USD Partners Announces Forbearance Agreement Under Credit Agreement

Rhea-AI Summary

USD Partners (USDP) announced a Forbearance Agreement with its lenders on June 21, 2024, to address events of default under its Credit Agreement. This agreement prevents lenders from exercising their rights or remedies until November 1, 2024, which can be extended to December 30, 2024, and potentially to January 31, 2025.

As part of the agreement, USD Partners must sell its Hardisty Rail Terminal by December 30, 2024, and adhere to an approved operating budget, repaying borrowings with excess cash. The Hardisty Rail Terminal is supported by a long-term contract with an investment-grade customer. Notably, the DRU, owned by Gibson Energy and US Development Group, is not included in the sale.

Positive

• Forbearance Agreement prevents immediate lender action until November 1, 2024, potentially extending to January 31, 2025.
• Sale of Hardisty Rail Terminal, supported by a long-term contract with an investment-grade customer, is expected to generate liquidity.

Negative

• Events of default under the existing Credit Agreement indicate financial distress.
• Mandatory sale of Hardisty Rail Terminal by December 30, 2024, under lender conditions.
• Obligation to adhere to a lender-approved operating budget and repay borrowings with excess cash limits operational flexibility.

HOUSTON--(BUSINESS WIRE)-- USD Partners LP (OTC: USDP) (the “Partnership”) announced today that on June 21, 2024 it entered into an agreement (the “Forbearance Agreement”) with the lenders and administrative agent under its existing Credit Agreement. Pursuant to the Forbearance Agreement, subject to certain terms and conditions, the lenders have agreed to forbear through and until November 1, 2024 (the “Termination Date”), from exercising any rights or remedies arising from certain events of default and certain prospective events of default related to the Partnership’s failure to satisfy certain milestones under the Credit Agreement and other loan documents.

In exchange for agreeing to enter into the Forbearance Agreement, the lenders under the Credit Agreement will require the Partnership to, among other things, complete the sale of the Partnership’s Hardisty Rail Terminal on or before December 30, 2024. The Termination Date may be extended (i) to December 30, 2024, upon satisfaction of certain milestones in the sale process and (ii) to January 31, 2025, in the discretion of the administrative agent. The Forbearance Agreement also obligates the Partnership to adhere to an operating budget approved by the administrative agent and includes an obligation to repay borrowings with any cash on hand in excess of an agreed maximum.

The Hardisty Rail Terminal is underpinned by a long term take-or-pay contract to load DRU volumes with an investment grade customer. The DRU, which is owned jointly by Gibson Energy Inc. and US Development Group, LLC (“USDG”), the owner of the Partnership’s general partner, is not a part of the sale.

About USD Partners LP

USD Partners LP is a fee-based master limited partnership formed in 2014 by USDG to acquire, develop and operate midstream infrastructure and complementary logistics solutions for crude oil, biofuels and other energy-related products. The Partnership generates substantially all of its operating cash flows from multi-year, take-or-pay contracts with primarily investment grade customers, including major integrated oil companies, refiners and marketers. The Partnership’s current operations include railcar loading, storage, and as well as other related logistics services. In addition, the Partnership provides customers with leased railcars and fleet services to facilitate the transportation of liquid hydrocarbons by rail.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of U.S. federal securities laws, including statements with respect to the impact of the Forbearance Agreement, future events relating to our Credit Agreement, including the Partnership’s ability to successfully market and complete the sale of the Hardisty Rail Terminal, and the business prospects of the Partnership and the DRU. Words and phrases such as “plans,” “will,” “could” and similar expressions are used to identify such forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements relating to the Partnership are based on management’s expectations, estimates and projections about the Partnership, its interests and the energy industry in general on the date this press release was issued. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Factors that could cause actual results or events to differ materially from those described in the forward-looking statements include those set forth under the heading “Risk Factors” in the Partnership’s financial statements for the year ended December 31, 2023, which are available on the Partnership’s website, and actions by lenders, the Partnership’s ability to successfully market and complete the sale of the Hardisty Rail Terminal in compliance with the Forbearance Agreement, the Partnership’s ability to obtain further forbearance, waivers, amendments, an extension of the maturity date of the Credit Agreement or the Partnership’s ability to repay or refinance borrowings under the Credit Agreement, the impact of the loss of cash flows from the Hardisty Rail Terminal if sold, the tax impact of cancellation of indebtedness income on the Partnership and its unitholders upon completion of such sale, and the potential winding down of the Partnership’s operations and/or dissolution of the Partnership following such sale. Investors are advised to read such “Risk Factors,” together with all information publicly disclosed by the Partnership subsequent thereto, before making an investment decision. The Partnership is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240624018828/en/

Investor Relations Contacts:

Kyle Schornick, (832) 991-8575

Senior Vice President and Chief Financial Officer

Jennifer Waller, (832) 991-8383

Senior Director, Financial Reporting and Investor Relations

Source: USD Partners LP

FAQ

What is the Forbearance Agreement announced by USD Partners on June 21, 2024?

The Forbearance Agreement prevents lenders from exercising their rights or remedies due to events of default under the Credit Agreement until November 1, 2024, with possible extensions.

Why does USD Partners have to sell the Hardisty Rail Terminal?

The sale of the Hardisty Rail Terminal is a condition under the Forbearance Agreement with lenders to address financial defaults, required by December 30, 2024.

What is the impact of the Forbearance Agreement on USD Partners?

The agreement provides temporary relief from lender actions but imposes conditions like selling assets and adhering to an approved budget, limiting operational flexibility.

What are the key dates in USD Partners' Forbearance Agreement?

Key dates include November 1, 2024, as the initial termination date, with possible extensions to December 30, 2024, and January 31, 2025.

How is the Hardisty Rail Terminal related to USD Partners' financial situation?

The Hardisty Rail Terminal's sale is part of USD Partners' strategy to meet lender requirements under the Forbearance Agreement, addressing financial distress.