Business Context and Reporting Period
This Form 8-K filing by Energy Transfer Equity, L.P. (the "Partnership") reports on events occurring on March 24, 2017, with the report dated March 30, 2017. The filing details the entry into a new material definitive agreement to refinance existing debt facilities and support the ongoing SXL Transaction (the merger of Sunoco Logistics Partners L.P. into Energy Transfer Partners, L.P.).
Key Financial Metrics and Debt Structure
- New Credit Facility: Entered into a Revolver Credit Agreement with an aggregate principal commitment of $1.5 billion.
- Expansion Option: The Partnership may request increases in commitments up to an additional $500 million.
- Letters of Credit: A sublimit of $150 million is available for letters of credit.
- Initial Borrowing: Approximately $869.22 million was borrowed at closing.
- Interest Rates: LIBOR loans carry a margin of 1.75% to 2.50%; base rate loans carry a margin of 0.75% to 1.50%, based on leverage ratios.
- Collateral: Obligations are secured by a lien on substantially all tangible and intangible assets, including approximately 18.4 million ETP common units and 81.0 million ETP Class H units.
Material Changes Versus Prior Period
The Partnership terminated its Existing Revolver Credit Agreement dated December 2, 2013, effective March 24, 2017. Proceeds from the new facility were used to refinance amounts outstanding under the terminated agreement. The new agreement replaces the prior facility with updated terms, including a maturity date of March 24, 2022, and specific covenants tied to the SXL Transaction.
Covenants, Risks, and Management Commentary
- Financial Covenants:
- Maximum Consolidated Funded Debt to Consolidated EBITDA ratio: 6.00 to 1.00 (subject to increase to 7.00 to 1.00 for certain acquisitions).
- Minimum Consolidated EBITDA to Consolidated Interest Expense ratio: 1.50 to 1.00.
- Use of Proceeds: Funds may be used for working capital, capital expenditures, restricted payments, and permitted acquisitions.
- Risks and Contingencies: The agreement includes standard events of default, including a change of control provision. During an event of default, lenders may declare the entire outstanding amount due and payable. The filing notes that the description of the agreement is qualified by reference to the full text filed as Exhibit 10.1.
Investor Verification Checklist
- Verify the full text of the Revolver Credit Agreement (Exhibit 10.1) for specific definitions of Consolidated Funded Debt and Consolidated EBITDA.
- Confirm the status of the SXL Transaction and its impact on the collateral structure post-merger.
- Monitor the Partnership's leverage ratio to ensure compliance with the 6.00 to 1.00 debt-to-EBITDA covenant.
- Review the terms regarding the $500 million expansion option and the conditions required to exercise it.