Long-Term Debt

3 Months Ended

Mar. 31, 2019

6. Long-Term Debt

Long-term debt consisted of the following (in thousands):



	March 31, 2019			December 31, 2018
Partnership Credit Facility	$	400,500		$	839,500

Partnership’s 6.875% senior notes due April 2027	500,000			—
Less: Deferred financing costs, net of amortization	(9,111		)	—
	490,889			—

Partnership’s 6% senior notes due April 2021	350,000			350,000
Less: Debt discount, net of amortization	(1,598		)	(1,789		)
Less: Deferred financing costs, net of amortization	(2,055		)	(2,311		)
	346,347			345,900

Partnership’s 6% senior notes due October 2022	350,000			350,000
Less: Debt discount, net of amortization	(2,590		)	(2,766		)
Less: Deferred financing costs, net of amortization	(2,929		)	(3,133		)
	344,481			344,101
Long-term debt	$	1,582,217		$	1,529,501

Archrock Credit Facility

In April 2018, in connection with the Merger and Amendment No. 1, the Archrock Credit Facility was terminated. Prior to its termination, we incurred $0.2 million in commitment fees during the three months ended March 31, 2018 and were in compliance with all of its covenants as of March 31, 2018.

Partnership Credit Facility

As of March 31, 2019, the Partnership had $15.2 million letters of credit outstanding under the Partnership Credit Facility and the applicable margin on borrowings outstanding was 2.7%. The weighted average annual interest rate on the outstanding balance under the Partnership Credit Facility, excluding the effect of interest rate swaps, was 5.3% and 5.4% at March 31, 2019 and December 31, 2018, respectively. The Partnership incurred $0.5 million in commitment fees on the daily unused amount of the Partnership Credit Facility during each of the three months ended March 31, 2019 and 2018.

The Partnership must maintain the following consolidated financial ratios, as defined in the Partnership Credit Facility agreement:



EBITDA to Interest Expense	2.5 to 1.0
Senior Secured Debt to EBITDA	3.5 to 1.0
Total Debt to EBITDA
Through fiscal year 2018	5.95 to 1.0
Through fiscal year 2019	5.75 to 1.0
Through second quarter of 2020	5.50 to 1.0
Thereafter ⁽¹⁾	5.25 to 1.0

——————


⁽¹⁾	Subject to a temporary increase to 5.5 to 1.0 for any quarter during which an acquisition satisfying certain thresholds is completed and for the two quarters immediately following such quarter.

As a result of the ratio requirements above, $485.8 million of the $834.3 million of undrawn capacity was available for additional borrowings as of March 31, 2019. As of March 31, 2019, the Partnership was in compliance with all covenants under the Partnership Credit Facility agreement.

2027 Notes

On March 21, 2019, the Partnership completed a private offering of $500.0 million aggregate principal amount of 6.875% senior notes due April 2027. The Partnership received net proceeds of $490.9 million after deducting issuance costs. The $9.1 million of issuance costs were recorded as deferred financing costs within long-term debt in our condensed consolidated balance sheets and are being amortized to interest expense in our condensed consolidated statement of operations over the term of the notes. The net proceeds were used to repay borrowings outstanding under the Partnership Credit Facility as of March 31, 2019. In April 2019, the Partnership borrowed on the Partnership Credit Facility to repay the $350.0 million of the Partnership’s 6% senior notes due April 2021. See Note 20 (“Subsequent Events”) for further details of this redemption.

The 2027 Notes have not been and will not be registered under the Securities Act or the securities laws of any other jurisdiction and may not be offered or sold in the U.S. except pursuant to a registration exemption under the Securities Act and applicable state securities laws. The Partnership offered and issued the 2027 Notes only to qualified institutional buyers in accordance with Rule 144A under the Securities Act and to certain non-U.S. persons outside the U.S. in accordance with Regulation S under the Securities Act.

The 2027 Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by us and all of our existing subsidiaries, other than Archrock Partners, L.P. and APLP Finance Corp., which are co-issuers of the 2027 Notes, and certain of our future subsidiaries. The 2027 Notes and the guarantees rank equally in right of payment with all of our and the guarantors’ existing and future senior indebtedness.

Prior to April 1, 2022, the Partnership may redeem all or part of the 2027 Notes at a redemption price equal to 100% of the principal amount of the 2027 Notes plus a make-whole premium plus accrued and unpaid interest, if any. The Partnership may also redeem up to 35% of the aggregate principal amount of the 2027 Notes prior to April 1, 2022 with the net proceeds of one or more equity offerings at a redemption price of 106.875% of the principal amount of the 2027 Notes plus any accrued and unpaid interest as long as at least 65% of the aggregate principal amount of the 2027 Notes remains outstanding after such redemption and the redemption occurs within 180 days of the closing of such equity offering. On or after April 1, 2022, the Partnership may redeem all or part of the 2027 Notes at redemption prices equal to 105.156%, 103.438% and 101.719% for the 12-month periods beginning on April 1, 2022, 2023 and 2024, respectively, and 100.000% beginning on April 1, 2025 and at any time thereafter, plus any accrued and unpaid interest.