Mammoth Energy Services Inc. filed SEC Form 8-K: Entry into a Material Definitive Agreement, Creation of a Direct Financial Obligation, Regulation FD Disclosure, Financial Statements and Exhibits
$TUSK
Oilfield Services/Equipment
Energy
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
| PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
Date of Report (Date of earliest event reported): October 16, 2024
(Exact name of registrant as specified in its charter)
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Item 1.01 Entry Into a Material Definitive Agreement.
Introductory Note
As previously disclosed in the filings with the Securities and Exchange Commission (the “SEC”) made by Mammoth Energy Services, Inc. (“Mammoth” or the “Company”), on July 22, 2024, Cobra Acquisitions LLC (“Cobra”), a wholly-owned subsidiary of Mammoth, entered into a release and settlement agreement with the Puerto Rico Electric Power Authority (“PREPA”) and the Financial Oversight and Management Board for Puerto Rico, in its capacity as PREPA’s representative to the United States District Court for the District of Puerto Rico (the “Title III Court”), to settle all outstanding matters between Cobra and PREPA (the “Settlement Agreement”). Under the terms of the Settlement Agreement, Cobra was allowed an administrative expense claim against PREPA of $170.0 million (plus the $18.4 million in funds received by PREPA from the Federal Emergency Management Agency (“FEMA”) and considered payable to Cobra but for purported garnishments in this amount asserted by three Puerto Rican municipalities (the “Specified Municipalities”) for certain municipal tax claims (the “Specified Municipal Tax Claims”) discussed in Mammoth’s filings with the SEC (the “Withheld FEMA Funds”)). Cobra’s allowed claim is payable through three installments: (i) $150.0 million on the later of (A) ten business days following approval of the Settlement Agreement by the Title III Court and (B) August 31, 2024; (ii) $20.0 million within seven days following the effective date of PREPA’s plan of adjustment; and (iii) $18.4 million in the Withheld FEMA Funds within either (A) ten business days after the deadline for appealing the entry of the settlement order by the Title III Court under the applicable bankruptcy rules of procedure if no such appeal is filed, or (B) if the provisions of the settlement order allowing PREPA to release the Withheld FEMA Funds to Cobra without retaining any liability to the Specified Municipalities are appealed by such municipalities, within ten business days of the filing of the notice of such appeal. Further, upon PREPA’s payment of the Withheld FEMA Funds to Cobra following the notice of appeal described above, Cobra agreed to indemnify and hold PREPA harmless, as well as to provide PREPA with an indemnity letter of credit, solely for any payment(s) PREPA is subsequently required to make pursuant to the Specified Municipalities on account of the Specified Municipal Tax Claims if such order is entered as a result of (i) any reversal on appeal of the settlement order with respect to the Withheld FEMA Funds and/or (ii) the Puerto Rico Court of First Instance or other court of competent jurisdiction enters such order after a diligent challenge by PREPA (including through enforcement of the order approving Settlement Agreement). Any such indemnity obligation will in no event exceed $18.4 million.
As previously announced, on September 18, 2024, the Settlement Agreement was approved by the Title III Court overruling all objections thereto and an order was entered the same day (the “Settlement Order”). On October 1, 2024, Cobra received the first installment payment of $150.0 million from the Commonwealth of Puerto Rico in connection with the Settlement Agreement with PREPA. Also on October 1, 2024, certain Puerto Rico municipalities and Foreman Electric Services Inc. that had objected to approval of the Settlement Order each filed timely notices of appeal of the Settlement Order to the United States Court of Appeals for the First Circuit. None of the foregoing parties have sought a stay of the Settlement Order pending such appeals. Although the ultimate outcome of these appeals cannot be predicted with certainty, Cobra believes that the appeals are without merit.
Revolving Credit Agreement and Reimbursement Agreement
On October 16, 2024, the Company entered into (i) an amendment to its revolving credit agreement (the “Credit Agreement Amendment”) and (ii) a letter of credit reimbursement agreement (the “Reimbursement Agreement”), each with Fifth Third Bank, National Association (“Fifth Third Bank”). The Credit Agreement Amendment permits the transactions contemplated by the Reimbursement Agreement, including the issuance of one or more letters of credit to satisfy Cobra’s obligations under the Settlement Agreement. The aggregate amount of all such letters of credit shall not exceed $18.4 million. Under the terms of the Reimbursement Agreement, the Company agreed to hold cash funds totaling at least 105% of the stated amount of all letters of credit issued pursuant to the Reimbursement Agreement in an account maintained by Fifth Third Bank and to which Fifth Third Bank has a first priority security interest.
On October 18, 2024, Cobra received a payment from PREPA totaling $18.4 million under the terms of the Settlement Agreement. In connection with the receipt of the $18.4 million from PREPA, Cobra instructed Fifth
Third Bank to issue a letter of credit to PREPA under the Reimbursement Agreement in the amount of $18.4 million and transferred a total of $19.3 million to a restricted cash account maintained by Fifth Third Bank as collateral for the letter of credit.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth in Item 1.01 above is incorporated herein by reference, as applicable.
Item 7.01 Regulation FD Disclosure.
On October 21, 2024, the Company issued a press release announcing the receipt of the $18.4 million under the Settlement Agreement, which press release is attached hereto as Exhibit 99.1.
The information in this Item 7.01 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified as being incorporated by reference in the registration statement.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
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Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| MAMMOTH ENERGY SERVICES, INC. | |||||||||||||||||
| Date: | October 21, 2024 | By: | /s/ Mark Layton | ||||||||||||||
| Mark Layton | |||||||||||||||||
| Chief Financial Officer and Secretary | |||||||||||||||||