Kodiak Gas Services Announces Launch of $750 Million Senior Unsecured Notes Offering

Rhea-AI Summary

Kodiak Gas Services, Inc. (NYSE: KGS) has announced a private offering of $750 million in senior unsecured notes due 2029 by its subsidiary, Kodiak Gas Services, LLC. The net proceeds will be used to repay a portion of outstanding debt and to cover fees, costs, and expenses related to the acquisition of CSI Compressco LP. The Notes will not be registered under the Securities Act of 1933 and are offered only to qualified institutional buyers or non-U.S. persons.

Insights

Financial Analyst

The launch of a private offering of $750 million in senior unsecured notes by Kodiak Gas Services, LLC represents a significant capital market transaction. The decision to repay a portion of the existing debt under the ABL Facility indicates a strategic move to optimize the company's capital structure. By addressing its current debt obligations, Kodiak is potentially reducing the cost of capital and improving its financial flexibility, which is crucial for executing the CSI Acquisition.

Investors should note that the use of the term 'senior unsecured notes' implies that these debt instruments rank higher in the event of liquidation than other unsecured debt but do not have collateral backing them. This may affect the perceived risk of the investment. The notes' attractiveness will be contingent on the interest rate offered compared to the current market rates and the company's creditworthiness.

However, the fact that the offering is not registered under the Securities Act and is limited to qualified institutional buyers or non-U.S. persons could limit the investor pool, potentially affecting the offering's success. The reliance on exemptions from registration requirements also suggests a need for expedience or confidentiality in the transaction.

Debt Market Analyst

In evaluating the impact of the proposed senior unsecured notes offering on Kodiak Gas Services, it's essential to consider the implications for debt investors. The terms of the notes, including their maturity in 2029, will be a critical factor in assessing their marketability. The maturity period provides a medium-term investment horizon, which could be attractive to institutional investors seeking to balance yield and duration risk.

Moreover, the decision to repay and potentially terminate or redeem CSI's existing long-term indebtedness post-acquisition is a prudent step. It implies a consolidation of debt and possibly a reduction in the overall interest burden. This could result in credit rating improvements, which would be favorable for both the company and debt holders.

Yet, the lack of registration under the Securities Act means that the notes will not have the same level of public disclosure as registered securities, which could affect the due diligence process for potential buyers. This opacity must be weighed against the potential financial benefits of the offering.

Mergers and Acquisitions Analyst

The strategic rationale behind Kodiak's acquisition of CSI Compressco LP and the associated financing maneuvers is a key point of analysis. The CSI Acquisition appears to be a growth-oriented move, likely aiming to expand Kodiak's market share and operational capabilities. By financing this acquisition through a combination of the notes offering and additional draws on the ABL Facility, Kodiak is leveraging its access to capital markets to fund growth without immediately diluting shareholder equity.

It's important to scrutinize the terms of the acquisition and the expected synergies. If the acquisition leads to significant cost savings or revenue enhancement, it could positively impact Kodiak's earnings and, ultimately, shareholder value. On the other hand, the integration of CSI's operations will require careful management to realize these potential benefits and mitigate integration risks.

Investors should also consider the timing of the transaction and its alignment with industry trends, such as consolidation in the energy sector or technological advancements in gas services. The acquisition's success will depend on Kodiak's ability to integrate CSI's assets effectively and capitalize on any emerging market opportunities.

MONTGOMERY, Texas, Jan. 29, 2024 /PRNewswire/ -- Kodiak Gas Services, Inc. (NYSE: KGS) ("Kodiak", "we" or the "Company") today announced that its wholly owned subsidiary, Kodiak Gas Services, LLC (the "Issuer") has launched a private offering (the "Offering") of $750 million in aggregate principal amount of senior unsecured notes due 2029 (the "Notes").

The Issuer intends to use the net proceeds from the Offering to repay a portion of the outstanding indebtedness under the Issuer's revolving asset-based loan credit facility (the "ABL Facility") and to pay related fees, costs, premiums and expenses in connection therewith and with the closing of the Company's previously announced acquisition of CSI Compressco LP (the "CSI Acquisition"). In connection with closing of the CSI Acquisition, the Company intends, using proceeds from additional draws on the ABL Facility, to repay, terminate and/or redeem all of CSI's existing long-term indebtedness.

The Notes will not be registered under the Securities Act of 1933, as amended (the "Securities Act"), or under any state or other securities laws and may not be offered or sold within the United States, or to or for the account or benefit of any U.S. person, absent registration or an applicable exemption from registration requirements. The Notes are being offered only to persons who are either reasonably believed to be "qualified institutional buyers" under Rule 144A or who are non-"U.S. persons" under Regulation S as defined under applicable securities laws.

This news release does not constitute an offer to sell, a solicitation to buy or an offer to purchase or sell any securities, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. This news release is being issued pursuant to and in accordance with Rule 135c under the Securities Act.

About Kodiak

KGS is one of the largest contract compression services providers in the continental United States with a fleet of over 3.2 million horsepower. Kodiak focuses on providing contract compression services to oil and gas producers and midstream customers in high–volume gas gathering systems, processing facilities, multi–well gas lift applications and natural gas transmission systems.

Cautionary Note Regarding Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Forward-looking statements contained herein include statements we make regarding the Notes offering and the expected use of proceeds therefrom. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. A list and description of risks, uncertainties and other factors can be found in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of our final prospectus filed with the U.S. Securities and Exchange Commission (the "SEC") on June 30, 2023 pursuant to Rule 424(b)(4) and in Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Part II, Item 1A. "Risk Factors" sections of our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023 and filed with the SEC on November 9, 2023. Any forward-looking statement made by us in this news release is based only on information currently available to us and speaks only as of the date on which it is made. Except as may be required by applicable law, we undertake no obligation to publicly update any forward-looking statement whether as a result of new information, future developments or otherwise.

Contacts:

Kodiak Gas Services, Inc.
Graham Sones, VP of Investor Relations
ir@kodiakgas.com
(936) 755-3259

Dennard Lascar Investor Relations
Ken Dennard / Rick Black
KGS@dennardlascar.com
713-529-6600

 

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SOURCE Kodiak Gas Services, Inc.

FAQ

What is the purpose of the private offering of senior unsecured notes by Kodiak Gas Services, LLC?

The purpose is to repay a portion of outstanding debt and to cover fees, costs, and expenses related to the acquisition of CSI Compressco LP.

What is the amount of the private offering of senior unsecured notes?

The offering is for $750 million in aggregate principal amount.

Who is the subsidiary launching the private offering?

The subsidiary is Kodiak Gas Services, LLC.

What is the ticker symbol for Kodiak Gas Services, Inc.?

The ticker symbol is KGS.

Are the Notes being offered to U.S. persons?

No, the Notes are being offered only to qualified institutional buyers or non-U.S. persons.

Will the Notes be registered under the Securities Act of 1933?

No, the Notes will not be registered under the Securities Act of 1933.