CJ 2017 Annual Report

The Amended Credit Facility allows the Borrowers, to incur revolving loans in an aggregate amount up to the lesser of $200.0 million and a borrowing base, which borrowing base is based upon the value of the Borrowers’ accounts receivable and inventory, subject to eligibility criteria and customary reserves which may be modified in the Agent’s permitted discretion. The Amended Credit Facility also provides for the issuance of letters of credit, which would further reduce borrowing capacity thereunder. The maturity date of the Amended Credit Facility is May 4, 2022. If at any time the amount of loans and other extensions of credit outstanding under the Amended Credit Facility exceed the borrowing base, the Borrowers may be required, among other things, to prepay outstanding loans immediately. The Borrowers’ obligations under the Amended Credit Facility are secured by liens on a substantial portion of the Borrowers’ personal property, subject to certain exclusions and limitations. Upon the occurrence of certain events, additional collateral, including a portion of the Borrowers’ real properties, may also be required to be pledged. Each of the Borrowers is jointly and severally liable for the obligations of the other Borrowers under the Amended Credit Facility. At the Borrowers’ election, interest on borrowings under the Amended Credit Facility will be determined by reference to either LIBOR plus an applicable margin of 2.0% or an “alternate base rate” plus an applicable margin of 1.0%. These margins are subject to a monthly step-up of 0.25% in the event that average excess availability under the Amended Credit Facility is less than 37.5% of the total commitment, and a monthly step-down of 0.25% in the event that average excess availability under the Amended Credit Facility is equal to or greater than 62.5% of the total commitment. Interest will be payable quarterly for loans bearing interest based on the alternative base rate and on the last day of the interest period applicable to LIBOR-based loans. The Borrowers will also be required to pay a fee on the unused portion of the Amended Credit Facility equal to (i) 0.75% in the event that utilization is less than 25.0% of the total commitment, (ii) 0.50% in the event utilization is equal to or greater than 25% of the total commitment but less than 50% of the total commitment and (iii) 0.375% in the event that utilization is equal to or greater than 50% of the total commitment. The Amended Credit Facility contains covenants that limit the Borrowers’ and their subsidiaries’ ability to incur additional indebtedness, grant liens, make loans or investments, make distributions, merge into or consolidate with other persons, make capital expenditures or engage in certain asset dispositions including a sale of all or substantially all of the Company’s assets. The Amended Credit Facility also contains a financial covenant that requires the Company to maintain a monthly minimum fixed charge coverage ratio of 1.0:1.0 if, as of any month-end, liquidity is less than $40.0 million. The fixed charge coverage ratio is generally defined in the Amended Credit Facility as the ratio of (i) EBITDA minus certain capital expenditures and cash taxes paid to (ii) the sum of cash interest expenses, scheduled principal payments on borrowed money and certain distributions. As of December 31, 2017, the Company was in compliance with all financial covenants. DIP Facility On July 29, 2016, the Predecessor entered into the DIP Credit Agreement with the other Debtors, the DIP Lenders and Cortland Capital Market Services LLC, as administrative agent. The borrowers under the DIP Facility were the Predecessor and CJ Holding Co. All obligations under the DIP Facility were guaranteed by the Company’s subsidiaries that were debtors in the Bankruptcy cases. Borrowings under the DIP Credit Agreement were generally secured by superpriority priming liens on substantially all of the assets of the borrowers and guarantors. Amounts outstanding under the DIP Facility bore interest based on, at the option of the borrower, LIBOR or an alternative base rate, plus an applicable margin equal to 9.0% in the case of LIBOR loans and 8.0% in the case of base rate loans. The alternative base rate was equal to the highest of (i) the published ‘prime rate’, (ii) the Federal Funds Effective Rate (as defined in the DIP Credit Agreement) plus 0.5% and (iii) LIBOR plus 1.0%. The DIP Facility also required that the Company pay various fees to the DIP Lenders, including a commitment fee equal to 5.0% of the unused commitments thereunder. The DIP Facility was scheduled to mature on March 31, 2017. In accordance with the Restructuring Plan, on the Plan Effective Date, the Company repaid all amounts outstanding under the DIP Facility with the proceeds from the Rights Offering and the DIP Facility was canceled and discharged. C&J ENERGY SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 92