NOTE E — LONG-TERM DEBT AND OTHER BORROWINGS

Long-term debt consists of the following:



		December 31,
		2015		2014
	Scheduled Maturity	(In Thousands)
Credit Agreement	August 4, 2019	$	235,000	$	195,000
7.25% Senior Notes (presented net of the unamortized discount of $4.5 million as of December 31, 2015 and $5.0 million as of December 31, 2014)	August 15, 2022	345,481		344,961
Total debt		580,481		539,961
Less current portion		—		—
Total long-term debt		$	580,481	$	539,961

Bank Credit Facilities

On August 4, 2014, in connection with the CSI Acquisition, we entered into a credit agreement (the "Credit Agreement"), and borrowed $210.0 million, which was used to fund, in part, the $825.0 million CSI Acquisition purchase price. In addition, the Credit Agreement borrowings were used to pay fees and expenses related to the CSI Acquisition, the Senior Notes offering, and the Credit Agreement, and to repay the $38.1 million balance outstanding under our previous revolving credit facility dated October 15, 2013, (the "Previous Credit Agreement"), which was then terminated. As a result, approximately $0.8 million of unamortized deferred financing costs associated with that terminated Previous Credit Agreement was charged to earnings and reflected in other expense during 2014.

Under our Credit Agreement, we and our subsidiary CSI Compressco Sub Inc. are named as the borrowers, and all obligations under the Credit Agreement are guaranteed by all of our existing and future, direct and indirect, domestic restricted subsidiaries (other than domestic subsidiaries that are wholly owned by foreign subsidiaries). The Credit Agreement matures on August 15, 2019 and includes a maximum credit commitment of $400.0 million, and included within such amount is availability for letters of credit (with a sublimit of $20.0 million) and swingline loans (with a sublimit of $60.0 million). The amount of outstanding borrowings under the Credit Agreement is subject to certain limitations, including borrowing limitations as a result of financial covenants. During the year ended December 31, 2014, we incurred financing costs of approximately $7.0 million related to the Credit Agreement. These costs are included in Other Assets and are being amortized over the term of the Credit Agreement. As of December 31, 2015, we had a balance outstanding of $235.0 million, had approximately $1.6 million letters of credit and performance bonds, and had availability under the Credit Agreement of approximately $163.4 million.

The Credit Agreement is available to provide our working capital needs, letters of credit, and for general partnership purposes, including capital expenditures and potential future expansions or acquisitions. So long as we are not in default, the Credit Agreement can also be used to fund our quarterly distributions at the option of the board of directors of our General Partner (provided, that after giving effect to such distributions, we will be in compliance with the financial covenants). Borrowings under the Credit Agreement are subject to the satisfaction of customary conditions, including the absence of a default.

All obligations under the Credit Agreement and the guarantees of those obligations are secured, subject to certain exceptions, by a first lien security interest in substantially all of our assets and the assets of our existing and future domestic subsidiaries, and all of the capital stock of our existing and future subsidiaries (limited in the case of foreign subsidiaries, to 65% of the voting stock of first tier foreign subsidiaries). Borrowings under the Credit Agreement bear interest at a rate per annum equal to, at our option, either (a) LIBOR (adjusted to reflect any required bank reserves) for an interest period equal to one, two, three, or six months (as selected by us), plus a leverage-based margin or (b) a base rate plus a leverage-based margin; such base rate shall be determined by reference to the highest of (1) the prime rate of interest per annum announced from time to time by Bank of America, N.A. (2) the Federal Funds rate plus 0.50% per annum and (3) LIBOR (adjusted to reflect any required bank reserves) for a one month interest period on such day plus 1.00% per annum. LIBOR based loans will have an applicable margin that will range between 1.75% and 2.50% per annum and base rate loans will have an applicable margin that will range between 0.75% and 1.50% per annum, each based on our consolidated total leverage ratio when financial statements are delivered. The weighted average interest rate on borrowings outstanding under the Credit Agreement as of December 31, 2015 and 2014 was 2.59% and 3.11% per annum, respectively. In addition to paying interest on outstanding principal under the Credit Agreement, we are required to pay a commitment fee in respect of the unutilized commitments thereunder at the applicable rate ranging from 0.375% to 0.50% per annum, paid quarterly in arrears based on our consolidated total leverage ratio. We are also required to pay a customary letter of credit fee equal to the applicable margin on revolving credit LIBOR loans, fronting fees and other fees, agreed to with the administrative agent and lenders.

The Credit Agreement requires us to maintain (i) a minimum consolidated interest coverage ratio (ratio of consolidated earnings before interest, taxes, depreciation, and amortization ("EBITDA") to consolidated interest charges) of 3.0 to 1.0, (ii) a maximum consolidated total leverage ratio (ratio of consolidated total indebtedness to consolidated EBITDA) of 5.5 to 1.0 (with step downs to 5.0 to 1.0), and (iii) a maximum consolidated secured leverage ratio (consolidated secured indebtedness to consolidated EBITDA) of 4.0 to 1.0, in each case, as of the last day of each fiscal quarter, calculated on a trailing four quarters basis. At December 31, 2015, our leverage ratio was 4.56 to 1. In addition, the Credit Agreement includes customary negative covenants that, among other things, limit our ability to incur additional debt, incur or permit certain liens to exist, or make certain loans, investments, acquisitions, or other restricted payments. The Credit Agreement provides that we can make distributions to holders of our common and subordinated units, but only if there is no default or event of default under the facility.

We are in compliance with all covenants and conditions of our Credit Agreement as of December 31, 2015. Our ability to continue to comply with our financial covenants depends largely upon our ability to generate adequate cash flow. Historically, our financial performance has been more than adequate to meet these covenants, and we expect this trend to continue. However, as a result of the recent decrease in demand for certain of our products and services by our customers in response to decreased oil and natural gas prices, and our expectation that the reduced demand will continue for an indefinite period of time, we have taken strategic cost reduction efforts, including headcount reductions, deferral of wage increases, wage reductions and other efforts to reduce costs and generate cash in anticipation of the reduced demand for our products and services. In addition, on January 22, 2016, the board of directors of our General Partner declared a cash distribution attributable to the quarter ended December 31, 2015, of $0.3775 per common unit, which represents a decrease of $0.1250 per common unit compared to the previous quarterly distribution. Based on our projections for each of the quarterly periods in 2016, and including the impact of these cost reduction efforts to increase operating cash flows, and the impact of decreased quarterly distributions, we anticipate that we will be in compliance with the financial covenants under our Credit Agreement through December 31, 2016.

7.25% Senior Notes

In August 2014, we, and one of our indirect and wholly owned subsidiaries, CSI Compressco Finance Inc., a Delaware corporation (we, together with CSI Compressco Finance, the "Issuers"), issued $350.0 million aggregate principal amount of the Issuers’ 7.25% Senior Notes due 2022 (the "7.25% Senior Notes") in a private offering exempt from the registration requirements under the Securities Act of 1933, as amended, pursuant to a Note Purchase Agreement dated July 29, 2014. The 7.25% Senior Notes were subsequently exchanged for registered securities under a public exchange offer that closed on July 20, 2015.

The obligations under the 7.25% Senior Notes are jointly and severally, and fully and unconditionally, guaranteed on a senior unsecured basis by each of our domestic restricted subsidiaries (other than CSI Compressco Finance) that guarantee our other indebtedness (the "Guarantors" and together with the Issuers, the "Obligors"). The 7.25% Senior Notes and the subsidiary guarantees thereof (together, the "Securities") were issued pursuant to an indenture described below.

The Obligors issued the Securities pursuant to the Indenture dated as of August 4, 2014 (the "Indenture") by and among the Obligors and U.S. Bank National Association, as trustee (the "Trustee"). The 7.25% Senior Notes accrue interest at a rate of 7.25% per annum. Interest on the 7.25% Senior Notes is payable semi-annually in arrears on February 15 and August 15 of each year, beginning February 15, 2015. The 7.25% Senior Notes are scheduled to mature on August 15, 2022.

The Indenture contains customary covenants restricting our ability and the ability of our restricted subsidiaries to: (i) pay dividends and make certain distributions, investments and other restricted payments; (ii) incur additional indebtedness or issue certain preferred shares; (iii) create certain liens; (iv) sell assets; (v) merge, consolidate, sell or otherwise dispose of all or substantially all of their assets; (vi) enter into transactions with affiliates; and (vii) designate our or their subsidiaries as unrestricted subsidiaries under the Indenture. The Indenture also contains customary events of default and acceleration provisions relating to such events of default, which provide that upon an event of default under the Indenture, the Trustee or the holders of at least 25% in aggregate principal amount of the 7.25% Senior Notes then outstanding may declare all amounts owing under the 7.25% Senior Notes to be due and payable. We are in compliance with all covenants and conditions of the Indenture as of December 31, 2015.