Item 1.01 – Entry into a Material Definitive Agreement
On September 15, 2026 (the “Closing Date”), Hallador Energy Company (“Hallador” or the “Company”) and its wholly-owned subsidiary, Turtle Creek Gas Holdings, LLC (“Turtle Creek”), each as a co-borrower, jointly and severally liable for all obligations thereunder, entered into a Credit Agreement (the “Credit Agreement”) with Kennedy Lewis Investment Management LLC (“KLIM”), acting for certain managed or advised funds and accounts, the other lenders from time to time party thereto, U.S. Bank Trust Company, National Association, as administrative agent, and U.S. Bank National Association, as collateral agent.
Term Loan Facility - The Credit Agreement provides for a $600 million senior secured term loan facility (the “Term Loan Facility”), with $550 million funded at closing and a $50 million delayed draw available for 12 months after closing, subject to an agreed draw schedule and funding conditions.
Revolving Credit Facility - The Credit Agreement permits that Hallador may obtain, on a post-closing basis, a revolving credit facility up to $75 million (the “Revolving Facility” and, together with the Term Loan Facility, the “Facilities”) from one or more commercial banks. The Revolving Facility will not be documented under, and does not otherwise form a part of, the Credit Agreement, but will be secured by a first-priority lien on the Hallador collateral under the Credit Agreement (senior to the lien securing the Term Loan Facility) and will be subject to an intercreditor agreement to be entered into between KLIM and the lender(s) under the Revolving Facility.
The Term Loan Facility matures three years following the Closing Date, subject to a two-year extension option, exercisable with KLIM's approval upon payment of an extension fee equal to 3.0% of the outstanding principal amount of the Term Loan Facility.
Closing date proceeds from the Facilities will be used to fund turbine purchases and refurbishment, gas plant expansion expenses, equipment acquisitions, project-cost reimbursements, transaction fees and expenses, repayment of the outstanding indebtedness under the Company’s existing $45 million delayed draw term loan and $75 million revolver with Texas Capital Bank, and general corporate purposes.
Before commercial operation of the applicable project (“COD”), borrowings under the Term Loan Facility bear interest at a rate of 3.5% per annum payable in cash, plus SOFR plus 4.50% per annum payable in kind (“PIK”). After COD, borrowings bear interest at SOFR plus 8.00% per annum, payable in cash. SOFR is subject to a 3.5% floor.
The Term Loan Facility obligations are secured by a first-priority perfected security interest in substantially all real and personal property of Hallador and Turtle Creek, including subsidiary equity interests, subject to customary exceptions and, upon establishment of the Revolving Facility, an intercreditor agreement to be entered into between KLIM and the lender(s) under the Revolving Facility.
Key financial terms include a 2.5% commitment fee, a 100% excess cash flow sweep commencing after COD, and a 1.35x minimum MOIC increasing to 1.50x upon extension. The Credit Agreement also contains financial covenants, including: (i) commencing with the test period ending December 31, 2026, minimum unrestricted cash of $10 million and a minimum 1.15x consolidated debt service coverage ratio, and (ii) commencing with the first full fiscal quarter after COD, a maximum consolidated leverage ratio of 9.00x for the first tested period and 8.00x for each period thereafter. The debt service coverage ratio and leverage ratio covenants are subject to customary equity cure rights (limited to two of any four consecutive fiscal quarters, and no more than three times over the term of the facility); the minimum unrestricted cash covenant is not subject to a cure right.
The Credit Agreement also contains customary affirmative and negative covenants and events of default, including limitations on liens, indebtedness, restricted payments, investments, and affiliate transactions, as well as mandatory prepayment requirements with respect to certain proceeds of future indebtedness.
