Business Context and Reporting Period
Company: Delek Logistics Partners, LP
Filing Type: Form 8-K (Current Report)
Date of Report: July 9, 2013
Event: Entry into an Amended and Restated Senior Secured Revolving Credit Agreement with Fifth Third Bank and a syndicate of lenders.
Key Financial Metrics and Debt Structure
This filing details a restructuring of the company's credit facility rather than reporting operational financial results (revenue, profit, or cash flow) for a specific period. Key debt metrics include:
- Total Credit Facility: Increased from $175.0 million to $400.0 million.
- Tranche Structure:
- U.S. dollar-only borrowing tranche: $320.0 million.
- U.S. dollar or Canadian dollar borrowing tranche: $80.0 million.
- Accordion Feature: Option to increase the facility to an aggregate of $450.0 million subject to lender commitments.
- Outstanding Borrowings (as of June 30, 2013): $90.0 million principal.
- Letters of Credit Issued (as of June 30, 2013): $11.5 million.
- Available Capacity (Pro Forma as of June 30, 2013): Approximately $298.5 million.
- Interest Rate (as of June 30, 2013): Weighted average borrowing rate of approximately 2.0% per year.
- Unused Commitment Fee (as of June 30, 2013): 0.25% per year.
- Maturity Date: November 7, 2017 (unchanged).
Material Changes Versus Prior Period
The Amended and Restated Credit Agreement introduces significant changes to the previous facility established in November 2012:
- Commitment Increase: Total commitments rose by $225.0 million (from $175.0 million to $400.0 million).
- Swing Line Limit: Increased from $7.0 million to $14.0 million total.
- Letter of Credit Limit: Increased from $50.0 million to $85.0 million total.
- Financial Covenants:
- Leverage Ratio: Maximum ratio of Total Funded Debt to EBITDA increased from 3.50 to 1.0 to 4.0 to 1.0.
- Interest Coverage Ratio: Minimum ratio of EBITDA to Cash Interest Expenses increased from 2.0 to 1.0 to 2.50 to 1.0.
Outlook, Risks, and Contingencies
Management Commentary and Guarantees: The agreement remains secured by a first priority lien on substantially all tangible and intangible assets of the Partnership and its U.S. subsidiaries. Delek Marketing & Supply, LLC (a subsidiary of Delek US Holdings) provides a limited guaranty secured by a pledge of a $102.0 million Holdings Note (principal as of June 30, 2013). Delek US Holdings owns a 60.3% limited partner interest in the Partnership.
Risks and Covenants: The agreement imposes affirmative and negative covenants restricting the ability to incur additional debt, create liens, dispose of assets, make distributions, or engage in mergers and acquisitions. Events of default include failure to pay principal or interest, breach of covenants, insolvency, and a "change of control" defined as Delek US ceasing to control at least 51% of the equity interests of the General Partner.
Investor Verification Checklist
- Verify the full text of the Amended and Restated Credit Agreement (Exhibit 10.1) for specific definitions of EBITDA and Total Funded Debt.
- Confirm the current status of the $102.0 million Holdings Note and the extent of the limited guaranty provided by the Subsidiary Guarantor.
- Monitor the company's leverage ratio to ensure compliance with the new 4.0 to 1.0 covenant threshold.
- Review the "change of control" provisions to understand the implications of Delek US Holdings' ownership structure on the credit facility.
- Check subsequent filings for any utilization of the accordion feature to increase the facility to $450.0 million.