8-KMaterial AgreementsFinancial EventsExhibits & Filings

Energy Transfer LP 8-K Report, Material Agreement (Feb 3, 2017)

Filed February 3, 2017For Securities:ETET-PI

Summary

On February 2, 2017, Energy Transfer Equity, L.P. (the "Partnership") entered into a new $2.2 billion Senior Secured Term Loan Agreement (the "Term Credit Agreement") with Credit Suisse AG, maturing on February 2, 2024, with an extension option. This new facility was utilized to refinance existing term loan obligations and associated transaction costs, providing a significant liquidity injection for the company. The new loan is secured by substantially all of the Partnership's assets, including its interests in ETP and SXL, and importantly, its Incentive Distribution Rights (IDRs) in these entities. This filing also confirms the ongoing merger between Sunoco Logistics Partners L.P. (SXL) and Energy Transfer Partners (ET), detailing the structure where ETP will survive as a subsidiary of SXL post-merger. The new Term Credit Agreement contains important financial covenants, including a maximum funded debt to EBITDA ratio of 6.00:1.00 (potentially increasing to 7.00:1.00 with acquisitions) and a minimum EBITDA to consolidated interest expense ratio of 1.50:1.00. The company also terminated its prior senior secured term loan agreements in connection with entering into this new facility.

Key Highlights

  • 1Entered into a new $2.2 billion Senior Secured Term Loan Facility due February 2, 2024, with an extension option.
  • 2Proceeds used to refinance existing term loan facilities and pay related transaction fees and expenses.
  • 3New loan is secured by substantially all of the Partnership's tangible and intangible assets, including significant equity interests and IDRs in ETP and SXL.
  • 4Confirms the ongoing merger transaction between ETP and SXL, with ETP surviving as a subsidiary of SXL post-merger.
  • 5Establishes key financial covenants: maximum funded debt to EBITDA ratio of 6.00:1.00 (extendable to 7.00:1.00) and minimum EBITDA to consolidated interest expense ratio of 1.50:1.00.
  • 6No amortization payments are required on the new term loans.
  • 7Prior senior secured term loan agreements were terminated in connection with the new facility.

Frequently Asked Questions

The primary purpose of the new $2.2 billion Senior Secured Term Loan Agreement, entered into on February 2, 2017, was to refinance existing term loan facilities of Energy Transfer Equity, L.P. and to cover transaction fees and expenses associated with the new facility and other related activities. It provides a significant source of liquidity for the company.

The loan is secured by a lien on substantially all of Energy Transfer Equity's and certain of its subsidiaries' tangible and intangible assets. This includes significant equity interests in Energy Transfer Partners (ETP) and Sunoco Logistics Partners (SXL), as well as the Partnership's 100% equity interest in entities that hold general partnership interests and Incentive Distribution Rights (IDRs) in ETP (prior to the merger) and SXL (after the merger).

The Term Credit Agreement includes two primary financial covenants: 1) a maximum ratio of funded debt to EBITDA of 6.00 to 1.00, which can increase to 7.00 to 1.00 in connection with certain future acquisitions. 2) a minimum ratio of EBITDA to consolidated interest expense of 1.50 to 1.00. These are measured on a trailing twelve-month basis as of the last day of each fiscal quarter.

While the new loan is from Energy Transfer Equity (ET), the underlying assets pledged as collateral include significant interests in ETP and SXL, particularly the Incentive Distribution Rights (IDRs) of these entities. The structure of the collateral is described differently before and after the consummation of the MLP Merger, indicating the loan is structured to accommodate the ongoing business combination between ETP and SXL.