Business Context and Reporting Period
Company: Global Partners LP (Delaware limited partnership)
Filing Type: Form 8-K (Current Report)
Date of Report: June 19, 2014
Event Date: June 19, 2014 (Agreement); June 24, 2014 (Closing)
The filing reports the entry into a Material Definitive Agreement for a private placement of senior notes and the creation of a direct financial obligation.
Key Financial Metrics and Capital Structure
- New Debt Issuance: $375 million aggregate principal amount of 6.25% Senior Notes due 2022.
- Interest Rate: 6.25% per annum, payable semi-annually.
- Maturity Date: July 15, 2022.
- Debt Repayment: Net proceeds used to repay $150 million of existing high-yield notes (comprising $70 million of 8.0% Senior Notes due 2018 and $80 million of 7.75% Senior Notes due 2018) and a portion of borrowings under the revolving credit facility.
- Guarantees: Notes are guaranteed on a joint and several senior unsecured basis by the Partnership's subsidiaries.
Material Changes and Transaction Details
The primary material change is the refinancing of existing debt obligations. The company replaced higher-interest debt maturing in 2018 with new debt maturing in 2022 at a lower interest rate (6.25% vs. 7.75% and 8.0%).
- Existing Debt Retired: $150 million in aggregate principal of existing high-yield notes.
- Revolving Credit Facility: A portion of the new proceeds was applied to reduce outstanding borrowings under the facility.
- Exchange Rights: Agreements were entered with FS Energy and Power Fund and funds managed by Kayne Anderson Capital Advisors to facilitate the repayment of existing notes and the issuance of new notes to these holders.
Terms, Covenants, and Risks
Redemption Provisions
- Before July 15, 2017: Issuers may redeem up to 35% at 106.25% of principal plus accrued interest. Full redemption prior to this date requires a "make whole" premium.
- After July 15, 2017: Issuers may redeem at declining premiums (104.688%, 103.125%, 101.563%) until reaching 100.000% on or after July 15, 2020.
Covenants and Restrictions
The Indenture limits the Partnership's ability to incur additional indebtedness, issue preferred securities, make restricted payments (dividends/distributions), create liens, or enter into sale-leaseback transactions.
Events of Default
Includes failure to pay principal/interest, breach of covenants, bankruptcy/insolvency, acceleration of other indebtedness exceeding $15.0 million, or failure to pay uninsured final judgments exceeding $15.0 million within 60 days.
Registration Rights
The Issuers agreed to file a registration statement to permit an exchange offer for SEC-registered notes by the 360th day after June 24, 2014. Failure to complete this exchange will result in a 1.0% per annum increase in the interest rate.
Investor Verification Checklist
- Verify the exact amount of revolving credit facility debt repaid versus the $150 million in existing notes retired.
- Confirm the status of the registration statement filing required by the 360-day deadline to avoid the 1.0% interest rate penalty.
- Review the specific terms of the Exchange Rights Agreements with FS Energy and Power Fund and Kayne Anderson funds (Exhibits 10.2 and 10.3).
- Assess the impact of the new covenants on the Partnership's future ability to distribute cash to unitholders.
- Check for any subsequent filings regarding the effectiveness of the shelf registration statement for resales of the Notes.