Business Context and Reporting Period
This Form 8-K Current Report was filed by NGL Energy Partners LP on February 14, 2017. The filing primarily addresses the entry into a material definitive agreement: an Amended and Restated Credit Agreement.
Key Financial Metrics and Debt Structure
- Total Credit Commitments: $1.765 billion aggregate.
- Facility Breakdown:
- $1.0 billion revolving credit facility for working capital and general corporate purposes.
- $765 million revolving credit facility for acquisitions, internal growth, capital expenditures, and general corporate purposes.
- Maturity Date: Extended from November 5, 2018, to October 5, 2021.
- Expansion Option: Right to increase commitments by an additional $300 million upon satisfaction of certain conditions.
- Interest Rates:
- Alternate Base Rate + 0.50% to 1.75% per annum.
- Adjusted LIBOR + 1.50% to 2.75% per annum.
- Collateral: Secured by substantially all of the Partnership's assets (subject to exclusions).
- Guarantees: Obligations are fully and unconditionally guaranteed on a senior secured basis by the Partnership.
Material Changes Versus Prior Period
The new agreement amends and restates the Existing Credit Agreement dated June 19, 2012. Key changes include:
- Term Extension: Maturity extended by approximately three years.
- Covenant Adjustments: Introduction of a Senior Secured Leverage Ratio covenant and revisions to borrowing base, financial reporting, and negative covenants.
- Leverage Ratio: As of December 31, 2016, the Senior Secured Leverage Ratio was approximately 1.76 to 1.0, well below the new maximum covenant limit of 3.50 to 1.0.
Outlook, Risks, and Contingencies
The filing does not provide specific revenue guidance or management commentary on future operational performance. However, it outlines significant financial covenants and risks:
- Covenants: The agreement includes maximum leverage and minimum interest coverage covenants, as well as limitations on fundamental changes, indebtedness, and liens.
- Events of Default: Acceleration of obligations may occur due to failure to pay principal/interest, breach of material representations or covenants, or bankruptcy/insolvency events.
- Unusual Items: None reported in this filing.
Investor Verification Checklist
- Verify the full text of the Amended and Restated Credit Agreement (Exhibit 10.1) for specific covenant definitions and exclusions.
- Confirm the current leverage ratio and interest coverage ratio to ensure compliance with the new 3.50 to 1.0 Senior Secured Leverage Ratio limit.
- Review the press release (Exhibit 99.1) for any additional context on the strategic rationale for the refinancing.
- Monitor the utilization of the $1.765 billion facility to assess liquidity needs and potential drawdowns.