Business Context and Reporting Period
This Form 8-K, filed on July 26, 2019, by Marathon Petroleum Corporation (MPC), reports on material definitive agreements and the completion of a merger. The filing details the integration of Andeavor Logistics LP (ANDX) into MPLX LP (MPLX), a wholly owned subsidiary of MPC. The merger was completed on July 30, 2019, with ANDX surviving as a wholly owned subsidiary of MPLX.
Key Financial Metrics and Agreements
The filing outlines two primary credit facilities established to support the corporate structure post-merger:
- MPC Revolving Credit Agreement: A new $1 billion 364-day facility entered into on July 26, 2019. Interest margins range from 112.5 to 150 basis points over LIBOR (currently 125 bps) or 12.5 to 50 basis points over the Alternate Base Rate (currently 25 bps). Commitment fees range from 10.0 to 17.5 basis points (currently 12.5 bps).
- MPLX Amended and Restated Credit Agreement: A five-year $3.5 billion revolving credit facility effective July 30, 2019. It includes up to $300 million in letter of credit capacity and $150 million in swingline loans. Interest margins range from 100.0 to 175 basis points over LIBOR (currently 125 bps) or 0 to 75 basis points over the Alternate Base Rate (currently 25 bps). Commitment fees range from 10.0 to 25.0 basis points (currently 15.0 bps).
The filing does not provide specific revenue, profit, cash flow, or total debt figures for the reporting period, as this is a current report regarding specific agreements rather than a periodic financial statement.
Material Changes and Terminations
Concurrent with the merger closing on July 30, 2019, ANDX terminated two existing credit agreements:
- The Third Amended and Restated Credit Agreement (Revolving Credit Agreement) dated January 29, 2016.
- The Credit Agreement (Drop-Down Credit Agreement) dated January 29, 2016.
All outstanding borrowings and unpaid fees under these terminated agreements were paid in full. Additionally, an Omnibus Amendment was executed to reflect the change in general partnership control for ANDX, ensuring that a "Partnership Change of Control" is not triggered as long as MPC retains control.
Covenants, Risks, and Outlook
The new credit agreements impose specific financial covenants:
- MPC Covenant: Must maintain a Consolidated Net Debt to Total Capitalization ratio not exceeding 65% as of the last day of each fiscal quarter.
- MPLX Covenant: Must maintain a Consolidated Total Debt to Consolidated EBITDA ratio not exceeding 5.0 to 1.0 (or 5.5 to 1.0 during an Acquisition Period) for the four prior fiscal quarters.
Risks and Contingencies: The availability of the new MPC credit facility is contingent on the termination of the existing facility and is expected to occur around September 30, 2019. If the availability date does not occur by October 1, 2019, the lender commitments will automatically terminate. An event of default under either agreement could result in the termination of commitments and immediate repayment of all outstanding borrowings.
Investor Verification Checklist
- Verify the effective date of the new MPC credit facility availability (expected September 30, 2019) to ensure no automatic termination occurs.
- Confirm MPC's compliance with the 65% Consolidated Net Debt to Total Capitalization covenant in the upcoming quarterly reports.
- Monitor MPLX's Consolidated Total Debt to EBITDA ratio to ensure it remains below the 5.0x threshold.
- Review the full text of the credit agreements (Exhibits 10.1 and 10.2) for detailed definitions of "Consolidated Net Debt," "Total Capitalization," and "Consolidated EBITDA."