--- title: "Phoenix Energy Discloses Covenant Waiver and Files for $500 Million Junior-Lien Note Offering" url: https://altstreet.investments/news/phoenix-energy-one-fortress-covenant-waiver-500-million-junior-lien-notes-2026-10-22 kind: news-article updated: 2026-10-23 description: "Phoenix Energy One's Oct. 22, 2026 8-K discloses a waived September current-ratio covenant default under its senior credit agreement (Fortress Credit Corp. as agent); a same-day S-1 offers up to $500M of junior-lien notes at 7.5% to 11%." publisher: AltStreet (https://altstreet.investments) license: Public factual pages may be read, quoted and cited with attribution and a link. Bulk redistribution is not permitted. --- # Phoenix Energy Discloses Covenant Waiver and Files for $500 Million Junior-Lien Note Offering Phoenix Energy One failed the current-ratio covenant in its senior secured credit agreement for September 2026, and the lenders waived that month's default; the same day it filed to sell up to $500 million of junior-lien notes to the public at 7.5% to 11%, with a $5,000 minimum. By Michael E., Head of Research, AltStreet Research (https://altstreet.investments/authors/michael-e). Published October 23, 2026. Platform: Phoenix Energy (formerly Phoenix Capital Group) (https://altstreet.investments/platforms/reviews/phoenix-capital-group). Entity: Phoenix Energy One, LLC (CIK 1818643, https://altstreet.investments/edgar/1818643). Phoenix Energy One, the Irvine, California oil and gas company that funds its drilling largely with bonds and notes sold to individual investors, disclosed on October 22, 2026 that it failed the current-ratio covenant for September under the senior secured credit agreement through which its subsidiary Phoenix Operating LLC borrows, and that the lenders, with Fortress Credit Corp. as administrative agent, waived that default. It was a breach of a financial covenant; the filings do not disclose any missed interest or principal payment. The same amendment permits new notes secured by junior liens, and that day Phoenix filed a registration statement to sell up to $500 million of them to the public. ## What the amendment waives, and what it leaves in place Amendment No. 11, dated October 21, 2026, is attached to the 8-K as Exhibit 10.1. The parties are Phoenix Energy One (the Company), Phoenix Operating LLC as borrower, the Guarantors, the Specified Additional Guarantor, the Lenders, and Fortress Credit Corp. as administrative agent, collateral agent and technical agent. The recitals state that the borrower notified the agent that an Event of Default 'has occurred and is continuing'. Section 5.1 waives that 'Specified Default', and Schedule A defines it narrowly: 'Solely with respect to the calendar month ended September 30, 2026', an Event of Default under Section 10.01(d) for failing Section 9.01(b)'s requirement that the Current Ratio not fall below 0.90 to 1.00 at the end of any month from April 30 through December 31, 2026. Section 4.2 says the amendment is not a waiver of any other Default or Event of Default, and Section 5.1 says the waiver does not create a course of dealing. The 8-K's summary refers to the April-to-December test period; the operative provisions waive September only. A current ratio compares what a company expects to turn into cash within a year with what it owes within a year. The credit agreement's version starts from the balance-sheet totals and adjusts both sides: current assets exclude non-cash derivative assets, collateral posted for hedges, deferred tax assets and restricted cash; current liabilities exclude non-cash derivative liabilities, deferred tax liabilities and the current portion of the credit-agreement loans and the junior lien notes, and are reduced further by an amount tied to recent bond and junior-lien-note sales. Phoenix's September figure under that definition fell below 0.90; the filings do not give the number. The waiver does not change the test ahead. Section 9.01(b), as attached, keeps the 0.90 minimum for the October, November and December 2026 month-ends and raises it to 1.00 for January 31, 2027 and every month-end after. The minimum has moved before: 0.90 for September and October 2024, 0.80 from November 2024 through March 2026, then 0.90 again. The agreement, restated on August 12, 2024, has been amended 11 times in 26 months; six of the amendments carry 'Limited Waiver' in their titles, though the titles alone do not show what each one waived. Section 2.1(b) makes the amendment effective only once the agent, the arranger and the lenders have received 'all fees and amounts due and payable' and reimbursement of specified expenses, including Sidley Austin LLP's fees; the exhibit does not quantify any fee specific to the waiver. The amendment also adds forms of indenture for '2026 Registered Secured Notes' and '2026 Regulation D Secured Notes' and a restated junior lien intercreditor agreement, which permit those notes to be secured by liens junior to the lenders'. ## The $500 million Phoenix Access Notes offering The Form S-1 filed the same day registers up to $500 million of Senior Subordinated Junior Lien Notes marketed as 'Phoenix Access Notes', in ten series: two-year notes at 7.5%, three-year at 8.0%, five-year at 9.0%, seven-year at 10.0% and eleven-year at 11.0%, each as a Cash Interest Note or a Compound Interest Note. Cash Interest Notes pay interest monthly. On Compound Interest Notes the interest is added to principal instead of being paid out, so the holder receives nothing until maturity or an earlier redemption by Phoenix. The minimum initial investment is $5,000. The S-1 is not yet effective and its terms may change. The collateral is second mortgages on all of Phoenix's real estate and a blanket second lien on all of its assets, shared equally with other parity-lien debt and junior to the Fortress lenders and any other senior-priority secured debt, subject to limitations, exceptions and permitted liens. The indenture lets Phoenix 'add or release Collateral at its discretion, without the consent of or notice to' the trustee, the collateral trustee or noteholders, but subject to the Collateral Trust Agreement and the Intercreditor Agreement, and liens are also released on full repayment, defeasance or discharge, with the consent of a majority of noteholders, or under those agreements. The trustee acts on an officer's certificate, without an opinion of counsel. AltStreet found no requirement in the prospectus's description to substitute replacement collateral, and the prospectus says proceeds of collateral that is sold stay subject to the noteholders' lien only to the extent they themselves qualify as collateral. The full indenture and intercreditor agreement govern. According to the prospectus, $848.5 million of debt outstanding at June 30, 2026 would rank ahead of the proposed notes, including $525.0 million under the Fortress agreement; the notes would also be structurally junior to the liabilities of Phoenix's subsidiaries. The prospectus's pro forma total of $2,320.8 million adds the full $500 million to June 30 debt of $1,820.8 million but does not reflect the use of proceeds, including any repayment of existing debt, so it is not a forecast of net borrowing. At June 30, $173.5 million of debt matured within a year, almost all of it Reg A and Rule 506(c) bonds, and Phoenix says it plans to repay debt with cash from operations and the proceeds of its continuing note offerings, including these notes. | Rank relative to the new notes | At June 30, 2026 | What the prospectus includes | | --- | --- | --- | | Senior (contractually ahead) | $848.5M | Secured debt, including $525.0M under the Fortress Credit Agreement and borrowings under the Adamantium Loan Agreement | | Equal (pari passu) | $143.9M | Debt ranking equally with the notes, before collateral arrangements; excludes the new notes | | Subordinated (behind the notes) | $828.4M | Debt contractually subordinated to the notes | | Total debt | $1,820.8M | Before any Phoenix Access Notes are sold | | Pro forma, all $500M sold | $2,320.8M | Does not reflect the use of proceeds, including repayment of other debt | Source: Phoenix Energy One Form S-1 filed October 22, 2026; figures as of June 30, 2026. ## Also disclosed: employee well interests Under Item 5.02, the same 8-K describes a Wellbore Participation and Assignment Plan letting employees, including executive officers, buy non-operated working interests in 38 Phoenix-operated wells in North Dakota and Montana, paying 3.0% of their commitment up front against an aggregate gross AFE estimate of $414.4 million and then bearing their share of costs. The filing does not say who has elected to participate or at what size. ## The pattern in AltStreet's data AltStreet's review of Phoenix tracks its retail debt program: Reg D bonds, registered unsecured notes, Flex Notes and Adamantium securities sold to individual investors, with the senior secured Fortress facility above them. The new notes add a second-lien layer to that structure. The S-1 shows revenue of $704.5 million and a net loss of $34.1 million for the first half of 2026, against net income of $24.3 million a year earlier, with liabilities of $2,178.6 million against assets of $2,219.3 million at June 30. ## Why it matters For an investor weighing the new notes, the question is whether 7.5% to 11% compensates for where they would sit. According to the prospectus, $848.5 million of debt outstanding at June 30 would rank ahead of them; their collateral is a second lien that Phoenix may add to or release within the limits of the collateral trust and intercreditor agreements; and the company's stated plan for near-term maturities relies in part on selling more notes like these. The waiver covered September only: the 0.90 test applies again at the October through December month-ends and rises to 1.00 from January 2027. A covenant breach is not a payment default, and the filings do not show one. ## What the filings do not show The filings do not state Phoenix's current ratio for September or any later month, the amount of fees paid when the amendment took effect, or how much of the $500 million will be sold. The S-1 is not yet effective. AltStreet summarized the collateral terms from the prospectus; the full indenture, collateral trust agreement and intercreditor agreement govern. The 8-K does not disclose which employees or executives have elected to join the wellbore plan. ## Key facts - Form 8-K filed October 22, 2026 by Phoenix Energy One, LLC (formerly Phoenix Capital Group Holdings, LLC; CIK 1818643; accession 0001193125-26-428937), reporting Amendment No. 11, dated October 21, 2026, to the Amended and Restated Senior Secured Credit Agreement of August 12, 2024 among the Company, Phoenix Operating LLC as borrower, the Guarantors, the Specified Additional Guarantor, the Lenders, and Fortress Credit Corp. as administrative agent, collateral agent and technical agent (the 'Fortress Credit Agreement', as the S-1 calls it). - Section 5.1 of the amendment waives the 'Specified Default'. Schedule A limits it to 'the calendar month ended September 30, 2026': an Event of Default under Section 10.01(d) for failing Section 9.01(b)'s requirement not to let the Current Ratio fall below 0.90 to 1.00 at any month-end from April 30 through December 31, 2026. Section 4.2 states that the amendment is not a waiver of any other Default or Event of Default. - The default was a breach of a financial covenant. Neither the 8-K nor the amendment discloses a missed payment of interest or principal. - Section 9.01(b), as attached to the amendment, keeps the 0.90 minimum for each month-end through December 31, 2026 and raises it to 1.00 for January 31, 2027 and each month-end after. - The agreement defines Current Ratio as Current Assets to Current Liabilities, each starting from the GAAP balance-sheet totals with adjustments: current assets exclude non-cash derivative assets, collateral posted for hedges, deferred tax assets and restricted cash; current liabilities exclude non-cash derivative liabilities, deferred tax liabilities and the current portion of the credit-agreement loans and of the junior lien notes (other than notes holders have put), and are reduced by up to the lesser of current maturities of long-term debt and four times the prior quarter's proceeds from certain bond and junior-lien-note sales. - Section 2.1(b) makes the amendment effective only once the agent, arranger and lenders have received 'all fees and amounts due and payable' and specified expenses, including Sidley Austin LLP's fees; the exhibit does not quantify any waiver-specific fee. - The amendment also permits '2026 Registered Secured Notes' and '2026 Regulation D Secured Notes' secured by junior liens. It is the 11th amendment since the agreement was restated on August 12, 2024; six of the eleven are titled 'Limited Waiver and Amendment', though the titles alone do not show what each one waived. - Form S-1 filed the same day (accession 0001193125-26-429061) registers up to $500,000,000 of 'Phoenix Access Notes', senior subordinated junior-lien notes of two to eleven years at 7.5% to 11.0%, each offered as a Cash Interest Note (monthly cash interest) or a Compound Interest Note (interest added to principal, nothing paid until maturity or earlier redemption), with a $5,000 initial minimum. - Per the S-1, at June 30, 2026 Phoenix had $1,820.8 million of debt: $848.5 million ranking contractually senior to the new notes (including $525.0 million under the Fortress Credit Agreement), $143.9 million ranking equally and $828.4 million subordinated to them. Its $2,320.8 million pro forma figure adds the full $500 million but not the use of proceeds, including repayment of other debt. - The S-1 reports revenue of $704.5 million and a net loss of $34.1 million for the six months ended June 30, 2026, against revenue of $279.6 million and net income of $24.3 million a year earlier; total assets were $2,219.3 million and total liabilities $2,178.6 million at June 30. - Item 5.02 of the 8-K also describes a Wellbore Participation and Assignment Plan letting employees, including executive officers, buy non-operated working interests in 38 Phoenix-operated wells. ## Sources - Form 8-K, Phoenix Energy One, LLC, filed October 22, 2026 (accession 0001193125-26-428937): https://www.sec.gov/Archives/edgar/data/1818643/000119312526428937/ck0001818643-20261009.htm - Exhibit 10.1: Limited Waiver and Amendment No. 11 to Amended and Restated Senior Secured Credit Agreement, October 21, 2026: https://www.sec.gov/Archives/edgar/data/1818643/000119312526428937/ck0001818643-ex10_1.htm - Exhibit 10.2: Wellbore Participation and Assignment Agreement, 38 subject wells: https://www.sec.gov/Archives/edgar/data/1818643/000119312526428937/ck0001818643-ex10_2.htm - Form S-1, Phoenix Access Notes, $500,000,000, filed October 22, 2026 (accession 0001193125-26-429061): https://www.sec.gov/Archives/edgar/data/1818643/000119312526429061/d194117ds1.htm ## SEC accession numbers - 0001193125-26-428937 - 0001193125-26-429061 --- Source page: https://altstreet.investments/news/phoenix-energy-one-fortress-covenant-waiver-500-million-junior-lien-notes-2026-10-22 Machine index: https://altstreet.investments/llms.txt AltStreet reads what platforms, funds and issuers file with the SEC and what they tell investors, and publishes the difference. 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