SEC Filing Summary: STAR GROUP, L.P. (Form 8-K)
Business Context and Reporting Period
This Current Report on Form 8-K was filed by STAR GROUP, L.P. on July 2, 2018. The filing reports the entry into a material definitive agreement regarding the company's debt financing structure.
Key Financial Metrics and Debt Structure
The filing details a new fourth amended and restated asset-based revolving credit facility and a senior secured term loan. Specific financial metrics include:
- Revolving Credit Facility: Up to $300 million, increasing to $450 million during the heating season (December through April). Includes capacity for up to $25 million in letters of credit.
- Term Loan: $100 million five-year senior secured term loan.
- Use of Proceeds: Term loan proceeds will repay existing outstanding debt; revolving facility is for working capital.
- Interest Rates: Based on a margin over LIBOR or a base rate.
- Commitment Fees: 0.30% on unused portions from December through April; 0.20% from May through November.
- Collateral: Secured by liens on substantially all company assets, including accounts receivable, inventory, real property, and equipment.
Material Changes and Covenants
The new agreement replaces the previous credit facility and introduces specific financial covenants and restrictions:
- Fixed Charge Coverage Ratio: Must not be less than 1.1 while the Term Loan is outstanding or if revolving loan availability drops below 12.5% of the facility size.
- Senior Secured Leverage Ratio: Cannot exceed 3.0 for quarters ending June or September, and 4.5 for quarters ending December or March, while the Term Loan is outstanding.
- Repayment Terms: Term Loan requires quarterly payments of $2.5 million plus an annual payment equal to 25% of annual Excess Cash Flow (capped at $15 million annually).
- Restrictions: The agreement limits the company's ability to incur additional debt, pay distributions to unitholders, make investments, grant liens, sell assets, or make acquisitions.
- Expansion Option: The company may increase the revolving facility by $200 million without bank group consent, though funding is not guaranteed.
Guidance, Outlook, and Risks
The filing does not provide specific revenue guidance, profit outlook, or management commentary on future operational performance. The primary risk disclosed relates to compliance with the new financial covenants and restrictions on capital allocation. Failure to meet the fixed charge coverage or leverage ratios could result in a default. The filing text does not provide clear values for current liquidity, cash flow, or existing debt levels prior to this transaction.
Key Facts for Investor Verification
- Verify the company's current Fixed Charge Coverage Ratio and Senior Secured Leverage Ratio to ensure compliance with the new covenants.
- Confirm the exact amount of existing debt being repaid with the $100 million Term Loan proceeds.
- Assess the impact of the new restrictions on the company's ability to pay distributions to unitholders.
- Review the definition of "Excess Cash Flow" in the agreement to understand the variable repayment obligations on the Term Loan.
- Monitor the company's ability to maintain the required liquidity levels during the non-heating season when the revolving facility is capped at $300 million.