Business Context and Reporting Period
Company: Global Partners LP
Filing Type: Form 8-K (Current Report)
Date of Report: May 12, 2010 (Earliest event reported)
Reporting Period: Events occurring between May 12, 2010, and May 18, 2010.
This filing details the entry into material definitive agreements, including an amended credit facility, a shared services letter agreement with an affiliate, and an extension of a terminal storage agreement.
Key Financial Metrics and Agreements
Debt and Liquidity
- New Credit Facility: Entered into an Amended and Restated Credit Agreement on May 14, 2010.
- Total Aggregate Commitments: Increased to $950.0 million (up from $850.0 million).
- Maturity Date: May 14, 2014.
- Facility Structure:
- Working capital revolving credit facility: Lesser of borrowing base or $800.0 million.
- Acquisition/general corporate revolving credit facility: $150.0 million.
- Accordion Feature: Option to increase total facility by up to $200.0 million (total potential capacity of $1.15 billion).
- Interest Rates:
- Working capital: Eurodollar/Cost of Funds + 2.50% to 3.00% or Base Rate + 1.50% to 2.00%.
- Acquisition facility: Eurodollar/Cost of Funds + 3.00% to 3.25% or Base Rate + 2.00% to 2.25%.
- Fees: Commitment fee of 0.50% per annum on unused portions; letter of credit fees at applicable working capital interest rates.
- Collateral: Secured by substantially all assets of the Partnership and its operating subsidiaries.
Related Party Transactions
- Alliance Shared Services: Letter Agreement for calendar year 2010 with affiliate Alliance Energy LLC.
- IT Infrastructure: $106,000 flat fee.
- IT Support: $100.00/hour (routine maintenance and project support).
- Legal Services: $75,000 flat fee.
- Accounting/Treasury/Tax/HR: $15,000 flat fee.
- Terminal Storage: First Amendment to extend the Terminal Storage Rental and Throughput Agreement for the Revere, Massachusetts terminal through July 31, 2014.
Material Changes Versus Prior Period
- Debt Capacity: Increased total credit availability by $100.0 million (from $850.0 million to $950.0 million).
- Term Extension: Extended the terminal storage agreement term by approximately four years (to July 31, 2014).
- Service Rates: Formalized specific fee structures for 2010 shared services with Alliance Energy LLC, replacing the previous hourly rate termination date of May 1, 2010, with a new agreement structure.
Guidance, Risks, and Covenants
Financial Covenants
The new Credit Agreement imposes the following covenants:
- Minimum working capital amounts.
- Capital expenditure limits.
- Minimum EBITDA.
- Minimum combined interest coverage ratio.
- Maximum senior secured leverage ratio.
- Maximum total leverage ratio.
Risks and Contingencies
- Borrowing Base Volatility: Availability under the working capital facility is subject to a borrowing base redetermined periodically. Availability may be negatively affected by changes in refined petroleum product prices, collection cycles, counterparty performance, and general economic conditions.
- Distribution Limitations: The agreement limits distributions to unitholders to "Available Cash" as defined in the Partnership Agreement.
- Material Adverse Effect: The agreement includes a representation that no event or circumstance exists that could reasonably be expected to have a Material Adverse Effect.
Investor Verification Checklist
- Verify the current utilization of the $950.0 million credit facility and the specific borrowing base calculation as of the latest reporting date.
- Confirm compliance with the new financial covenants (leverage ratios, interest coverage, and EBITDA) under the May 14, 2010 agreement.
- Review the impact of the $106,000 IT infrastructure fee and hourly rates on the consolidated financial statements regarding related party transactions.
- Assess the stability of the Revere, Massachusetts terminal operations under the extended agreement through 2014.
- Monitor refined petroleum product prices, as these directly influence the borrowing base and liquidity availability.