Business Context and Reporting Period
CrossAmerica Partners LP (CAPL), a publicly traded Delaware limited partnership, filed this Form 8-K on April 3, 2023, reporting events occurring on March 31, 2023. The filing details the entry into a new material definitive agreement regarding the company's senior secured revolving credit facility.
Key Financial Metrics and Debt Structure
The filing focuses on debt restructuring rather than operational financial performance metrics such as revenue or profit. Key debt terms include:
- Facility Size: Increased from $750 million to $925 million, with an accordion option to increase by an additional $350 million.
- Maturity Date: Extended from April 1, 2024, to March 31, 2028.
- Interest Rates: SOFR-based loans carry a margin of 1.75% to 2.75% plus a credit spread adjustment; alternative base rate loans carry a margin of 0.75% to 1.75%.
- Commitment Fees: Ranging from 0.25% to 0.45% on the unused portion.
- Letters of Credit: Up to $65.0 million aggregate amount.
- Swingline Loans: Up to $35.0 million.
- Collateral: Secured by substantially all assets of the Partnership and its guarantors.
Material Changes Versus Prior Period
The primary material change is the amendment and restatement of the existing credit agreement. The new facility replaced the previous agreement dated April 1, 2019, and terminated the "JKM Credit Agreement" dated July 16, 2021. Initial borrowings under the new facility were used to repay outstanding borrowings under the terminated JKM Credit Agreement and to pay associated fees and expenses.
Financial Covenants, Risks, and Outlook
The new agreement imposes specific financial covenants and operational restrictions:
- Consolidated Leverage Ratio:
- Not greater than 5.25 to 1.00 for quarters ending through December 31, 2023.
- Not greater than 5.00 to 1.00 for quarters ending through September 30, 2024.
- Not greater than 4.75 to 1.00 for quarters ending December 31, 2024, and thereafter.
- Consolidated Interest Coverage Ratio: Must be at least 2.50 to 1.00.
- Qualified Note Offering: If triggered, leverage thresholds adjust (up to 5.25 to 1.00 generally, 5.50 to 1.00 during acquisition periods), and a Consolidated Senior Secured Leverage Ratio of not greater than 3.75 to 1.00 (4.00 to 1.00 during acquisition periods) applies.
- Restrictions: The agreement limits the ability to grant liens, incur additional indebtedness, alter the business character, merge, liquidate, or make certain investments. Cash distributions to unitholders are prohibited if an event of default occurs.
- Events of Default: Include failure to pay principal or interest, breach of covenants, cross-defaults on indebtedness over $45.0 million, judgments exceeding $45.0 million, bankruptcy, ERISA violations, and change of control.
The filing text does not provide specific revenue, profit, or cash flow figures for the period.
Investor Verification Checklist
- Verify the current Consolidated Leverage Ratio to ensure compliance with the 5.25 to 1.00 threshold for the quarter ending March 31, 2023.
- Confirm the status of the terminated JKM Credit Agreement and ensure all transition fees were accounted for.
- Review the "Specified Acquisition Period" definition to understand potential temporary leverage covenant relief.
- Assess the impact of the new interest rate margins (SOFR + 1.75% to 2.75%) on future interest expense compared to the prior facility.
- Check for any pending Qualified Note Offerings that would alter the leverage ratio requirements.