Business Context and Reporting Period
Company: Delek Logistics Partners, LP
Filing Type: Form 8-K (Current Report)
Date of Report: January 6, 2015
Event Date: December 30, 2014
Context: The Partnership entered into an amended and restated senior secured revolving credit agreement (the "DKL Credit Facility") with Fifth Third Bank as administrative agent and a syndicate of lenders. This agreement replaces the facility entered into on July 9, 2013.
Key Financial Metrics and Debt Structure
This filing details a restructuring of the company's credit facility rather than reporting operational financial results (revenue, profit, or cash flow). Key debt metrics include:
- Total Commitment: Increased from $400.0 million to $700.0 million.
- Tranche Structure:
- U.S. dollar-only borrowing tranche: $620.0 million.
- U.S. dollar or Canadian dollar borrowing tranche: $80.0 million.
- Accordion Feature: Capacity to increase the facility to an aggregate of $800.0 million subject to lender commitments.
- Swing Line Limit: Increased from $14.0 million to $18.0 million total.
- Letter of Credit Limit: Increased from $85.0 million to $100.0 million total.
- Maturity Date: Extended to December 30, 2019 (previously November 7, 2017).
- Collateral: Secured by a first priority lien on substantially all tangible and intangible assets.
- Guaranty: Delek Marketing & Supply, LLC provides a limited guaranty secured by a pledge of a $102.0 million Holdings Note.
Material Changes Versus Prior Period
The DKL Credit Facility introduces significant changes to the 2013 Facility:
- Capacity Expansion: Total borrowing capacity increased by $300.0 million.
- Currency Flexibility: New tranches allow for Canadian dollar borrowings at the borrower's option.
- Covenant Adjustments:
- Total Leverage Ratio: Increased from 4.00 to 1.0 to 4.25 to 1.0 (up to 5.00 to 1.0 if senior unsecured notes are outstanding).
- Interest Coverage Ratio: Decreased from 2.50 to 1.0 to 2.00 to 1.0.
- New Covenant: Added a Senior Leverage Ratio covenant capped at 3.50 to 1.0 (4.00 to 1.0 during Temporary Increase Periods).
Guidance, Outlook, and Risks
Management Commentary: The filing does not contain forward-looking guidance regarding revenue or earnings. The primary focus is the execution of the credit agreement to support liquidity and operational needs.
Risks and Contingencies:
- Covenant Compliance: The Partnership must adhere to the new leverage and interest coverage ratios to avoid events of default.
- Interest Rate Exposure: Borrowings bear interest based on Prime or LIBOR/CDOR rates plus an applicable margin, which varies based on the Total Leverage Ratio.
- Security Interest: The facility is secured by substantially all assets, limiting the ability to pledge these assets for other financing without lender consent.
Important Facts for Investor Verification
- Verify the current utilization of the $700.0 million facility and the outstanding balance of the $102.0 million Holdings Note.
- Confirm the Partnership's current Total Leverage Ratio and Interest Coverage Ratio to ensure compliance with the new covenants (4.25x and 2.00x, respectively).
- Review the full text of Exhibit 10.1 (Second Amended and Restated Credit Agreement) for specific definitions of "Total Funded Debt," "EBITDA," and "Temporary Increase Period."
- Monitor the status of any senior unsecured notes, as their existence alters the permissible leverage ratios to 5.00 to 1.0.