. In addition, affiliates of certain financial institutions party to the New Credit Agreement were
the initial purchasers of the Notes. In particular, J.P. Morgan Securities LLC (an affiliate of JPMorgan Chase Bank, N.A.), RBC
Capital Markets, LLC (an affiliate of Royal Bank of Canada), Barclays Capital Inc. (an affiliate of Barclays Bank PLC), TD Securities
(USA) LLC (an affiliate of Toronto-Dominion Bank, New York Branch) and Wells Fargo Securities, LLC (an affiliate of Wells Fargo
Bank, National Association) were the initial purchasers of the Notes.
The above description
of the New Credit Agreement and the ABL Facility is a summary only and is subject to, and qualified entirely by, the New Credit
Agreement, which is filed as Exhibit 10.1 to this Form 8-K and incorporated herein by reference.