Business Context and Reporting Period
This Form 8-K, filed on July 21, 2017, by Marathon Petroleum Corporation (MPC) and its subsidiary MPLX LP, reports the entry into new material definitive credit agreements and the termination of prior agreements. The filing details the restructuring of the company's revolving credit facilities to secure liquidity and extend maturity dates.
Key Financial Metrics and Debt Structure
The filing establishes three new unsecured revolving credit facilities with the following terms:
- MPC Five-Year Facility: $2.5 billion commitment maturing July 21, 2022. Includes up to $500 million accordion capacity, $100 million swing-line loans, and approximately $1.8 billion in letters of credit.
- MPC 364-Day Facility: $1.0 billion commitment maturing July 20, 2018.
- MPLX Five-Year Facility: $2.25 billion commitment maturing July 21, 2022. Includes up to $500 million accordion capacity, $100 million swing-line loans, and approximately $222 million in letters of credit.
Interest and Fees (Current Rates):
- MPC Five-Year: Commitment fee of 15.0 basis points; LIBOR margin of 125.0 basis points; Base Rate margin of 25.0 basis points.
- MPC 364-Day: Commitment fee of 12.5 basis points; LIBOR margin of 125.0 basis points; Base Rate margin of 25.0 basis points.
- MPLX Five-Year: Commitment fee of 20.0 basis points; LIBOR margin of 150.0 basis points; Base Rate margin of 50.0 basis points.
Covenants:
- MPC: Consolidated Net Debt to Total Capitalization ratio must not exceed 65%.
- MPLX: Consolidated Total Debt to Consolidated EBITDA ratio must not exceed 5.0 to 1.0 (or 5.5 to 1.0 during an Acquisition Period).
The filing text does not provide specific values for revenue, profit, cash flow, or current liquidity balances.
Material Changes Versus Prior Period
The new agreements replaced the following prior facilities, which were terminated concurrently:
- MPC: The $2.5 billion four-year Revolving Credit Agreement dated July 20, 2016.
- MPLX: The $2.0 billion Revolving Credit Agreement dated November 20, 2014 (amended December 4, 2015).
Key changes include extending the maturity of the primary long-term facilities to 2022 and increasing the MPLX facility size from $2.0 billion to $2.25 billion.
Outlook, Risks, and Contingencies
Management Commentary: The agreements contain customary representations, warranties, affirmative and negative covenants, and events of default. The filing notes that certain lenders have performed and may continue to perform investment banking and commercial banking services for the registrants.
Risks and Contingencies:
- Default Consequences: An event of default allows lenders to terminate commitments, require immediate repayment of all outstanding borrowings, and demand cash collateralization of outstanding letters of credit.
- Extension Conditions: Both five-year facilities allow for up to two one-year extensions, subject to the consent of lenders holding a majority of commitments. Non-consenting lenders' commitments will terminate on the original maturity date.
Investor Verification Checklist
- Verify the current credit ratings of MPC and MPLX to confirm the applicable interest rate margins and commitment fees.
- Review the full text of Exhibits 10.1, 10.2, and 10.3 for detailed definitions of "Consolidated Net Debt," "Total Capitalization," and "Consolidated EBITDA."
- Monitor compliance with the 65% debt-to-capitalization covenant for MPC and the 5.0x debt-to-EBITDA covenant for MPLX.
- Assess the utilization of the $1.8 billion (MPC) and $222 million (MPLX) letter of credit sub-facilities.