PBF Energy Inc. current report, 21 August 2023

Business Context and Reporting Period

This Form 8-K filing by PBF Energy Inc. (PBF) and its subsidiary PBF Holding Company LLC reports a material definitive agreement dated August 21, 2023. The filing details the closing of a private placement offering of senior notes to refinance existing debt obligations.

Key Financial Metrics

  • New Debt Issuance: $500.0 million aggregate principal amount of 7.875% Senior Notes due 2030.
  • Issue Price: 99.324% of principal.
  • Net Proceeds: Approximately $489.6 million (after discounts and estimated expenses).
  • Interest Payments: Semi-annually in arrears on March 15 and September 15, commencing March 15, 2024.
  • Maturity Date: September 15, 2030.
  • Debt Ranking: Senior unsecured obligations, ranking equally with existing senior indebtedness (including the Revolving Credit Facility and 6.00% Notes due 2028) and effectively subordinated to secured indebtedness.

Material Changes and Use of Proceeds

The primary material change is the execution of a new debt instrument to facilitate a debt exchange. The Company intends to use the net proceeds from the $500.0 million offering, combined with cash on hand, to fund the redemption of $664.5 million in aggregate principal amount of its outstanding 7.25% Senior Notes due 2025. This transaction extends the maturity profile of the Company's debt from 2025 to 2030.

Guidance, Covenants, and Risks

  • Covenants: The Indenture includes customary non-investment grade covenants limiting additional indebtedness, equity distributions, dividends, stock repurchases, affiliate transactions, liens, mergers, and asset sales. Many covenants may cease or be modified upon a covenant termination event (e.g., achieving investment grade rating).
  • Redemption Terms:
    • Before September 15, 2026: Issuers may redeem up to 35% of principal using equity offering proceeds at 107.875% of principal. Full redemption is possible at a "make-whole" price.
    • On or after September 15, 2026: Issuers may redeem all or part of the Notes at specified redemption prices.
  • Change of Control: If a change of control results in a ratings decline, the Issuers must offer to purchase the Notes at 101% of principal plus accrued interest.
  • Asset Dispositions: Prior to a covenant termination event, net cash proceeds from certain asset dispositions may be required to be used to offer to purchase the Notes at 100% of principal.

Investor Verification Checklist

  • Verify the exact amount of cash on hand available to supplement the $489.6 million net proceeds to fully cover the $664.5 million redemption of the 2025 Notes.
  • Review the full text of the Indenture (Exhibit 4.1) for specific definitions of "covenant termination events" and exceptions to debt incurrence limitations.
  • Confirm the impact of the new 7.875% interest rate on the Company's overall weighted average cost of debt compared to the redeemed 7.25% Notes.
  • Assess the structural subordination risk relative to the Company's secured Revolving Credit Facility.