HALLADOR ENERGY CO Debt Disclosure

(4)     BANK DEBT

The Company is a party to a credit agreement with PNC Bank, National Association (“PNC”), in its capacity as administrative agent, which consists of a revolving credit facility of up to $75.0 million and a term loan.

On September 27, 2024, the Company executed the First Amendment (“First Amendment”) to the Fourth Amended and Restated Credit Agreement, dated as of August 2, 2023 (as amended, the “Credit Agreement”), with PNC Bank, which was accounted for as a debt modification. The primary purpose of the First Amendment was to provide the Company with short-term covenant relief to pursue additional liquidity. During the fourth quarter of 2024, the Company entered into a prepaid forward power sales contract in which $20.0 million of the proceeds were used to pay our required $6.5 million quarterly loan payments through the third quarter of 2025 and also reduced our fourth quarter 2025 payment to $6.0 million. Furthermore, the First Amendment defined certain administrative changes which include, among other things, added requirements related to reporting, third party financial advisors, and appraisals on coal and power assets.

On June 27, 2025, the Company executed the Third Amendment (“Third Amendment”) to our Credit Agreement, which was accounted for as a debt modification. The primary purpose of the Third Amendment was to provide additional operating flexibility for the remainder of 2025 by redefining covenants and deferring certain covenants until the third quarter of 2025. During the second quarter of 2025, the Company entered into a $35.0 million prepaid forward power sales contract of which $19.0 million of the proceeds were deposited into a money market account with the administrative agent as a compensating balance. The compensating balance was utilized to fully repay the outstanding term loan during the fourth quarter of 2025. As of March 5, 2026, the Company fully repaid its revolving credit facility.

Bank debt was reduced by $14.0 million and $47.5 million during the years ended December 31, 2025 and 2024, respectively.

Our debt is recorded at amortized cost, which approximates fair value due to the variable interest rates in the agreement and is collateralized by substantially all our assets.

Liquidity

As of December 31, 2025, we had additional borrowing capacity of $28.8 million under the revolving credit facility and total liquidity of $38.8 million. Our additional borrowing capacity is net of $16.2 million in outstanding letters of credit as of December 31, 2025 that were required to maintain surety bonds or related to PPAs. Liquidity consists of additional borrowing capacity and cash and cash equivalents.

PNC’s commitment to make additional advances, and their obligation to issue letters of credit, may be terminated or reduced upon the occurrence of certain events, including, but not limited to (a) an event of default as defined in the Credit Agreement, including, among other things: (i) non-payment of principle, interest or other obligations; (ii) breaches of covenants, including financial covenants; (iii) breaches of representations and warranties; (iv) cross-defaults to other indebtedness; (v) change of control events; and (vi) bankruptcy or insolvency events; or (b) the failure to satisfy certain conditions at the time of a draw request. Upon the occurrence of an event of default, PNC, at its option, may terminate its commitments and obligation to issue letters of credit, declare all outstanding borrowings immediately due and payable, require cash collateralization of outstanding letters of credit and exercise other rights and remedies available under the Credit Agreement.

Fees

Unamortized bank fees and other costs incurred in connection with our initial facility totaled $4.3 million. Additional costs incurred with our Credit Agreement amendments totaled $0.9 million, of which $0.3 million related to our Third Amendment. These unamortized bank fees were deferred and are being amortized over the term of the Credit Agreement. 

During 2025, we recognized a loss on extinguishment of debt of $0.6 million for the write-off of unamortized loan fees related to the Term Loan which was paid off in the fourth quarter of 2025. The remaining costs deferred are being amortized over the term of the revolving credit facility. Unamortized bank fees as of December 31, 2025 and 2024, were $0.3 million and $2.5 million, respectively. Commitment fees on the unused portion of the facility are 0.50% per annum.

Bank debt, less debt issuance costs, is presented below (in thousands):

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Covenants

The First Amendment, among other things, provided the Company with short-term covenant relief to pursue additional liquidity. The First Amendment waived the Company’s Leverage Ratio requirement for the third and fourth quarters of 2024, increased the threshold to 5.50 to 1.00 for the first quarter of 2025, and decreased the threshold back to 2.25 to 1.00 for each fiscal quarter thereafter. Additionally, the Debt Service Coverage Ratio requirement (1.25 to 1.00) was waived from third quarter of 2024 through the first quarter of 2025. The First Amendment also added additional financial covenants which include: (i) a maximum First Lien Leverage Ratio for the first quarter of 2025, calculated as of the end of each fiscal quarter for the trailing twelve months, not to exceed 3.50 to 1.00; (ii) a minimum liquidity requirement of $10.0 million, beginning on the First Amendment execution date and ending when the second quarter of 2025 compliance certificate is received; and (iii) a minimum quarterly EBITDA requirement, as defined in the First Amendment, of $5.0 million for the third quarter of 2024 through the first quarter of 2025.

The Third Amendment, among other things, deferred the Maximum Leverage Ratio and Minimum Debt Service Coverage Ratios until September 2025. The Maximum Leverage Ratio requirement was changed to 3.00 to 1.00 for our fiscal quarter ending September 30, 2025, and is 2.25 to 1.00 thereafter. The Debt Service Coverage Ratio requirement was changed to 3.25 to 1.00 as long as the Company maintains the required compensating balance, if not, the ratio remains at 1.25 to 1.00. The Third Amendment removed the First Lien Leverage Ratio (as defined in the First Amendment to the Credit Agreement) while maintaining the minimum liquidity requirement of $10.0 million.

We were in compliance with all covenants defined in the Credit Agreement throughout the year and as of December 31, 2025.

Interest Rate

The interest rate on the PNC facility ranges from secured overnight financing rate (“SOFR”) plus 4.00% to SOFR plus 5.00%, depending on our Leverage Ratio. As of December 31, 2025, we were paying SOFR plus 4.25% on the outstanding bank debt which equates to an all-in rate of 8.17%.

The Company’s total outstanding balance of $30.0 million on the revolving credit facility is scheduled to mature in 2026, with no amounts due in periods thereafter.

On March 5, 2026, Hallador entered into a credit agreement with Texas Capital Bank and Old National Bank, among others, that replaces the Credit Agreement with PNC Bank and includes a $75.0 million revolving credit facility (the "New Revolving Credit Facility") and a $45.0 million delayed draw term loan (the "Delayed Draw Term Loan", and together with the New Revolving Credit Facility, the "New Credit Facility"). The New Credit Facility bears interest with margins ranging from 2.25% to 3.75% above SOFR or the applicable base rate, subject to a SOFR floor of 1.00%. The applicable margin is determined based upon the Company's leverage ratio and the type of loan drawn. The New Credit Facility includes a commitment fee of 0.50% on any unused portions of the New Revolving Credit Facility. If the Delayed Draw Term Loan occurs, which is subject to meeting certain conditions, the principal balance of the Delayed Draw Term Loan shall be due and payable in equal quarterly installments of 2.5% of the original principal amount of such Delayed Draw Term Loan with a final payment of the remaining balance upon maturity. The New Credit Facility matures on March 5, 2029, and is collateralized by substantially all our assets. When drawn, the proceeds from the New Credit Facility may be used for ongoing working capital and general corporate purposes. Liquidity at December 31, 2025, excludes the availability under the New Credit Facility.