8-KMaterial AgreementsFinancial EventsExhibits & Filings

Energy Transfer LP 8-K Report, Material Agreement (Mar 30, 2017)

Filed March 30, 2017For Securities:ETET-PI

Summary

This 8-K filing by Energy Transfer LP (ET) on March 30, 2017, primarily announces the entry into a new $1.5 billion Revolver Credit Agreement, which includes an option for a $500 million increase, maturing on March 24, 2022. This new agreement replaces the prior credit facility, with proceeds used to refinance existing debt and for general corporate purposes, including working capital and capital expenditures. The credit facility is secured by a significant portion of ET's and its subsidiaries' assets, including substantial holdings in Energy Transfer Partners (ETP) and Sunoco Logistics Partners (SXL), underscoring the interconnectedness of these entities within ET's structure. Key to investors, the new credit agreement introduces specific financial covenants, including a maximum Consolidated Funded Debt to Consolidated EBITDA ratio of 6.00:1.00 (with a potential increase to 7.00:1.00 for acquisitions) and a minimum Consolidated EBITDA to Consolidated Interest Expense ratio of 1.50:1.00. These covenants will be critical for monitoring the company's financial health and its ability to service its debt obligations, especially in the context of ongoing merger activities between ETP and SXL, which are also detailed in this filing. The initial borrowing under the new agreement was approximately $869.2 million.

Key Highlights

  • 1Entry into a new $1.5 billion Revolver Credit Agreement, with an option to increase by $500 million, maturing in March 2022.
  • 2The new credit facility replaces a previous agreement, with initial borrowings of approximately $869.2 million used for refinancing and general corporate purposes.
  • 3The agreement is secured by a substantial portion of the Partnership's and certain subsidiaries' tangible and intangible assets, including significant stakes in ETP and SXL.
  • 4Introduction of key financial covenants: a maximum Debt/EBITDA ratio of 6.00x (potentially 7.00x for acquisitions) and a minimum EBITDA/Interest Expense ratio of 1.50x.
  • 5Termination of the previous Credit Agreement dated December 2, 2013, in conjunction with the new agreement.
  • 6The filing references ongoing merger activities between ETP and SXL, highlighting the strategic consolidation within Energy Transfer's structure.

Frequently Asked Questions

The primary purpose of the new Revolver Credit Agreement is to refinance existing debt and provide liquidity for general partnership purposes, including working capital, capital expenditures, and permitted acquisitions. It establishes a new, larger credit facility with a longer maturity date.

The most significant financial covenants are the maximum ratio of Consolidated Funded Debt to Consolidated EBITDA, set at 6.00 to 1.00 (which can increase to 7.00 to 1.00 in connection with certain acquisitions), and the minimum ratio of Consolidated EBITDA to consolidated interest expense, set at 1.50 to 1.00. These covenants are crucial for maintaining compliance and demonstrating financial stability.

While this filing focuses on the credit agreement, it references the ongoing merger between ETP and SXL. The credit facility's terms, including covenants and asset pledges, are structured to support the overall operations and financial health of Energy Transfer LP, which is undergoing this significant consolidation. The ability to increase commitments for acquisitions may also be relevant to financing such strategic moves.

The obligations under the Revolver Credit Agreement are secured by a lien on substantially all of the Partnership's and certain of its subsidiaries' tangible and intangible assets. This includes approximately 18.4 million common units and 81.0 million Class H units of ETP owned by the Partnership, as well as the Partnership's 100% equity interest in Energy Transfer Partners, L.L.C. and Energy Transfer Partners GP, L.P.