Business Context and Reporting Period
This Form 8-K was filed by CVR Partners, LP on February 9, 2016. The filing reports the entry into a material definitive agreement involving a guaranty of existing indebtedness.
Key Financial Metrics
- Outstanding Indebtedness: $125 million under the Credit Facility.
- Facility Maturity: April 2016.
- Guarantor: Coffeyville Resources, LLC (a wholly-owned subsidiary of CVR Energy, Inc.).
- Revenue, Profit, Cash Flow, Margins, Liquidity: The filing text does not provide a clear value for these metrics.
Material Changes
On February 9, 2016, CVR Partners and Coffeyville Resources, LLC entered into a Guaranty. Under this agreement, Coffeyville has agreed to guarantee the $125 million outstanding indebtedness under the Credit Facility dated April 13, 2011. If the facility becomes due prior to refinancing, Coffeyville is obligated to pay the indebtedness.
Outlook, Management Commentary, and Risks
Repayment Terms: CVR Partners' obligation to repay Coffeyville will be governed by a promissory note. The term of this note will be the lesser of two years or the time required for CVR Partners to obtain third-party financing ("New Debt") of at least $125 million on acceptable terms with a duration greater than one year.
Risks: The primary risk highlighted is the maturity of the Credit Facility in April 2016. If refinancing is not secured by that date, the guaranty triggers a payment obligation from the parent company subsidiary.
Investor Verification Checklist
- Verify the status of refinancing efforts for the $125 million Credit Facility maturing in April 2016.
- Review the full text of the Guaranty (Exhibit 10.1) for specific covenants and conditions.
- Monitor the terms of the promissory note to be issued to Coffeyville Resources, LLC.
- Assess the financial capacity of Coffeyville Resources, LLC to fulfill the guaranty if triggered.