Long-Term Debt

12 Months Ended

Dec. 31, 2019

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



	December 31,
	2019		2018

10.75% Senior Notes due 2023	$	300,000	$	300,000


Capital leases and other notes	35,898		49,926
Unamortized discount and deferred debt costs	(8,795)		(11,169)
Total long-term debt	327,103		338,757
Less current portion	18,738		19,582
Total non-current portion of long-term debt	$	308,365	$	319,175

Debt Discounts

The following discounts on debt represent the unamortized discount to fair value of prior Amended and Restated Term Loan Agreement and the short-term and long-term portions of the fair value discount of capital leases (in thousands):


	December 31,
	2019		2018

Unamortized discount on Senior Notes	$	2,156	$	2,731
Unamortized discount on Capital Leases - short-term	—		479

Unamortized deferred debt issuance costs	6,639		7,959
Total	$	8,795	$	11,169

Senior Secured Notes

On October 2, 2018, the Company issued $300 million aggregate principal amount of 10.75% senior secured notes due 2023 (the “Senior Notes”) in an offering exempt from registration under the Securities Act. The Senior Notes were issued at a price of 99.042% of par to yield 11.0%. The Senior Notes are secured by a first-priority lien on substantially all of the assets of the Company and the subsidiary guarantors other than accounts receivable, inventory and certain related assets. Net proceeds from the offering of approximately $290.0 million were used to repay the Company’s existing indebtedness under the Amended and Restated Term Loan Agreement, to repay the Company’s outstanding borrowings under its previous credit facility (the "Prior ABL Facility"), and for general corporate purposes.

Indenture

The Company’s Senior Notes were issued under and are governed by an indenture, dated as of October 2, 2018 (the “Indenture”), by and among the Company, the guarantors named therein (the “Guarantors”), and UMB Bank, N.A. as Trustee and Collateral Agent (the “Trustee”). The Senior Notes are jointly and severally, fully and unconditionally guaranteed (the “Guarantees”) on a senior secured basis by the Guarantors and are secured by first priority liens on substantially all of the Company’s and the Guarantors’ assets, other than accounts receivable, inventory and certain related assets.

The Indenture contains covenants that limit the ability of the Company and certain subsidiaries to:

•incur additional indebtedness or issue preferred stock;

•pay dividends or make other distributions to its stockholders;

•repurchase or redeem capital stock or subordinated indebtedness and certain refinancings thereof;

•make certain investments;

•incur liens;

•enter into certain types of transactions with affiliates;

•limit dividends or other payments by restricted subsidiaries to the Company; and

•sell assets or consolidate or merge with or into other companies.

These limitations are subject to a number of important qualifications and exceptions.

Upon an Event of Default (as defined in the Indenture), the Trustee or the holders of at least 25% in aggregate principal amount of the outstanding Senior Notes may declare the entire principal of, premium, if any, and accrued and unpaid interest, if any, on all the Senior Notes to be due and payable immediately.

At any time on or prior to October 15, 2020, the Company may redeem up to 35% of the aggregate principal amount of the Senior Notes at a redemption price equal to 110.75% of the principal amount, plus accrued and unpaid interest, if any, to the redemption date, with an amount of cash not greater than the net proceeds from certain equity offerings. At any time prior to October 15, 2020, the Company may redeem the Senior Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the Senior Notes plus a “make-whole” premium plus accrued and unpaid interest, if any, to the redemption date. The Company may also redeem all or a part of the Senior Notes at any time on or after October 15, 2020, at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to the redemption date.

The Company may redeem all, but not less than all, of the Senior Notes in connection with a company sale transaction, at a redemption price of 105.375% of principal for a company sale that occurs on or after April 15, 2019 and on or before October 15, 2019, or 108.063% of principal amount for a company sale that occurs after October 15, 2019 and before October 15, 2020, in each case plus accrued and unpaid interest, if any, to the redemption date. If the transactions contemplated by the Exchange Agreement are followed by a downgrade in the Company's rating by either S&P Global Ratings or Moody’s Investors Service within 90 days, a “Change of Control” as defined in our Senior Notes will be deemed to have occurred. If the Company experiences such a Change of Control, the Company may be required to offer to purchase the Senior Notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest, if any, to the purchase date.

The Senior Notes and the Guarantees rank equally in right of payment with all of the Company’s and the Guarantors’ existing and future unsubordinated indebtedness, effectively senior to all of the Company’s and the Guarantors’ existing and future indebtedness to the extent of the value of the collateral securing the Senior Notes but junior to other indebtedness that is secured by liens on assets other than collateral for the Senior Notes to the extent of the value of such assets, and senior to all of the Company’s and the Guarantors’ future subordinated indebtedness.

Pursuant to a collateral rights agreement, the Senior Notes and Guarantees are secured by first priority liens, subject to limited exceptions, on the collateral securing the Senior Notes, consisting of substantially all of the property and assets now owned or hereafter acquired by the Company and the Guarantors, except for certain excluded property described in the Indenture.

ABL Facility

On October 2, 2018, the Company terminated the Prior ABL Facility and Amended and Restated Term Loan Agreement and entered into an ABL Credit Agreement (the “ABL Credit Agreement”) among the Company, as borrower (in such capacity, the “Borrower”), Bank of America, N.A., as administrative agent (the “Administrative Agent”), swing line lender and letter of credit issuer, UBS Securities LLC, as syndication agent, PNC Bank National Association, as documentation agent and letter of credit issuer, and the other lenders from time to time party thereto (collectively, the “ABL Lenders”). Pursuant to the ABL Credit Agreement, the ABL Lenders have extended to the Borrower a revolving credit facility in the maximum aggregate principal amount of $150 million, subject to borrowing base capacity (the “ABL Facility”). The ABL Facility includes a sublimit for letters of credit of up to $50 million in the aggregate, and for borrowings on same-day notice under swingline loans subject to a sublimit of the lesser of (a) $15 million and (b) the aggregate commitments of the ABL Lenders. The ABL Facility also provides capacity for base rate protective advances up to $10 million at the discretion of the Administrative Agent and provisions relating to overadvances. The ABL Facility contains no restricted cash requirements.

Borrowings under the ABL Facility bear interest at a rate per annum equal to an applicable rate, plus, at Borrower’s option, either (a) a base rate or (b) a LIBO rate. The applicable rate is fixed from the closing date to April 1, 2019. After April 1, 2019, the applicable rate is determined by reference to the average daily availability as a percentage of the borrowing base during the fiscal quarter immediately preceding such applicable quarter. The applicable rate has remained unchanged since inception of the ABL Facility.

Principal amounts outstanding under the ABL Facility will be due and payable in full on the maturity date, which is five years from the closing of the facility; provided that if the Senior Notes have not been redeemed by July 3, 2023, then the maturity date shall be July 3, 2023.

Substantially all of the domestic subsidiaries of the Company guarantee the borrowings under the ABL Facility, and Borrower guarantees the payment and performance by each specified loan party of its obligations under its

guaranty with respect to swap obligations. All obligations under the ABL Facility and the related guarantees are secured by a perfected first-priority security interest in substantially all accounts receivable, inventory, and certain other assets, not including equity interests. As of December 31, 2019, Basic had no borrowings and $34.2 million of letters of credit outstanding under the ABL Facility.

Prior ABL Facility

On September 29, 2017, Basic entered into a credit facility (the "Prior ABL Facility") pursuant to (i) a Receivables Transfer Agreement (the “Transfer Agreement”) entered into by and among Basic Energy Services, L.P. (“BES LP”), as the initial originator and Basic Energy Receivables, LLC (the “SPE”), as the transferee and (ii) the Credit Agreement.

Under the Transfer Agreement, BES LP was required to sell or contribute, on an ongoing basis, its accounts receivable and related security and interests in the proceeds thereof (the “Transferred Receivables”) to the SPE. The SPE financed a portion of its purchase of the accounts receivable through borrowings, on a revolving basis, of up to $100 million (with the ability to request an increase in the size of the Prior ABL Facility by $50 million) under the Credit Agreement, and such borrowings were secured by the accounts receivable. The SPE financed its purchase of the remaining portion of the accounts receivable by issuing subordinated promissory notes to BES LP and/or by contributing the remaining portion of the accounts receivables in exchange for equity in the SPE in the amount of the purchase price of the receivable not paid in cash. BES LP was responsible for the servicing, administration and collection of the accounts receivable, with all collections going into lockbox accounts. The Company provided a customary guaranty of performance to the administrative agent with respect to certain obligations of BES LP and any successor servicer under the Prior ABL Facility. In connection with entering into the Prior ABL Facility, on September 29, 2017, the Company amended the Amended and Restated Term Loan Agreement to permit, among other things, (i) the acquisition of the Transferred Receivables by the SPE pursuant to the Transfer Agreement, free and clear of the liens under the Amended and Restated Term Loan Agreement and (ii) the transactions contemplated under each of the Transfer Agreement and Credit Agreement. The Company consolidated the SPE, which the Company determined to be a variable interest entity ("VIE"), and all intercompany activity was eliminated upon consolidation. In concluding the SPE was a VIE, the Company determined it is the primary beneficiary of the SPE, as all activities of SPE are for the benefit of the Company. The accounts receivable held at the SPE are used solely to settle the debt obligations of the SPE.

Loans under our Prior ABL Facility bore interest at a fluctuating rate equal to (a) the Alternate Base Rate plus 2.25% with respect to ABR Loans or (b) the Adjusted LIBO rate plus 3.25% with respect to Eurodollar Loans (each as defined in the Credit Agreement). A commitment fee equal to 0.375% per annum was payable on the unused commitments under the Credit Agreement. The loans made pursuant to the Credit Agreement had a maturity date of September 29, 2021.

In connection with the closing of its Senior Notes offering, the Company repaid the balances outstanding under the Prior ABL Facility in its entirety and terminated the Prior ABL Facility.

Amended and Restated Term Loan Agreement

On December 23, 2016, the Company entered into an Amended and Restated Term Loan Credit Agreement (the “Amended and Restated Term Loan Agreement”) with a syndicate of lenders and U.S. Bank National Association, as administrative agent for the lenders. On October 2, 2018, in connection with the closing of its Senior Note offering, the Company repaid its outstanding debt (including accrued interest) under the Amended and Restated Term Loan Agreement and terminated the Amended and Restated Term Loan Agreement. The Amended and Restated Term Loan Agreement repayment was made prior to the maturity date defined in the Amended and Restated Term Loan Agreement, and the Company incurred repayment penalties of approximately $17.6 million associated with the repayment.

Other Debt

Basic has a variety of other capital leases outstanding, which are generally customary in Basic’s business.

As of December 31, 2019, the aggregate maturities of debt, including capital leases, for the next five years and thereafter are as follows (in thousands):


Period:	Debt		Capital Leases
2020	$	—	$	18,738
2021	—		11,485
2022	—		4,835
2023	300,000		785
Thereafter	—		55
Total	$	300,000	$	35,898

Basic’s interest expense consisted of the following (in thousands):



	Year ended December 31,
Interest expense:	2019		2018
Cash payments for interest	$	39,248	$	34,396
Commitment and other fees paid	48		2,441

Amortization of discounts	1,054		3,424
Amortization of deferred debt costs	2,338		1,050
Change in accrued interest	86		3,688

Other	113		162
Interest expense - continuing operations	$	42,887	$	45,161