8-KMaterial AgreementsFinancial EventsExhibits & Filings

Energy Transfer LP 8-K Report, Material Agreement (Mar 9, 2015)

Filed March 9, 2015For Securities:ETET-PI

Summary

This 8-K filing from Energy Transfer LP (ET) on March 9, 2015, primarily details the entry into a new $850 million Senior Secured Term Loan C Agreement. This financing was crucial for funding the cash component of the previously announced Bakken/Class H Transaction, which involved a significant exchange and repurchase of units and assets related to the Bakken Pipeline project between ET, ETE Holdings, and ETP. The new term loan matures in December 2019 and is secured by a substantial portion of ET's assets, including significant holdings in ETP and Regency Energy Partners. Importantly, this loan facility does not require amortization payments, offering ET flexibility, but does include covenants related to debt-to-EBITDA and EBITDA-to-interest expense ratios, with provisions for adjustments in certain acquisition scenarios. The transaction also involved ET transferring its 60% membership interests in Dakota Access Holdings LLC and ETCO Holdings LLC to ETP, along with substantial cash payments to ETP to cover capital and development expenses for the Bakken Pipeline project. In return, ETP issued various classes of units to ET and ETE Holdings. Investors should note that the proceeds from this term loan were also used to repay outstanding amounts under ET's revolving credit facility and cover related transaction fees. The filing underscores ET's ongoing strategic maneuvers and financing activities related to its key infrastructure projects and partnerships.

Key Highlights

  • 1Energy Transfer LP (ET) secured an $850 million Senior Secured Term Loan C Facility on March 5, 2015.
  • 2The primary purpose of the loan is to finance the cash portion of the Bakken/Class H Transaction.
  • 3The Bakken/Class H Transaction involves ETP repurchasing ET and ETE Holdings' ETP Common Units and transferring interests in Dakota Access Holdings and ETCO Holdings to ETP.
  • 4The Term Loan C matures on December 2, 2019, with an option for extension, and requires no amortization payments.
  • 5The loan is secured by a broad range of ET's assets, including significant stakes in ETP and Regency Energy Partners.
  • 6Key financial covenants include a maximum funded debt to EBITDA ratio of 6.00:1.00 (expandable to 7.00:1.00 with acquisitions) and a minimum EBITDA to consolidated interest expense ratio of 1.50:1.00.
  • 7Loan proceeds were also used to repay ET's revolving credit facility and cover transaction-related expenses.

Frequently Asked Questions

The primary purpose of the Senior Secured Term Loan C is to provide the cash necessary to complete the previously announced Bakken/Class H Transaction, which involves significant unit repurchases and asset transfers between Energy Transfer Equity (ET), Energy Transfer Partners (ETP), and ETE Holdings related to the Bakken Pipeline project. Additionally, proceeds were used to repay ET's existing revolving credit facility and cover transaction costs.

The loan is secured by a comprehensive lien on substantially all of ET's and certain of its subsidiaries' tangible and intangible assets. This includes significant holdings of ETP common and Class H units, ET's equity interests in entities that hold general partnership interests and incentive distribution rights (IDRs) in ETP and Regency Energy Partners, and ET's interests in ETE GP Acquirer, which in turn controls Regency GP entities.

The Term Credit Agreement includes two main financial covenants: 1) The ratio of funded debt to EBITDA must not exceed 6.00 to 1.00 (subject to an increase to 7.00 to 1.00 in connection with certain future acquisitions). 2) The ratio of EBITDA to consolidated interest expense must be no less than 1.50 to 1.00. These ratios are measured on a trailing twelve-month basis as of the last day of each fiscal quarter.

No, the agreement states that the Partnership shall not be required to make any amortization payments with respect to the term loans under the Term Credit Agreement. However, there are mandatory prepayment requirements under certain circumstances, such as in connection with dispositions of incentive distribution rights or general partnership interests in ETP or Regency that yield net proceeds exceeding $50 million.