Business Context and Reporting Period
STAR GROUP, L.P. filed this Form 8-K on July 6, 2022, to report the entry into a material definitive agreement. The Company is a Delaware limited partnership trading on the New York Stock Exchange under the symbol SGU.
Key Financial Metrics and Debt Structure
This filing details a new credit facility rather than operational financial results. Key debt metrics include:
- Revolving Credit Facility: Up to $400 million, increasing to $550 million during the heating season (December through April). Includes capacity for up to $25 million in letters of credit.
- Term Loan: A new $165 million five-year senior secured term loan.
- Interest Rates: Based on a margin over Adjusted Term SOFR or a base rate.
- Commitment Fees: 0.30% on unused revolving capacity from December through April; 0.20% from May through November.
- Collateral: Secured by liens on substantially all assets, including accounts receivable, inventory, real property, and equipment.
Material Changes Versus Prior Period
The Company entered into a sixth amended and restated asset-based credit facility agreement, replacing the prior revolving credit facility. Material changes include:
- Extension of Maturity: The new facility expires in July 2027.
- Debt Refinancing: Proceeds from the new $165 million Term Loan are designated to repay existing outstanding debt.
- Expansion Option: Retains the ability to increase the revolving facility by $200 million without bank group consent, though funding is not guaranteed.
Guidance, Covenants, and Restrictions
The Credit Agreement imposes specific financial covenants and operational restrictions:
- Fixed Charge Coverage Ratio: Must not be less than 1.1:1.0 while the Term Loan is outstanding or if revolving availability drops below 12.5% of the facility size.
- Senior Secured Leverage Ratio: Cannot exceed 3.0:1.0 for quarters ending June or September, and 5.5:1.0 for quarters ending December or March, while the Term Loan is outstanding.
- Repayment Terms: The Term Loan requires quarterly payments of $4.1 million plus an annual payment of 25% of Excess Cash Flow (capped at $8.5 million annually).
- Restrictions: Limits on incurring additional indebtedness, paying distributions to unitholders, making investments, granting liens, selling assets, and making acquisitions.
Note: This filing does not provide revenue, profit, cash flow, or margin data, nor does it contain forward-looking guidance on business performance.
Investor Verification Checklist
- Verify the Company's current compliance with the new Fixed Charge Coverage Ratio (1.1:1.0) and Senior Secured Leverage Ratio covenants.
- Confirm the status of the existing debt being repaid by the $165 million Term Loan proceeds.
- Review the definition of "Excess Cash Flow" in the Credit Agreement to understand potential mandatory prepayment obligations.
- Assess the impact of the new restrictions on the Company's ability to pay distributions to unitholders.
- Monitor the utilization of the revolving credit facility, particularly the seasonal increase to $550 million.