Delek US Holdings, Inc. - Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K, dated March 30, 2018, details a significant refinancing event for Delek US Holdings, Inc. The Company entered into new credit facilities and terminated prior material definitive agreements on the Closing Date of March 30, 2018.
Key Financial Metrics and Debt Structure
The filing outlines the establishment of new senior secured debt facilities:
- Term Loan Credit Facility: Initial commitment of $700 million, borrowed in full on the Closing Date with a 0.50% original issue discount.
- Revolving Credit Facility (ABL): Initial commitment of $1.0 billion. Approximately $300 million was borrowed on the Closing Date.
- Letters of Credit: Capacity of up to $300 million under the Revolving Credit Facility.
- Interest Margins (Initial): Term Loan margins are 1.50% (Base Rate) and 2.50% (LIBOR). Revolver margins are 0.25% (Base Rate) and 1.25% (LIBOR/CDOR).
- Maturity: Term Loan matures in 7 years with quarterly principal payments of $1.75 million. Revolver matures in 5 years.
The filing does not provide specific values for revenue, profit, cash flow, or operating margins as this is a transactional report rather than a periodic financial statement.
Material Changes Versus Prior Period
The Company executed a complete refinancing of its existing debt structure:
- Termination of Prior Agreements: Concurrent with the new facilities, the Company terminated and repaid all outstanding borrowings under four previous credit agreements, including facilities held by Lion Oil Company, Alon USA Partners, LP, Alon USA Energy, Inc., and Southwest Convenience Stores, LLC.
- Use of Proceeds: Proceeds from the new Term Loan and the initial $300 million Revolver draw were used to repay the aforementioned indebtedness and cover transaction fees.
Guidance, Covenants, and Risks
Covenants and Restrictions:
- Springing Covenant: A minimum fixed charge coverage ratio of 1.00 to 1.00 applies if excess availability under the Revolver falls below the greater of $90 million or 10% of the loan limit.
- Negative Covenants: Limitations on incurring additional indebtedness, liens, investments, asset sales, dividends, and affiliate transactions.
- Prepayment Requirements: Mandatory prepayments are required from 100% of net cash proceeds from asset sales and a variable percentage (0% to 50%) of excess cash flow based on leverage ratios.
Incremental Capacity:
- The Company may request incremental term loans up to $200 million plus voluntary prepayments, provided the pro forma consolidated net leverage ratio does not exceed 2.50 to 1.00.
- The Revolver commitments may be increased by up to $500 million.
Risks: The agreements contain standard events of default, including a change of control, which could trigger acceleration of debt.
Investor Verification Checklist
- Verify the exact amount of debt retired versus the new debt incurred to assess net leverage impact.
- Review the full text of the New Credit Agreements (Exhibits 10.1 and 10.2) for detailed definitions of "excess cash flow" and leverage ratios.
- Confirm the status of the "MLP Subsidiaries" (Delek Logistics Partners, LP) which are excluded from the guarantee and security structure.
- Monitor the Company's excess availability under the Revolver to determine if the springing fixed charge coverage covenant becomes active.