Business Context and Reporting Period
Company: Global Partners LP
Filing Type: Form 8-K (Current Report)
Date of Report: October 20, 2014
Event: Entry into a Material Definitive Agreement and Creation of a Direct Financial Obligation.
The filing details the execution of the Second Amendment to the Company's Second Amended and Restated Credit Agreement. This amendment was entered into to facilitate the proposed acquisition of 100% of the equity interests in Warren Equities Inc. ("Warren") by Global Montello Group Corp., a wholly-owned subsidiary of Global Partners LP.
Key Financial Metrics and Obligations
This filing does not report operational financial metrics such as revenue, profit, or cash flow. It focuses on changes to the Company's credit facility and debt capacity:
- Revolver Commitment Increase: The amendment provides for an optional increase in the Aggregate Revolver Commitment of either $75 million or $150 million.
- Commitment Fee: A "ticking fee" of 50 basis points applies to the $150 million potential increase if the option is not exercised or terminated by January 15, 2015.
- Debt Limits: The $400 million limit on Senior Unsecured Indebtedness and Subordinated Debt has been eliminated.
- Investment Basket: The permitted investments basket for obligations due to the Partnership and its subsidiaries increased from $5 million to $50 million.
Material Changes Versus Prior Period
The Second Amendment introduces several material changes to the Credit Agreement dated December 16, 2013:
- Borrower and Guarantor Status: Upon closing the Warren Acquisition, Warren will be joined as a Borrower, and its subsidiaries will be joined as guarantors.
- EBITDA Definition: The definition of "Combined EBITDA" is revised to adjust for the Warren Acquisition when calculating leverage and interest coverage ratios.
- Collateral Requirements: The definition of "Subsidiary" is revised to exclude joint ventures where the Partnership owns more than 50% but less than 100% of the equity. Assets in these joint ventures are no longer required to be pledged as collateral.
- Administrative Provisions: Modifications were made to provisions regarding borrowing notices, bank accounts, and reference rates.
Guidance, Outlook, and Risks
Outlook: The amendments are contingent upon the consummation of the Warren Acquisition. The option to increase revolver commitments terminates upon the earliest of the acquisition closing, notification that the acquisition will not occur, or February 15, 2015.
Risks and Contingencies:
- Acquisition Risk: The financial terms and structural changes are predicated on the successful closing of the Warren Acquisition.
- Cost of Capital: If the option to increase commitments is not exercised by January 15, 2015, the Company incurs a 50 basis point fee on the $150 million commitment increase regardless of whether the increase is ultimately utilized.
Important Facts for Investor Verification
- Verify the status of the Warren Acquisition and whether it has been consummated.
- Confirm whether the Company exercised the option to increase the Aggregate Revolver Commitment by $75 million or $150 million.
- Review the impact of the revised "Combined EBITDA" definition on future leverage ratio compliance.
- Assess the implications of removing the $400 million cap on Senior Unsecured Indebtedness and Subordinated Debt.
- Check if the 50 basis point ticking fee was incurred due to the option not being exercised by January 15, 2015.