SEC Filing Summary: Energy Transfer Equity, L.P. (Form 8-K)
Business Context and Reporting Period
This Current Report on Form 8-K was filed on March 5, 2015, by Energy Transfer Equity, L.P. (the "Partnership"). The filing discloses the entry into a material definitive agreement to secure financing for a previously announced transaction involving Energy Transfer Partners, L.P. ("ETP").
Key Financial Metrics and Debt Structure
- New Debt Facility: Entered into a Senior Secured Term Loan C Agreement with an aggregate principal amount of $850,000,000.
- Maturity: Scheduled maturity date of December 2, 2019, with an extension option.
- Interest Rates: LIBOR plus 3.25% or Base Rate plus 2.25%.
- Amortization: No required amortization payments.
- Cash Consideration: The Partnership agreed to pay ETP $879,000,000 in cash (subject to adjustment) plus an additional $26,000,000 for prior development costs.
- Collateral: Obligations are secured by a lien on substantially all tangible and intangible assets, including approximately 30.8 million ETP common units, 50.2 million ETP Class H units, and 57.2 million Regency Energy Partners LP common units.
Material Changes and Transaction Details
The financing supports the "Bakken/Class H Transaction," which involves:
- Transfer of 25,614,102 ETP Common Units held by the Partnership and 5,226,967 units held by a subsidiary to ETP for repurchase.
- Transfer of the Partnership's 60% membership interest in Dakota Access Holdings LLC and ETCO Holdings LLC to ETP.
- Issuance of 30,841,069 Class H Units and 100 Class I Units by ETP to the Partnership and its subsidiaries in exchange.
- Use of loan proceeds to fund the cash consideration, repay amounts under the Partnership's revolving credit facility, and pay transaction fees.
Covenants, Risks, and Outlook
- Financial Covenants:
- Maximum Funded Debt to EBITDA ratio: 6.00 to 1.00 (increasable to 7.00 to 1.00 for certain acquisitions).
- Minimum EBITDA to Consolidated Interest Expense ratio: 1.50 to 1.00.
- Prepayment Triggers: Mandatory prepayment required if net proceeds from dispositions of IDRs or general partnership interests in ETP or Regency exceed $50,000,000.
- Restrictions: The agreement includes limitations on liens, new lines of business, mergers, and affiliate transactions.
- Default Consequences: Lenders may declare the entire outstanding amount due and payable upon an event of default.
Investor Verification Checklist
- Verify the final closing date and adjusted cash consideration amount for the Bakken/Class H Transaction.
- Confirm the impact of the $850 million term loan on the Partnership's current leverage ratios relative to the 6.00x covenant limit.
- Review the full text of the Senior Secured Term Loan C Agreement (Exhibit 10.1) for specific definitions of EBITDA and permitted liens.
- Assess the valuation of the Class H and Class I units received in exchange for the transferred assets and cash.
- Monitor future dispositions of IDRs or general partnership interests that could trigger mandatory prepayments.