Business Context and Reporting Period
This Form 8-K, filed on December 10, 2015, reports events occurring on December 4, 2015, for Marathon Petroleum Corporation (MPC) and its subsidiary, MPLX LP (MPLX). The filing primarily details the completion of the acquisition of MarkWest Energy Partners, L.P. (MarkWest) and the entry into a new material definitive loan agreement.
Key Financial Metrics and Agreements
- Acquisition Consideration: MarkWest common unit holders received 1.09 MPLX Common Units and $6.20 in cash per unit.
- Debt Assumption: MPLX assumed $4.1 billion in aggregate principal amount of MarkWest senior notes.
- Debt Repayment: Approximately $943 million outstanding under MarkWest's bank revolving credit facility was repaid using $850 million from MPLX's credit facility and $93 million in cash.
- New Credit Facility: MPLX entered a revolving loan agreement with MPC Investment LLC with a maximum aggregate principal of $500 million, maturing December 4, 2020, at LIBOR plus 150 basis points.
- Existing Credit Capacity: MPLX's revolving credit capacity was increased by $1.0 billion to a total of $2.0 billion in connection with the merger.
Material Changes Versus Prior Period
The most significant change is the consolidation of MarkWest as a wholly owned subsidiary of MPLX. This transaction resulted in:
- The assumption of $4.1 billion in senior unsecured debt obligations.
- The termination of MarkWest's independent bank revolving credit facility.
- An increase in the size of the MPC Board of Directors from eleven to twelve members with the election of Frank M. Semple.
- The conversion of MarkWest equity units into MPLX equity units and cash.
Guidance, Outlook, Risks, and Contingencies
Debt Restructuring: MPLX commenced exchange offers and consent solicitations for the assumed MarkWest senior notes to remove restrictive covenants and default provisions. Supplemental indentures were executed on December 3, 2015, to effect these changes, pending the consummation of the exchange offers set to expire on December 18, 2015.
Financial Reporting: The filing states that required financial statements and pro forma financial information for the acquired business will be filed within 71 days of this report. No specific revenue, profit, or margin guidance is provided in this document.
Risks: The indentures governing the assumed senior notes contain covenants restricting borrowing, distributions, investments, and asset sales, though many are being amended via the consent solicitation process.
Investor Verification Checklist
- Verify the final results of the exchange offers and consent solicitations for the $4.1 billion in MarkWest senior notes.
- Review the upcoming pro forma financial information (due within 71 days) to assess the combined entity's leverage and liquidity.
- Confirm the utilization of the new $500 million revolving loan facility between MPLX and MPC Investment.
- Monitor the conversion schedule for MPLX Class B Units (automatic conversion on July 1, 2016, and July 1, 2017).