Kodiak Gas Services, Inc.KGS
Kodiak Gas Services, Inc. Debt Disclosure
11. Debt and Credit Facilities
Long-term debt consisted of the following (in thousands):
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| ABL Facility | $ | 1,875,097 | $ | 1,830,346 | |||||||
| 2029 Senior Notes | 750,000 | — | |||||||||
| Total debt outstanding | 2,625,097 | 1,830,346 | |||||||||
| Less: unamortized debt issuance costs | (43,188) | (38,886) | |||||||||
| Long-term debt, net of unamortized debt issuance cost | 2,581,909 | 1,791,460 | |||||||||
| Other borrowings | 5,739 | — | |||||||||
| Total long-term debt and other borrowings | $ | 2,587,648 | $ | 1,791,460 | |||||||
ABL Facility
Kodiak and its subsidiary, Kodiak Services, are borrowers under a revolving asset-based loan credit facility (the “ABL Facility”) with unaffiliated secured lenders and JPMorgan Chase Bank, N.A., as administrative agent.
On March 22, 2023, Kodiak and Kodiak Services entered into the Fourth Amended and Restated Credit Agreement with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (as amended or restated from time to time, the “ABL Credit Agreement”) which mainly served to extend the maturity date to March 2028. The total commitments under the facility are $2.2 billion. As of December 31, 2024, there was $2.4 million in letters of credit outstanding under the ABL Facility.
Pursuant to the ABL Credit Agreement, the Company must comply with certain restrictive covenants, including a minimum interest coverage ratio of 2.5x and a maximum Leverage Ratio (calculated based on the ratio of Total Indebtedness to EBITDA, each as defined in the ABL Credit Agreement), and beginning for the quarter ended June 30, 2024, a Secured Leverage Ratio (calculated based on the ratio of Senior Secured Debt to EBITDA). The maximum Leverage Ratio is (i) 5.75 to 1.00 through the fiscal quarter ending March 31, 2025 and (ii) 5.25 to 1.00 for each fiscal quarter thereafter. The maximum Secured Leverage Ratio is (i) 3.75 to 1.00 through the fiscal quarter ending March 31, 2025 and (ii) 3.25 to 1.00 for each fiscal quarter thereafter.
The ABL Credit Agreement also restricts the Company’s ability to: incur additional indebtedness and guarantee indebtedness; pay certain dividends or make other distributions or repurchase or redeem equity interests; prepay, redeem or repurchase certain debt; issue certain preferred units or similar equity securities; make loans and investments; sell, transfer or otherwise dispose of assets; incur liens; enter into transactions with affiliates; enter into agreements restricting the Company’s restricted subsidiaries’ ability to pay dividends; enter into certain swap agreements; amend certain organizational documents; enter into sale and leaseback transactions; and consolidate, merge or sell all or substantially all of the Company’s assets.
The ABL Facility is a “revolving credit facility” that includes a lockbox arrangement whereby, under certain events, remittances from customers are forwarded to a bank account controlled by the administrative agent and are applied to reduce borrowings under the facility. One such event occurs if availability under the ABL Credit Agreement falls below a specified threshold (i.e., $125 million for five (5) consecutive days until such time availability is greater than $125 million for twenty (20) consecutive days). As of December 31, 2024 and 2023, availability under the ABL Facility was in excess of the specified threshold and as such the entire balance was classified as long-term in accordance with its maturity.
Third Amendment to Fourth Amended and Restated Credit Agreement
On January 22, 2024, Kodiak entered into the Third Amendment to the ABL Credit Agreement (the “Third Amendment”). The Third Amendment, among other things, amended certain provisions of the ABL Facility (i) to accommodate the consummation of the transactions contemplated by the Merger Agreement (see Note 3. Acquisitions and Divestitures) and (ii) to account for the Company’s organizational structure after giving effect to the transactions contemplated by the Merger Agreement. Lender fees and costs totaling $2.9 million were incurred related to the Third Amendment and will be amortized over the life of the ABL Credit Agreement to interest expense.
In addition, the Third Amendment amended the ABL Facility to (i) update the maximum secured leverage ratio to (x) 3.75 to 1.00 for the first four fiscal quarters after the Company issues any unsecured indebtedness and (y) 3.25 to 1.00 for each fiscal quarter thereafter, (ii) modify the triggers for commencing a “cash dominion” period (i.e., a period when the administrative agent applies proceeds in the deposit accounts to reduce borrowings under the ABL Credit Agreement) (iii) include customary provisions relating to the designation of “unrestricted subsidiaries” (i.e., subsidiaries that are not required to become loan parties or be bound by the covenants contained in the ABL Credit Agreement), (iv) provide that only material domestic restricted subsidiaries are required to become guarantors and collateral grantors under the ABL Facility, and (v) permit the Company and its restricted subsidiaries to incur additional indebtedness and liens and to make additional investments, dividends, distributions, redemptions and dispositions.
Interest is payable monthly. Depending on the loan type elected by the Company, interest accrues based on variable rates of SOFR plus an applicable rate ranging from 2% to 3% or prime rate plus an applicable rate ranging from 1% to 2% depending on the type of loan and the leverage ratio. The weighted average interest rate as of December 31, 2024 and 2023, was 6.8% and 8.8%, respectively, excluding the effect of interest rate swaps. The Company pays an annualized commitment fee of 0.25% on the unused portion of its ABL Facility if borrowings are greater than 50% of total commitments and 0.50% on the unused portion of the ABL Facility if borrowings are less than 50% of total commitments.
All obligations under the ABL Facility are collateralized by essentially all the assets of the Company. We were in compliance with all covenants as of December 31, 2024 and 2023.
2029 Senior Notes
On February 2, 2024, Kodiak Services issued $750.0 million aggregate principal amount of 7.25% senior notes due 2029 (the “2029 Senior Notes”), pursuant to an indenture, by and among the Company as guarantor and certain other subsidiary guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee. Prior to February 15, 2026, the Company may redeem all or part of the 2029 Senior Notes at a redemption price equal to 100% of the principal amount of the 2029 Senior Notes plus a make-whole premium, plus accrued and unpaid interest. This make-whole premium is determined as the excess, if any, of (a) the present value at such time of (i) the redemption price of the 2029 Senior Notes at February 15, 2026 plus (ii) any required interest payments due through February 15, 2026, computed using a discount rate equal to the applicable treasury rate plus 0.50%, discounted to the redemption date on a semi-annual basis, over (b) the principal amount of the 2029 Senior Notes. Prior to February 15, 2026, the Company may also redeem up to 40% of the aggregate principal amount of the 2029 Senior Notes, limited to the net cash proceeds of one or more equity offerings, at a redemption price of 107.25% of the principal amount of the 2029 Senior Notes to be redeemed, plus any accrued and unpaid interest, as long as at least 50% of the aggregate principal amount of the 2029 Senior Notes originally issued remains outstanding after each such redemption and the redemption occurs within 180 days after the date of the closing of such equity offering. On and after February 15, 2026, the Company may redeem all or a portion of the 2029 Senior Notes, along with accrued and unpaid interest at the redemption prices (expressed as percentages of principal amount) as follows, if redeemed during the twelve-month period beginning on February 15 of the years indicated below:
| Percentage | ||||||||
| 2026 | 103.625% | |||||||
| 2027 | 101.813% | |||||||
| 2028 and thereafter | 100.000% | |||||||
If the Company or Kodiak Services experiences certain kinds of changes of control and Moody’s Investors Service, Inc. (“Moody’s”), S&P Global Ratings (“S&P”) or Fitch Ratings, Inc. (“Fitch”) decreases their rating of the 2029 Senior Notes as a result thereof within 60 days, holders of the 2029 Senior Notes will be entitled to require Kodiak Services to repurchase all or any part of that holder’s notes at a price of 101% of the aggregate principal amount of the notes repurchased, plus accrued and unpaid interest, if any, on the notes repurchased to the date of settlement.
The Indenture contains certain covenants that limit the ability of the Company and its restricted subsidiaries, including Kodiak Services, to make distributions on, purchase or redeem the Company’s equity interests or repurchase or redeem contractually subordinated indebtedness; make certain investments; incur or guarantee additional indebtedness, issue any disqualified stock, or issue other preferred securities (other than non-economic preferred securities); create or incur certain liens to secure indebtedness; sell or otherwise dispose of assets; consolidate with or merge with or into another person; enter into transactions with affiliates; and create unrestricted subsidiaries. If the 2029 Senior Notes achieve an investment grade rating from any two of Moody’s, S&P and Fitch and no default under the Indenture exists, many of the foregoing covenants will terminate. The Indenture also contains customary events of default.
Fees and costs totaling $13.4 million were incurred related to the 2029 Senior Notes and will be amortized over the life of the 2029 Senior Notes to interest expense.
The proceeds from the 2029 Senior Notes were used to repay a portion of the outstanding indebtedness under the ABL Facility and to pay related fees and expenses in connection with the 2029 Senior Notes offering. In connection with the close of the CSI Acquisition on April 1, 2024, the Company used proceeds from additional draws on the ABL Facility to repay, terminate and/or redeem all of CSI Compressco’s existing outstanding indebtedness, except for certain equipment financing obligations, and pay fees and expenses related to the notes offering and the CSI Acquisition.
Term Loan
A wholly owned subsidiary of Kodiak had a term loan (the “Term Loan”), pursuant to a credit agreement with unaffiliated unsecured lenders and Wells Fargo Bank, N.A., as administrative agent.
On June 29, 2023, the Company terminated all interest rate swaps and collars attributable to the Term Loan and recognized a gain on derivatives and received cash of $25.8 million (the “Term Loan Derivative Settlement”). On July 3, 2023, in connection with the initial public offering (“IPO”), the Company used the net proceeds from the IPO, together with the proceeds resulting from the Term Loan Derivative Settlement and borrowings under the ABL Facility, to repay $300 million of borrowings outstanding under the Term Loan. Additionally, a subsidiary of Kodiak entered into a Novation, Assignment, and Assumption Agreement (“Novation Agreement”) with Frontier TopCo Partnership, L.P. (“Kodiak Holdings”), an affiliate of EQT and holder of record of Kodiak Gas Services, Inc. common stock, pursuant to which all of the Company’s remaining obligations under the Term Loan were assumed by Kodiak Holdings, and the Company’s obligations thereunder were terminated. The Company is no longer a borrower or guarantor and is not otherwise obligated with respect to the debt outstanding under the Term Loan. As part of the $300 million repayment of the Term Loan, unamortized debt issuance costs of $4.4 million and fees of $2.4 million were recorded to loss on extinguishment for the year ended December 31, 2023. The carrying value of the Term Loan novated under the Novation Agreement of $689.8 million (comprised of $700.0 million of principal balance less $10.2 million of unamortized debt issuance costs) was considered an equity transaction with the parent and recorded to additional paid-in capital in the consolidated statement of stockholder's equity.
As of December 31, 2024, the scheduled maturities, without consideration of potential mandatory prepayments, of the Company's long-term debt were as follows (in thousands):
| Amount | |||||
| Year ended December 31, | |||||
| 2025 | $ | 5,344 | |||
| 2026 | 395 | ||||
| 2027 | — | ||||
| 2028 | 1,875,097 | ||||
| 2029 | 750,000 | ||||
| Thereafter | — | ||||
| Total | $ | 2,630,836 | |||
Debt Issuance Costs
The total remaining unamortized debt issuance costs of $43.2 million, as of December 31, 2024, are being amortized over the respective terms of the ABL Facility and 2029 Senior Notes. As of December 31, 2023, debt issuance costs of $38.9 million were being amortized over the term of the ABL Facility. Amortization expense related to these costs of $12.0 million, $13.6 million and $13.7 million for year ended December 31, 2024, 2023 and 2022, respectively, are included in interest expense in the accompanying consolidated statements of operations.
Other Borrowings
Upon the completion of the CSI Acquisition, the Company has finance agreements with a third-party in the amount of $11.4 million to finance certain compression equipment. The notes were payable in monthly installments totaling $0.7 million for 36 months. As of December 31, 2024, amounts due under the finance agreements totaled $5.7 million. The current portion of this amount, $5.3 million, is classified in accrued liabilities and the long-term portion, $0.4 million, is classified in other long-term liabilities on the accompanying consolidated balance sheet.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Mar 7, 2025 | Showing above |
| 2023 | Mar 7, 2024 | |
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.