8-KMaterial AgreementsFinancial EventsRegulation FD+1

Energy Transfer LP 8-K Report, Material Agreement (Dec 2, 2013)

Filed December 2, 2013For Securities:ETET-PI

Summary

This 8-K filing from Energy Transfer Equity, L.P. (ETE) on December 2, 2013, primarily details the establishment of new credit facilities and the issuance of new senior notes, aimed at financing a tender offer for its existing 7.500% Senior Notes due 2020. The company secured a $600 million revolving credit facility maturing in December 2018 (with an option to extend) and a $1 billion senior secured term loan facility maturing in December 2019. These facilities are secured by a broad base of ETE's assets, including significant stakes in Energy Transfer Partners (ETP) and Regency Energy Partners (Regency). Additionally, ETE completed a $450 million offering of 5.875% Senior Notes due 2024. The proceeds from these new financings are intended to fund the tender offer for the 2020 Notes, repay existing debt, and cover related transaction expenses, with potential remaining funds for general corporate purposes. The filing also notes the termination of prior credit agreements and provides details on covenants, including leverage and debt-to-EBITDA ratios, which are crucial for assessing the company's financial health and debt management strategy.

Key Highlights

  • 1Energy Transfer Equity (ETE) entered into a new $600 million Revolving Credit Facility maturing in December 2018, with an option for extension, and a $1 billion Senior Secured Term Loan Facility maturing in December 2019.
  • 2The new credit facilities are secured by a lien on substantially all of ETE's and certain subsidiaries' tangible and intangible assets, including significant stakes in Energy Transfer Partners (ETP) and Regency Energy Partners (Regency).
  • 3ETE completed a $450 million public offering of 5.875% Senior Notes due 2024, with net proceeds of approximately $445 million.
  • 4The primary use of proceeds from the new credit facilities and senior notes is to fund a tender offer for ETE's 7.500% Senior Notes due 2020.
  • 5The Revolving Credit Facility and Term Loan Facility include covenants that limit the ratio of funded debt to EBITDA to 6.00:1.00 (with a potential increase to 7.00:1.00 for acquisitions) and require an EBITDA to interest expense ratio of at least 1.50:1.00.
  • 6The filing also announces the termination of ETE's previous credit agreements dated March 23, 2012, and March 26, 2013.
  • 7ETE announced the completion of its tender offer, accepting $612,968,000 in aggregate principal amount of the 2020 Notes, representing approximately 34.05% of the outstanding amount.

Frequently Asked Questions

The primary purpose of the new credit facilities (Revolving Credit Facility and Term Loan Facility) and the 5.875% Senior Notes due 2024 is to fund Energy Transfer Equity's tender offer for its 7.500% Senior Notes due 2020. Proceeds will also be used to repay outstanding amounts under existing credit facilities and cover associated transaction fees and expenses. Remaining funds may be used for working capital, capital expenditures, and other corporate purposes.

The credit agreements include leverage covenants that limit the ratio of funded debt to EBITDA to not more than 6.00 to 1.00 (with a potential increase to 7.00 to 1.00 in connection with certain acquisitions). They also require a minimum ratio of EBITDA to interest expense of 1.50 to 1.00, measured on a trailing twelve-month basis.

The obligations under the new credit facilities and the senior notes are secured by a lien on substantially all of Energy Transfer Equity's and certain of its subsidiaries' tangible and intangible assets. This includes significant holdings in Energy Transfer Partners (ETP) and Regency Energy Partners (Regency), as well as equity interests in entities that hold general partnership interests and incentive distribution rights in ETP and Regency.

The tender offer aims to reduce ETE's outstanding 7.500% Senior Notes due 2020. The completion of the tender offer, as announced, indicates that ETE accepted a substantial portion of these notes, suggesting a proactive approach to managing its debt structure and potentially refinancing higher-cost debt.