Business Context and Reporting Period
Company: Energy Transfer Equity, L.P.
Filing Type: Form 8-K (Current Report)
Date of Report: December 2, 2013
Context: The Partnership executed a comprehensive refinancing strategy involving new credit facilities and a public debt offering to fund a tender offer for existing senior notes and repay prior debt obligations.
Key Financial Metrics and Capital Structure
- New Revolving Credit Facility: $600 million aggregate principal amount (expandable to $1 billion); includes a $150 million sublimit for letters of credit. Maturity: December 2, 2018.
- New Term Loan Facility: $1 billion aggregate principal amount. Maturity: December 2, 2019. No amortization required.
- New Senior Notes: $450 million aggregate principal amount of 5.875% Senior Notes due 2024. Net proceeds expected: approximately $445 million.
- Initial Borrowings: Approximately $197 million borrowed under the Revolver at closing.
- Debt 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 Interest Expense ratio: 1.50 to 1.00.
- Interest Margins:
- Revolver LIBOR margin: 1.75% to 2.50% (based on leverage).
- Term Loan LIBOR margin: 2.50%.
Material Changes Versus Prior Period
The filing details a significant restructuring of the Partnership's debt profile on December 2, 2013:
- Termination of Prior Agreements: The Partnership terminated its Senior Secured Term Loan Agreement (dated March 23, 2012) and its Amended and Restated Credit Agreement (dated March 26, 2013).
- Tender Offer Completion: The Partnership accepted for purchase $612,968,000 of its 7.500% Senior Notes due 2020, representing approximately 34.05% of the outstanding principal of that series.
- Use of Proceeds: Proceeds from the new Term Loan, Revolver, and Senior Notes are being used to fund the tender offer for the 2020 Notes, repay amounts under the terminated facilities, and cover transaction fees.
Outlook, Risks, and Contingencies
- Collateral Pledge: Obligations under the new facilities and notes are secured by a first-priority lien on substantially all tangible and intangible assets, including significant equity interests in Energy Transfer Partners, L.P. (ETP) and Regency Energy Partners LP.
- Events of Default: Standard events of default apply, including failure to pay principal or interest, breach of covenants, bankruptcy, and cross-defaults on indebtedness aggregating $100 million or more.
- Redemption Rights: The new 2024 Notes may be redeemed at 100% of principal plus a make-whole premium and accrued interest.
- Future Acquisitions: Debt covenants allow for an increase in the leverage ratio cap to 7.00 to 1.00 in connection with certain future acquisitions.
Investor Verification Checklist
- Verify the final net proceeds received from the $450 million Senior Notes offering after underwriting discounts and expenses.
- Confirm the exact amount of the 2020 Notes retired via the tender offer and the associated premium paid.
- Review the full text of the Revolver Credit Agreement (Exhibit 10.1) and Term Credit Agreement (Exhibit 10.2) for specific definitions of EBITDA and leverage calculations.
- Monitor the status of the pledge of equity interests in ETP and Regency to ensure the first-priority security interest is perfected by December 31, 2013.
- Assess the impact of the new interest rate margins (LIBOR + 2.50% for Term Loan) on future interest expense compared to the retired 7.500% notes.