Business Context and Reporting Period
Company: Suburban Propane Partners, L.P.
Filing Type: Form 8-K (Current Report)
Date of Report: March 3, 2016
Event: Entry into a Second Amended and Restated Credit Agreement with Bank of America, N.A., and other lenders.
Key Financial Metrics and Debt Structure
- Revolving Credit Facility: $500 million.
- Expansion Capacity: Borrowings may be increased to $850 million subject to additional lender commitments.
- Maturity Date: March 3, 2021.
- Interest Rates:
- Base Rate Loans: Applicable Rate of 0.50% to 1.50% over the Base Rate.
- Eurodollar Rate Loans: Applicable Rate of 1.50% to 2.50% over the Eurodollar Rate.
- Applicable Rate is determined by the Total Consolidated Leverage Ratio.
- Existing Borrowings Rolled Over: $100 million from the prior credit agreement.
- Collateral: Liens on substantially all personal property of the Partnership and Operating Partnership, plus mortgages on the Elk Grove Facility (CA), New Jersey Headquarters, and Oregon Tank Farm.
Material Changes Versus Prior Period
The new agreement amends and restates the Existing Credit Agreement dated January 5, 2012. Key changes include:
- Facility Size Increase: The base Revolving Credit Facility increased from $400 million to $500 million.
- Expansion Potential: The potential to increase total borrowings to $850 million (up from a previous potential increase of up to $250 million over the $400 million base).
- Continuity: Existing borrowings of $100 million were rolled into the new facility.
Guidance, Covenants, and Risks
Financial Covenants:
- Consolidated Interest Coverage Ratio: Must not be less than 2.50 to 1.00.
- Total Consolidated Leverage Ratio: Must not exceed 5.50 to 1.00.
- Senior Secured Consolidated Leverage Ratio: Must not exceed 3.00 to 1.00.
Use of Proceeds: General corporate purposes, including working capital, capital expenditures, and acquisitions.
Risks and Contingencies:
- Events of Default: Include nonpayment, covenant violations, insolvency proceedings, change of control, and failure of collateral documents to create a lien.
- Prepayment: Loans may be prepaid without penalty; mandatory prepayments may apply to Incremental Term Facilities upon asset dispositions.
Management Commentary: The filing does not provide specific management commentary beyond the terms of the agreement and the issuance of a press release (Exhibit 99.1).
Investor Verification Checklist
- Verify the current Total Consolidated Leverage Ratio to ensure compliance with the 5.50 to 1.00 covenant.
- Confirm the Consolidated Interest Coverage Ratio meets the minimum 2.50 to 1.00 threshold.
- Review the press release (Exhibit 99.1) for any additional strategic context regarding the refinancing.
- Monitor the status of the $100 million rolled-over borrowing and any new drawdowns against the $500 million facility.
- Assess the impact of the increased leverage capacity ($850 million potential) on future capital allocation strategies.