Business Context and Reporting Period
Company: Global Partners LP
Filing Type: Form 8-K (Current Report)
Date of Report: August 18, 2010
Event: Entry into a Material Definitive Agreement and Creation of a Direct Financial Obligation via the First Amendment to the Amended and Restated Credit Agreement.
Key Financial Metrics and Debt Structure
This filing details amendments to the company's credit facility rather than reporting operational financial results (revenue, profit, or cash flow) for a specific period.
- Proposed Acquisition: Contemplated purchase of service station properties and assets from ExxonMobil for an aggregate price of not more than $205 million, including assumption of environmental liabilities.
- Existing Accordion Exercise: Revolving credit facility increased by $200 million, bringing the total credit facility to up to $1.15 billion.
- New Accordion Request: Option to request an additional increase of up to $200 million (total facility up to $1.35 billion), subject to no Default and minimum request amounts.
- Letter of Credit Commitment: Ceiling for Product Under Contract LCs increased from $20 million to $40 million.
- Interest Rates (Post-Amendment):
- Eurodollar rate plus 3.00% to 3.875%
- Cost of funds rate plus 3.00% to 3.875%
- Base rate plus 2.00% to 2.875%
Material Changes Versus Prior Period
The First Amendment introduces significant changes to the terms of the Credit Agreement dated May 14, 2010:
- Financial Covenants:
- Minimum Combined EBITDA: Increased from not less than $50 million to not less than $75 million for the four consecutive fiscal quarters most recently ended.
- Leverage Ratio: The Combined Senior Secured Leverage Ratio limit increases from 2.50:1.00 to 3.25:1.00 until the "Reduction Date" (earlier of $75 million equity/debt proceeds or June 30, 2011), after which it reverts to 2.50:1.00.
- Capital Expenditures: Aggregate ceiling increased from $20 million per fiscal year to $25 million for the fiscal year ending December 31, 2010, and $30 million for fiscal years ending December 31, 2011, and thereafter.
- Collateral: Obligations will be secured by the assets acquired in the Proposed Acquisition upon consummation.
Guidance, Outlook, and Risks
Outlook and Management Commentary:
- The Partnership expects to consummate the Proposed Acquisition in multiple tranches, beginning with an "Initial Closing."
- Amendments become effective upon the consummation of the Initial Closing and satisfaction of additional conditions.
Risks and Contingencies:
- Default Condition: The option to exercise the new accordion (additional $200 million) is contingent on the existence of no Default under the Credit Agreement.
- Environmental Liabilities: The acquisition involves the assumption of certain environmental liabilities.
- Covenant Compliance: The company must maintain higher minimum EBITDA levels and adhere to the new leverage ratio thresholds to avoid default.
Unusual Items: The filing does not disclose unusual items outside of the standard acquisition and credit facility restructuring.
Important Facts for Investor Verification
- Verify the status of the "Initial Closing" of the ExxonMobil acquisition to confirm when the amended credit terms (higher interest rates and leverage ratios) become effective.
- Confirm the company's ability to meet the new minimum Combined EBITDA requirement of $75 million for the four most recent consecutive fiscal quarters.
- Monitor the "Reduction Date" (June 30, 2011, or earlier upon $75 million capital raise) to determine when the leverage ratio covenant tightens back to 2.50:1.00.
- Review the specific environmental liabilities assumed in the $205 million acquisition for potential future costs.
- Check subsequent filings for the actual utilization of the new $200 million accordion capacity.