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LONG-TERM DEBT | 9 Months Ended
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Sep. 30, 2016
LONG-TERM DEBT. |
LONG-TERM DEBT | 8. LONG-TERM DEBT In March 2016, the Partnership began negotiations with the Lenders to secure waivers for non-compliance of its debt covenants related to the Credit Agreement. Subsequent amendments to the Credit Agreement and formal plans to sell the Partnerships assets and secure capital, submitted to the Lenders, have not resulted in a waiver of non-compliance of debt covenants greater than twelve months. Accordingly, based on relevant accounting guidance, the Partnership has classified its debt under the Credit Agreement as a current liability as of September 30, 2016. Long-term debt, net of deferred borrowing costs consisted of the following:
In thousands |  | September 30, 2016 |  | December 31, 2015 |
Credit Agreement |  | $ | 173,512 |  | $ | 231,735 |
Less: Net deferred borrowing costs |  |  | 1,569 |  |  | 3,261 |
Total debt |  |  | 171,943 |  |  | 228,474 |
Less: Current portion of long-term debt |  |  | 171,943 |  |  | — |
Total long-term debt, net of deferred borrowing costs |  | $ | — |  | $ | 228,474 |
Credit Agreement On February 27, 2015, we entered into the Credit Agreement with the Lenders. Borrowings under the Credit Agreement bear interest, at the Partnership’s election, at the lesser of: (i) the LIBOR Rate, as defined in the Credit Agreement, plus an applicable margin of 3.25% to 4.25%; or (ii) the Base Rate, as defined in the Credit Agreement plus an applicable margin of 2.25% to 3.25%, in each case, based on the Consolidated Total Leverage Ratio, as defined in the Credit Agreement. All of the Partnership's domestic restricted subsidiaries guarantee our obligations under the Credit Agreement, and all such obligations are secured by a security interest in substantially all of our assets, in each case, subject to certain customary exceptions. The Credit Agreement contains affirmative and negative covenants customary for credit facilities of its size and nature that, among other things, limit or restrict our ability and the ability of our subsidiaries to: (i) incur additional debt; (ii) grant certain liens; (iii) make certain investments; (iv) engage in certain mergers or consolidations; (v) dispose of certain assets; (vi) enter into certain types of transactions with affiliates; and (vii) make distributions, with certain exceptions, including the distribution of Available Cash, as defined in the Partnership Agreement, if no default or event of default exists. As of September 30, 2016, we had outstanding borrowings under the Credit Agreement of $173.5 million. For the three and nine months periods ended September 30, 2016 interest expense associated with the Credit Agreement was $3.3 million and $8.4 million. For the three months ended September 30, 2015 interest expense associated with the credit agreement was $1.8 million. For the period March 1, 2015 to September 30, 2015 interest expense associated with the Credit Agreement was $4.1 million. We had net deferred loan costs of $1.6 million and $3.3 million as of September 30, 2016 and December 31, 2015 in connection with the Credit Agreement. These financing costs were classified within long-term debt, net of deferred borrowing costs in the condensed consolidated balance sheets and will be amortized to interest expense and related charges over the maturity period of the Credit Agreement. As part of the AES Agreement discussed in Note 1, on April 1, 2016, the proceeds from the $15.0 million letter of credit were applied to pay down debt under our Credit Agreement. Proceeds of $41.0 million from the Sale Agreement discussed in Note 1, on August 4, 2016, were used to pay down debt under our Credit Agreement. Amendments to the Credit Agreement As a result of the decline in commodity prices and associated decline in upstream oil and gas drilling activity, we experienced a decline in the growth in volume of natural gas we gather and process for our customers. These collective events affected our operating results adversely and resulted in the need to amend our Credit Agreement. We have entered into several amendments to the credit facility which have, among other things,: i) waived certain covenants of default for specific periods of time; (ii) reduced the borrowing capacity under the Credit Agreement; (iii) restricted the amount of capital expenditures the Partnership may make; and (iv) required the Partnership to submit plans to sell assets of the Partnership and plans to raise capital. Please see Note 1 “Going Concern Uncertainty” and “Amendments to Credit Agreement” for further discussion of these amendments to our Credit Agreement. Based upon our current estimates and expectations for commodity prices in 2016, we do not expect to remain in compliance with all of the restrictive covenants contained in the Credit Agreement throughout 2016 unless those requirements are waived or amended. The Partnership does not currently have adequate liquidity to repay all of its outstanding debt in full if such debt were accelerated. Azure Credit Agreements On November 15, 2013, Azure closed on a $550.0 million Senior Secured Term Loan B (the "TLB") maturing November 15, 2018, and a $50.0 million Senior Secured Revolving Credit Facility, the ("Revolver") and collectively with the TLB, the ("Azure Credit Agreement"), with a maturity of November 15, 2017. Borrowings under the Azure Credit Agreement were unconditionally guaranteed, jointly and severally, by all of the Azure subsidiaries and are collateralized by first priority liens on substantially all of existing and subsequently acquired assets and equity. The Azure Credit Agreement weighted average interest rate for the period from January 1, 2015 to February 28, 2015 was 6.50%. Azure System Long-term Debt and Related Expense Allocations The Azure Credit Agreement served as the sole borrowing agreement applicable for the Azure System from the period November 15, 2013 up to the Transaction Date. In addition, substantially all of Azure’s subsidiaries, including the Azure System, served as guarantors and pledger's with respect to the Azure Credit Agreement. The Azure System’s long-term debt and related expense balances for the period from January 1, 2015 to February 28, 2015 represent an allocation of its proportionate share of the Azure consolidated long-term debt presented in accordance with applicable accounting guidance. The allocation of long-term debt and related expense is based on the Azure System’s proportional carrying value of assets as a percentage of total assets financed by the Azure Credit Agreement. In connection with entering into the Azure Credit Agreement, Azure incurred financing costs, which were deferred and amortized over the maturity period of the Azure Credit Agreement. These deferred financing costs have also been allocated to the Azure System’s balance sheet, included within long-term debt, net of deferred borrowing costs, as of December 31, 2015. The Azure System's interest expense allocation has also been calculated using a similar allocation methodology as long-term debt. The weighted average long-term debt allocated to the Azure System for the period January 1, 2015 to February 28, 2015 was $192.0 million. The weighted average long-term debt allocated to the Partnership for the Azure ETG System was $54.4 million for the period March 1, 2015 to June 30, 2015. The interest expense allocated to the Azure System for the period January 1, 2015 to February 28, 2015 was $2.3 million of which $0.3 million was associated with the allocation of deferred financing cost amortization expense. The interest expense allocated to the Partnership for the Azure ETG System was $1.7 million for the period March 1, 2015 to June 30, 2015, of which $0.2 million was associated with the allocation of deferred financing cost amortization expense. The allocation of long-term debt and related expenses to the Azure System were in accordance with applicable accounting guidance, and the long-term debt and related expenses were not assumed by the Partnership as part of the Contribution. As a result, the allocation of long-term debt and related expenses is only applicable for the Azure System historical periods presented.

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