Business Context and Reporting Period
This Form 8-K filing by Targa Resources Corp. (the "Registrant") reports on events occurring on April 12, 2018. The filing details a material definitive agreement entered into by Targa Resources Partners LP (the "Partnership"), a subsidiary of the Registrant, and its wholly-owned subsidiary, Targa Resources Partners Finance Corporation.
Key Financial Metrics and Transaction Details
- Debt Issuance: The Issuers issued $1,000,000,000 in aggregate principal amount of 5.875% senior unsecured notes due 2026 (the "Notes").
- Interest Terms: Interest is payable semi-annually in arrears on April 15 and October 15, commencing October 15, 2018.
- Maturity Date: The Notes mature on April 15, 2026.
- Guarantees: The Notes are guaranteed on a senior unsecured basis by certain subsidiary guarantors.
- Use of Proceeds: Net proceeds are intended to repay borrowings under credit facilities, fund general partnership purposes, redeem or repurchase outstanding senior notes, repay other indebtedness, fund working capital, and finance capital expenditures and acquisitions.
Material Changes and Covenants
The issuance of the Notes introduces new financial obligations and covenants that restrict the Partnership and certain subsidiaries. Key restrictions include limitations on:
- Incurring additional debt.
- Paying distributions on, or repurchasing, equity interests.
- Making certain investments and incurring liens.
- Entering into transactions with affiliates.
- Merging, consolidating, or transferring assets.
Many of these covenants will terminate if the Notes are rated investment grade by Moody's or S&P Global Ratings and no Default has occurred. The filing does not provide specific revenue, profit, or cash flow metrics for the period, as this is a transactional report rather than a periodic financial statement.
Redemption Provisions and Risks
Redemption Options:
- Before April 15, 2021: The Issuers may redeem up to 35% of the Notes at 105.875% of principal using proceeds from certain equity offerings. Alternatively, they may redeem some or all Notes at 100% of principal plus a make-whole premium.
- On or After April 15, 2021: The Issuers may redeem Notes at declining percentages of principal: 104.406% (2021), 102.938% (2022), 101.469% (2023), and 100.000% (2024 onwards), plus accrued interest.
Events of Default: The Indenture defines several events of default, including failure to pay interest or principal, failure to comply with covenants, bankruptcy, and cross-defaults on other indebtedness exceeding 3.0% of consolidated net tangible assets. Upon certain defaults, the Trustee or holders of 25% of the Notes may declare all Notes due and payable immediately.
Registration Rights: A Registration Rights Agreement was entered into with initial purchasers. If the Notes are not freely tradable by the 370th day following issuance, the Issuers must use commercially reasonable efforts to consummate an exchange offer or file a shelf registration statement.
Investor Verification Checklist
- Verify the exact amount of debt repaid from the $1 billion proceeds and the remaining balance on credit facilities.
- Confirm the current credit rating of the Notes to determine if restrictive covenants remain in effect.
- Review the specific subsidiaries acting as Guarantors to assess the scope of the guarantee.
- Monitor the 370-day timeline for the removal of restrictive legends on the Notes to ensure liquidity.
- Assess the impact of the new debt service obligations (5.875% interest) on future cash flow and distribution capabilities.