PHXE-P Phoenix Energy One, LLC

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Executive Summary

Phoenix Energy One entered into Amendment No. 9 to its senior secured credit agreement, which waives an existing Event of Default (Current Ratio covenant breach) and permits the issuance of up to $100,000,000 in junior lien notes, subject to conditions including a Junior Lien Intercreditor Agreement. The filing also amends financial covenants for the Asset Coverage Ratio and Current Ratio, and imposes a minimum Capital Raise Ratio requirement for certain transactions.

Actionable Insight

Key Facts

• Amendment No. 9 to the senior secured credit agreement was executed on June 1, 2026.
• The amendment permits the company to issue up to $100,000,000 in Junior Lien Notes, secured by junior-liens on Permitted Junior Lien Collateral and subordinated to the existing senior secured lenders via a new Junior Lien Intercreditor Agreement.
• The Lenders waived a Specified Default under Section 10.01(d) of the Credit Agreement: the Company failed to maintain a Current Ratio of at least 0.80:1.00 during calendar months ending between November 30, 2024 and March 31, 2026.
• The amendment amended the Asset Coverage Ratio covenant: for fiscal quarters ending March 31, 2026 and June 30, 2026, the minimum ratio is now 1.50:1.00, and for the fiscal quarter ending June 30, 2026 it will be 1.40:1.00.
• The amendment added a new financial condition called 'Capital Raise Ratio' — at least 0.65:1.00 — required for various transactions including certain acquisitions, redemptions, and the issuance of Junior Lien Notes.
• The amendment requested a certificate from a Responsible Officer certifying that since December 31, 2024, no Material Adverse Effect has occurred.
• The amendment modifies the drilling rig operations limit: the maximum number of rigs reduces from 3 to 2 if the company is not in compliance with the financial covenants on or after the Amendment No. 9 Effective Date.
• A new Schedule 1.02(g) (Permitted Junior Lien Collateral) was added.
• The amendment adds a definition limiting 'Specified Additional Bond Indebtedness' redemption features to Permitted Bond Repurchases.
• Adam Ferrari personally guaranteed as Specified Additional Guarantor.

Financial Impact

Credit facility amendment authorizes up to $100M in junior lien notes. The company was in default of its minimum Current Ratio (0.80:1.00) covenant — the waiver preserves access to the existing $100M+ senior secured facility. New financial covenant thresholds for Asset Coverage Ratio are lowered to 1.40:1.00 (June 2026 quarter) from prior thresholds, providing some covenant relief.

Risk Factors

• The company has a history of repeated credit agreement amendments (9th amendment) and was in default — signaling ongoing liquidity or operational stress.
• The new Asset Coverage Ratio covenant will tighten further after June 2026 (rising to 1.70:1.00 and then 2.00:1.00) — risk of future covenant breach if reserves decline.
• Junior Lien Notes add $100M of subordinated debt — while they provide capital, they increase total leverage and could pressure the preferred security.
• Adam Ferrari's personal guarantee exposes key-man risk.

Market Snapshot

Documents Analyzed

This report is based on 5 SEC documents filed with EDGAR.

US Market Status