Rhino Energy amends loan terms with PNC, Union Bank, extends to 2017

By Susanna Moon

Chicago, April 30 – Rhino Resource Partners LP’s wholly owned subsidiary, Rhino Energy LLC, amended its credit agreement Tuesday with PNC Capital Markets and Union Bank, NA as joint lead arrangers and joint bookrunners.

The agreement was extended to July 2017, according to an 8-K filing with the Securities and Exchange Commission.

The extension is contingent upon the partnership’s leverage ratio being no more than 2.75 times and the partnership having liquidity of at least $15 million for either quarter ending Dec. 31, 2015 or March 31, 2016. Otherwise, the expiration will revert to July 2016.

The amendment also reduces the borrowing capacity under the credit facility to a maximum of $100 million and reduces the amount available for letters of credit to $50 million.

The amended facility also provides that the disposition of any assets by the partnership consisting of net cash proceeds up to $35 million will reduce the total commitments under the facility on a dollar-for-dollar basis by up to a total of $10 million, and any dispositions of assets in excess of $35 million in the aggregate will reduce commitments under the facility on a dollar-for-dollar basis.

Interest initially will be Libor plus 450 basis points, with a spread ranging from Libor plus 350 bps to 450 bps.

The commitment fee is 50 bps.

The company amended the agreement with PNC Bank, NA as administrative agent. Union Bank, NA is the syndication agent, and Raymond James Bank, FSB, Wells Fargo Bank, NA and the Huntington National Bank are the co-documentation agents.

The amendment also changes the maximum leverage ratio to 3.75 times through Sept. 30. The maximum leverage ratio drops to 3.5 times from Oct. 1 through Dec. 31, 2015 and then to 3.25 times from Jan. 1, 2016 through March 31, 2016. The maximum leverage ratio falls to 3 times after March 31, 2016. The leverage ratio will be reduced by 0.25 for every $10 million of proceeds from the sale of any assets, with a leverage floor of 3 times.

More details

The amendment limits the partnership’s quarterly distributions to a maximum of $0.035 per unit unless leverage is 3 times or less and the amount of borrowings available under the credit facility is at least $20 million.

Also, the interest coverage ratio covenant was replaced with a minimum fixed-charge coverage ratio, which consists of the ratio of consolidated EBITDA minus maintenance capital expenditures to fixed charges.

Beginning with the quarter ending Sept. 30, the fixed-charge coverage ratio for the trailing four quarters must be a minimum of 1.1 times.

The amendment also limits any investments, including those in hydrocarbons, to $10 million provided that the leverage ratio is less than or equal to 3 times and the borrowers’ available liquidity is at least $20 million.

The amended agreement does not permit the partnership to issue any new equity unless the proceeds are used to reduce borrowings under the facility. Issuances of equity under the partnership’s long-term incentive plan are excluded from this requirement.

The amendment also limits the amount of the partnership’s capital expenditures to $20 million for fiscal year 2015 and limits capital expenditures to $27.5 million for each fiscal year after 2015. However, to the extent that capital expenditures for any fiscal year are less than those amounts, the partnership may increase the following year’s capital expenditures by the lesser of the unused amount or $5 million.

Rhino Resource operates both surface and underground mines in Colorado, Kentucky, Ohio and West Virginia and is based in Lexington, Ky.

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