CorEnergy Infrastructure Trust, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Debt

Debt

12 Months Ended

Dec. 31, 2019

The following is a summary of debt facilities and balances as of December 31, 2019 and 2018:



	Total Commitment or Original Principal		Quarterly Principal Payments			December 31, 2019				December 31, 2018
	Total Commitment or Original Principal		Quarterly Principal Payments		Maturity Date	Amount Outstanding		Interest Rate		Amount Outstanding		Interest Rate
CorEnergy Secured Credit Facility:
CorEnergy Revolver	$	160,000,000	$	—	7/28/2022	$	—	4.51	%	$	—	5.25	%
MoGas Revolver	1,000,000		—		7/28/2022	—		4.51	%	—		5.25	%
Omega Line of Credit	1,500,000		—		7/31/2020	—		5.76	%	—		6.50	%
Pinedale Secured Credit Facility:
Amended Pinedale Term Credit Facility	41,000,000		882,000		12/29/2022	33,944,000		6.50	%	37,472,000		6.50	%
7.00% Unsecured Convertible Senior Notes	115,000,000		—		6/15/2020	2,092,000		7.00	%	113,958,000		7.00	%
5.875% Unsecured Convertible Senior Notes	120,000,000		—		8/15/2025	120,000,000		5.875	%	—		—	%
Total Debt						$	156,036,000			$	151,430,000
Less:
Unamortized deferred financing costs ⁽¹⁾						$	635,351			$	283,278
Unamortized discount on 7.00% Convertible Senior Notes						6,681				1,108,342
Unamortized discount on 5.875% Convertible Senior Notes						3,284,542				—
Long-term debt, net of deferred financing costs						$	152,109,426			$	150,038,380
Debt due within one year						$	5,612,178			$	3,528,000
(1) Unamortized deferred financing costs related to the Company's revolving credit facilities are included in Deferred Costs in the Assets section of the Consolidated Balance Sheets. Refer to the "Deferred Financing Costs" paragraph below.

CorEnergy Credit Facilities

Prior to 2017, the Company had a credit facility with Regions Bank (as lender and administrative agent for the other participating lenders) providing borrowing capacity of $153.0 million, consisting of (i) the CorEnergy Revolver of $105.0 million, (ii) the CorEnergy Term Loan of $45.0 million and (iii) the MoGas Revolver of $3.0 million.

On July 28, 2017, the Company entered into an amendment and restatement of the CorEnergy Credit Facility with Regions Bank (as lender and administrative agent for other participating lenders). The amended facility provides for borrowing commitments of up to $161.0 million, consisting of (i) $160.0 million on the CorEnergy Revolver, subject to borrowing base limitations, and (ii) $1.0 million on the MoGas Revolver, as detailed below.

The amended facility has 5-year term maturing on July 28, 2022, and provided for a springing maturity on February 28, 2020, and thereafter, if the Company failed to meet certain liquidity requirements from the springing maturity date through the maturity of the Company's 7.00% Convertible Notes on June 15, 2020. This springing maturity would have been triggered on the first date on or after February 28, 2020 that both (i) the outstanding principal amount of the 7.00% Convertible Notes exceeded $28,750,000 and (ii) the Company's unrestricted cash liquidity (including, for purposes of this calculation, the undrawn portion of the Borrowing Base then available for borrowing under the CorEnergy Credit Facility) was less than the sum of (x) the outstanding principal amount of the 7.00% Convertible Notes plus (y) $5,000,000. The Company will not trigger the springing maturity as a result of the 7.00% Convertible Note exchange completed in August of 2019, which reduced the outstanding principal balance of the 7.00% Convertible Notes below the springing maturity threshold. Refer to "Convertible Debt" section below for further details on convertible debt transactions during 2019.

Borrowings under the credit facility will generally bear interest on the outstanding principal amount using a LIBOR pricing grid that is expected to equal a LIBOR rate plus an applicable margin of 2.75 percent to 3.75 percent, based on the Company's senior secured recourse leverage ratio. Total availability is subject to a borrowing base. The CorEnergy Credit Facility contains, among other restrictions, certain financial covenants including the maintenance of certain financial ratios, as well as default and cross-default provisions customary for transactions of this nature (with applicable customary grace periods). As of December 31, 2019, the Company was in compliance with all covenants of the CorEnergy Credit Facility.

The CorEnergy Credit Facility is secured by substantially all of the assets owned by the Company and its subsidiaries other than (i) the assets held by Mowood, LLC, Omega, Pinedale LP and Pinedale GP (the "Unrestricted Subs") and (ii) the equity investments in the Unrestricted Subs.

As of December 31, 2019, the Company had approximately $136.4 million and $1.0 million of availability under the CorEnergy Revolver and MoGas Revolver, respectively.

MoGas Revolver

In conjunction with the MoGas Transaction, MoGas and United Property Systems, as co-borrowers, entered into a revolving credit agreement dated November 24, 2014 ("the MoGas Revolver") with certain lenders, including Regions Bank as agent for such lenders. Following subsequent amendments and restatements made on July 8, 2015 and July 28, 2017, in connection with the amendments and restatements of the CorEnergy Credit Facility discussed above, commitments under the MoGas Revolver were reduced from the original level of $3.0 million to a current total of $1.0 million.

The MoGas Revolver is secured by the assets held at MoGas and has a maturity date of July 28, 2022. Interest accrues under the MoGas Revolver at the same rate and pursuant to the same terms as it accrues under the CorEnergy Revolver. As of December 31, 2019, the co-borrowers were in compliance with all covenants, and there were no borrowings against the MoGas Revolver.

Mowood/Omega Revolver

On July 31, 2015, a $1.5 million revolving line of credit ("Mowood/Omega Revolver") was established with Regions Bank with a maturity date of July 31, 2016. Following annual extensions, the current maturity of the facility has been amended and extended to July 31, 2020. The Mowood/Omega Revolver is used by Omega for working capital and general business purposes and is guaranteed and secured by the assets of Omega. Interest accrues at LIBOR plus 4 percent and is payable monthly in arrears with no unused fee. There was no outstanding balance at December 31, 2019.

Amended Pinedale Term Credit Facility

On December 20, 2012, Pinedale LP closed on a $70.0 million secured term credit facility with a lender that provided for monthly payments of principal and interest and was secured by the Pinedale LGS. The credit facility accrued interest at a variable annual rate linked to LIBOR.

On March 4, 2016, the Company obtained a consent from its lenders under the CorEnergy Credit Facility, which permitted the Company to utilize the CorEnergy Credit Facility to refinance the Company's pro rata share of the remaining balance of the Pinedale secured term credit facility. On March 30, 2016, the Company and Prudential (collectively, "the Refinancing Lenders"), refinanced the remaining $58.5 million principal balance of the $70.0 million credit facility (on a pro rata basis equal to their respective equity interests in Pinedale LP, with the Company's 81.05 percent share being approximately $47.4 million) and executed a series of agreements assigning the credit facility to the Refinancing Lenders, with CorEnergy Infrastructure Trust, Inc. as Agent for the Refinancing Lenders. The Company's portion of the debt and interest was eliminated in consolidation and Prudential's portion of the debt was shown as a related-party liability.

Pinedale LP automatically entered into a Cash Control Period (as defined in the credit facility) with the Refinancing Lenders upon the April 29, 2016 bankruptcy filing by Ultra Wyoming and its parent guarantor, Ultra Petroleum. During a Cash Control Period, the Company as Agent swept all funds for the repayment of accrued interest, scheduled principal payments and principal prepayments on the loans. Ultra Petroleum emerged from bankruptcy in April 2017, resulting in the end of the Cash Control Period and, in May 2017, Pinedale LP resumed distributions. For the year ended December 31, 2017, pursuant to these additional cash sweep provisions, an additional $4.4 million was distributed (pro rata, based on ownership percentages) to the Refinancing Lenders as a reduction to the outstanding principal.

On December 29, 2017, Pinedale LP entered into the Amended Pinedale Term Credit Facility with Prudential and a group of lenders affiliated with Prudential as the sole lenders and Prudential serving as administrative agent. Under the terms of the Amended Term Credit Facility, Pinedale LP was provided with a 5-year $41.0 million term loan facility, bearing interest at a fixed rate of 6.5 percent, which matures on December 29, 2022. Principal payments of $294 thousand, plus accrued interest, are payable monthly. The Amended Pinedale Term Credit Facility was utilized to pay off the balance due to the Refinancing Lenders under the previously existing Pinedale LP credit facility.

Outstanding balances under the facility are secured by the Pinedale LGS assets. The Amended Pinedale Term Credit Facility contains, among other restrictions, specific financial covenants including the maintenance of certain financial coverage ratios and a minimum net worth requirement which, along with other provisions of the credit facility, limit cash dividends and loans by Pinedale LP to the Company. At December 31, 2019, the net assets of Pinedale LP were $131.5 million and Pinedale LP was in compliance with all of the financial covenants of the Amended Pinedale Term Credit Facility.

Deferred Financing Costs

A summary of deferred financing cost amortization expenses for the years ended December 31, 2019, 2018 and 2017 is as follows:



Deferred Financing Cost Amortization Expense ⁽¹⁾⁽²⁾
	For the Years Ended December 31,
	2019		2018		2017
CorEnergy Credit Facility	$	574,542	$	574,541	$	873,601
Amended Pinedale Term Credit Facility	52,821		52,728		392
Total Deferred Debt Cost Amortization	$	627,363	$	627,269	$	873,993
(1) Amortization of deferred debt issuance costs is included in interest expense in the Consolidated Statements of Income.
(2) For the amount of deferred debt costs amortization relating to the Convertible Notes included in the Consolidated Statements of Income, refer to the Convertible Note Interest Expense table below.

CorEnergy Credit Facilities

Prior to the July 28, 2017 credit facility amendment and restatement, previously existing deferred financing costs related to the CorEnergy Credit Facility were approximately $1.8 million, of which approximately $1.6 million continue to be deferred and amortized under the amended and restated facility. Additionally, the Company incurred approximately $1.3 million in new debt issuance costs which have been deferred and are being amortized over the term of the new facility. The total deferred financing costs of $2.9 million are being amortized on a straight-line basis over the 5-year term of the amended and restated CorEnergy Credit Facility. Approximately $234 thousand of existing deferred costs and new debt issuance costs were expensed as a loss on extinguishment of debt related to the amendment and restatement in the Consolidated Statements of Income for the year ended December 31, 2017.

Amended Pinedale Term Credit Facility

In connection with entering into the Amended Pinedale Term Credit Facility, Pinedale LP incurred approximately $367 thousand in new debt issuance costs, of which $264 thousand were deferred and are being amortized on a straight-line basis over the 5-year term of the Amended Pinedale Term Credit Facility. The remaining $103 thousand was expensed as a loss on extinguishment of debt in the Consolidated Statements of Income for the year ended December 31, 2017.

Contractual Payments

The remaining contractual principal payments as of December 31, 2019 under the Amended Pinedale Term Credit Facility are as follows:



Year	Amended Pinedale Term Credit Facility
2020	$	3,528,000
2021	3,528,000
2022	26,888,000
2023	—
2024	—
Thereafter	—
Total	$	33,944,000

Convertible Debt

7.00% Convertible Notes

On June 29, 2015, the Company completed a public offering of $115.0 million aggregate principal amount of 7.00% Convertible Senior Notes Due 2020 (the "7.00% Convertible Notes"). The Convertible Notes mature on June 15, 2020 and bear interest at a rate of 7.0 percent per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2015.

The 7.00% Convertible Notes were initially issued with an underwriters' discount of $3.7 million which is being amortized over the life of the 7.00% Convertible Notes. Additionally, the Company incurred approximately $241 thousand in debt issuance costs associated with the 7.00% Convertible Notes which are being amortized over the life of the notes.

Holders may convert their 7.00% Convertible Notes into shares of the Company's common stock at their option until the close of business on the second scheduled trading day immediately preceding the maturity date. The initial conversion rate for the 7.00% Convertible Notes will be 30.3030 shares of common stock per $1,000 principal amount of the 7.00% Convertible Notes, equivalent to an initial conversion price of $33.00 per share of common stock. Such conversion rate will be subject to adjustment in certain events as specified in the Indenture.

On May 23, 2016, the Company repurchased $1.0 million of its 7.00% Convertible Notes on the open market. During the year ended December 31, 2018, certain holders elected to convert approximately $42 thousand of 7.00% Convertible Notes for 1,271 shares of CorEnergy common stock.

On January 16, 2019, the Company agreed with three holders of its 7.00% Convertible Notes, pursuant to privately negotiated agreements, to exchange $43.8 million face amount of such notes for an aggregate of 837,040 shares of the Company's common stock, par value $0.001 per share, plus aggregate cash consideration of $19.8 million, including $315 thousand of interest expense. The Company's agent and lenders under the CorEnergy Credit Facility provided a consent for the convertible note exchange. The Company recorded a loss on extinguishment of debt of approximately $5.0 million in the Consolidated Statements of Income for the first quarter of 2019. The loss on extinguishment of debt included the write-off of a portion of the underwriter's discount and deferred debt costs of $409 thousand and $27 thousand, respectively.

On August 15, 2019, the Company used a portion of the net proceeds from the offering of the 5.875% Convertible Notes discussed further below, together with shares of its common stock, to exchange $63.9 million face amount of its 7.00% Convertible Notes pursuant to privately negotiated agreements with three holders. The total cash and stock consideration for the exchange was valued at approximately $93.2 million. This included an aggregate of 703,432 shares of common stock plus cash consideration of approximately $60.2 million, including $733 thousand of interest expense. The Company recorded a loss on extinguishment of debt of approximately $28.9 million in the Consolidated Statements of Income for the third quarter of 2019. The loss on extinguishment of debt included the write-off of a portion of the underwriter's discount and deferred debt costs of $360 thousand and $24 thousand, respectively. Collectively, for the two exchange transactions described above, the Company recorded a loss on extinguishment of debt of $34.0 million for the year ended December 31, 2019.

Additionally, during the year ended December 31, 2019, certain holders elected to convert $4.2 million of 7.00% Convertible Notes for approximately 127,143 shares of common stock, respectively. As of December 31, 2019, the Company has $2.1 million aggregate principal amount of 7.00% Convertible Notes outstanding. Subsequent to December 31, 2019, certain holders elected to convert $416 thousand of 7.00% Convertible Notes for approximately 12,605 shares of common stock.

At the present time, the remaining 7.00% Convertible Notes may not be redeemed prior to the maturity date without the consent of the agent and lenders under the CorEnergy Credit Facility. However, upon the occurrence of a fundamental change (as defined in the Indenture), holders may require the Company to repurchase all or a portion of the 7.00% Convertible Notes for cash at a price equal to 100 percent of the principal amount of the 7.00% Convertible Notes to be purchased plus any accrued and unpaid interest, if any, to, but excluding, the applicable fundamental change repurchase date as prescribed in the Indenture. In addition, in certain circumstances the Company will increase the conversion rate for a holder that converts the 7.00% Convertible Notes in connection with any of a specified set of corporate events, each of which is deemed to constitute a make-whole adjustment event pursuant to the terms of the Indenture.

The 7.00% Convertible Notes rank equal in right of payment to any other current and future unsecured obligations of the Company and senior in right of payment to any other current and future indebtedness of the Company that is contractually subordinated to the 7.00% Convertible Notes. The 7.00% Convertible Notes are structurally subordinated to all liabilities (including trade payables) of the Company's subsidiaries. The 7.00% Convertible Notes are effectively junior to all of the Company's existing or future secured debt, to the extent of the value of the collateral securing such debt.

5.875% Convertible Notes

On August 12, 2019, the Company completed a private placement offering of $120.0 million aggregate principal amount of 5.875% Convertible Senior Notes due 2025 (the "5.875% Convertible Notes") to the initial purchasers of such notes for cash in reliance on an exemption from registration provided by Section 4(a)(2) of the Securities Act. The initial purchasers then resold the 5.875% Convertible Notes for cash equal to 100 percent of the aggregate principal amount thereof to qualified institutional buyers, as defined in Rule 144A under the Securities Act, in reliance on an exemption from registration provided by Rule 144A. The 5.875% Convertible Notes mature on August 15, 2025 and bear interest at a rate of 5.875 percent per annum, payable semiannually in arrears on February 15 and August 15 of each year, beginning on February 15, 2020.

The 5.875% Convertible Notes were issued with an initial purchasers' discount of $3.5 million, which is being amortized over the life of the notes. The Company also incurred approximately $508 thousand of deferred debt costs in issuing the 5.875% Convertible Notes, which are also being amortized over the life of the notes.

Holders may convert all or any portion of their 5.875% Convertible Notes into shares of the Company's common stock at their option at any time prior to the close of business on the business day immediately preceding the maturity date. The initial conversion rate for the 5.875% Convertible Notes is 20.0 shares of common stock per $1,000 principal amount of the 5.875% Convertible Notes, equivalent to an initial conversion price of $50.00 per share of the Company's common stock. Such conversion rate will be subject to adjustment in certain events as specified in the Indenture.

Upon the occurrence of a make-whole fundamental change (as defined in the Indenture), holders may require the Company to repurchase for cash all or any portion of their 5.875% Convertible Notes at a fundamental change repurchase price equal to 100 percent of the principal amount of the 5.875% Convertible Notes to be repurchased, plus any accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date as prescribed in the Indenture. Following the occurrence of a make- whole fundamental change, or if the Company delivers a notice of redemption (as discussed below), the Company will, in certain circumstances, increase the applicable conversion rate for a holder that elects to convert its notes in connection with such make-whole fundamental change or notice of redemption.

The Company may not redeem the 5.875% Convertible Notes prior to August 15, 2023. On or after August 15, 2023, the Company may redeem for cash all or part of the 5.875% Convertible Notes, at its option, if the last reported sale price of its common stock has been at least 125 percent of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. The redemption price will equal 100 percent of the principal amount of the 5.875% Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

The 5.875% Convertible Notes rank equal in right of payment to any other current and future unsecured obligations, including the 7.00% Convertible Notes, of the Company and senior in right of payment to any other current and future indebtedness of the Company that is contractually subordinated to the 5.875% Convertible Notes. The 5.875% Convertible Notes are structurally subordinated to all liabilities (including trade payables) of the Company’s subsidiaries. The 5.875% Convertible Notes are effectively junior to all of the Company’s existing or future secured debt, to the extent of the value of the collateral securing such debt.

The following is a summary of the impact of Convertible Notes on interest expense for the years ended December 31, 2019, 2018 and 2017:



Convertible Note Interest Expense
	For the Years Ended December 31,
	2019		2018		2017
7.00% Convertible Notes:
Interest Expense	$	3,354,178	$	7,979,118	$	7,980,000
Discount Amortization	320,821		738,912		738,912
Deferred Debt Issuance Cost Amortization	21,004		48,276		48,276
Total 7.00% Convertible Notes	$	3,696,003	$	8,766,306	$	8,767,188

5.875% Convertible Notes:
Interest Expense	$	2,722,083	$	—	$	—
Discount Amortization	225,458		—		—
Deferred Debt Issuance Amortization	31,493		—		—
Total 5.875% Convertible Notes	$	2,979,034	$	—	$	—
Total Convertible Note Interest	$	6,675,037	$	8,766,306	$	8,767,188

Including the impact of the convertible debt discount and related deferred debt issuance costs, (i) the effective interest rate on the 7.00% Convertible Notes was approximately 7.7 percent for each of the years ended December 31, 2019, 2018 and 2017 and (ii) the effective interest rate on the 5.875% Convertible Notes is approximately 6.4 percent for the year ended December 31, 2019.