Vertex gets commitments for $125 million term loan at 98.5 OID

By Marisa Wong

Los Angeles, Feb. 22 – Vertex Energy, Inc. and wholly owned subsidiary Vertex Refining Alabama LLC entered into a commitment letter with a syndicate of lenders for a three-year $125 million first-lien senior secured term loan facility, according to an 8-K filing with the Securities and Exchange Commission.

The facility will be issued with an original issue discount of 1.5%.

The closing date and the funding of the term loan are subject to the closing of Vertex’s planned acquisition of the Mobile, Ala., refinery and related logistics assets from Equilon Enterprises LLC d/b/a Shell Oil Products US during the first quarter of 2022.

The term loan syndicate is led by, among others, some funds and accounts managed by BlackRock Financial Management, Inc., Whitebox Advisors LLC and Highbridge Capital Management, LLC.

Loan proceeds are expected to be used to fund a portion of the purchase price of the Mobile refinery, a portion of a planned renewable diesel conversion project at the Mobile refinery, liquidity needs and fees and expenses associated with the closing of the term loan.

The term loan is expected to be secured by substantially all of the present and after-acquired assets of Vertex and its subsidiaries and to be guaranteed by Vertex and some of its subsidiaries.

Commitments will automatically terminate on the first to occur of (a) April 1, (b) consummation of the acquisition of the Mobile refinery without use of the facility or if the lenders become aware of a breach of the exclusivity provisions of the commitment letter, (c) the closing date of the term loan and the release of the term loan proceeds to Vertex, (d) the termination of the sale and purchase agreement in accordance with its terms prior to the closing date and (e) the date upon which Vertex breaches its obligations under the commitment letter or otherwise fails to comply with the terms and conditions of the commitment letter.

The term loan will bear interest at a rate per annum equal to 875 basis points over the greater of (i) Prime rate minus 150 bps and (ii) the Fed Funds rate plus 50 bps, subject to a floor of 1%.

Beginning on the first anniversary of the closing date, the loan will amortize in equal quarterly installments in aggregate annual amounts equal to 5% of the original principal amount.

The facility will be subject to some mandatory prepayment obligations.

As a closing condition to the facility, the company will issue to the lenders warrants to purchase 2.75 million shares of Vertex common stock on a pro-rata basis based on each lender’s lending commitments. The warrants will have a three-year term and a $4.50 per share exercise price.

Houston-based Vertex is a specialty refiner of alternative feedstocks and marketer of high-quality refined products.

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