What is the primary purpose of these new credit agreements?

The primary purpose is to provide Marathon Petroleum Corporation (MPC) and its affiliate MPLX Operations LLC with significant, flexible, and readily available sources of capital. These facilities are intended to support ongoing operational needs, potential growth initiatives, and strategic activities, including MPLX's planned IPO.

How much financial flexibility do these new credit facilities offer?

MPC's new facility provides an initial $2.0 billion with an option to increase by $500 million, totaling up to $2.5 billion. MPLX's facility offers $500 million with an option to increase by $300 million, totaling up to $800 million. This combined capacity offers substantial liquidity for their respective operations and future endeavors.

What is the significance of the MPLX credit facility being tied to an IPO?

The MPLX credit facility's effectiveness is contingent upon the consummation of MPLX's Contribution and IPO by March 29, 2013. This indicates that the credit facility is designed to support MPLX's transition as a public entity and may be a prerequisite or an integral part of its go-public strategy.

What are the key financial covenants MPC and MPLX must adhere to?

MPC must maintain a ratio of total net debt to total capitalization not exceeding 65%. MPLX Operations LLC must keep its ratio of total debt to EBITDA for the prior four fiscal quarters at or below 5.0 to 1.0 (or 5.5 to 1.0 during an Acquisition Period). These covenants are standard for such agreements and are designed to ensure the companies maintain a healthy financial structure.

MPC 8-K: Material Agreements & Financial Events

Summary

This 8-K filing from Marathon Petroleum Corporation (MPC) on September 20, 2012, announces the execution of two significant new credit facilities. MPC entered into a $2.0 billion unsecured five-year revolving credit facility, replacing its prior 2011 agreement. This new facility provides substantial borrowing capacity, with an option to increase by an additional $500 million, and includes terms for interest rates based on MPC's credit rating and covenants, such as a maximum total net debt to total capitalization ratio of 65%. Concurrently, MPC's affiliate, MPLX LP, and its subsidiary MPLX Operations LLC, secured a $500 million unsecured five-year revolving credit facility, with an option to increase by $300 million. This facility is crucial for MPLX's operations and potential future activities, including an IPO. The establishment of these credit lines demonstrates MPC's proactive approach to managing its liquidity and supporting its strategic initiatives, including the development of its midstream business through MPLX.

Key Highlights

1Marathon Petroleum Corporation (MPC) secured a new $2.0 billion unsecured five-year revolving credit facility, maturing September 14, 2017.
2The MPC credit facility has an option to increase the total commitment by an additional $500 million.
3MPC's prior 2011 credit agreement was terminated concurrently with the execution of the new facility.
4MPLX Operations LLC, an MPC affiliate, obtained a $500 million unsecured five-year revolving credit facility, with an option to increase by $300 million.
5The MPLX credit facility is subject to certain closing conditions, including the consummation of its Contribution and IPO by March 29, 2013.
6Both credit agreements include provisions for commitment fees, variable interest rates based on credit ratings or financial ratios, and customary covenants, including debt-to-capitalization limits for MPC (65%) and debt-to-EBITDA limits for MPLX (5.0:1.0 or 5.5:1.0).
7These new credit facilities provide significant liquidity and flexibility for MPC and its midstream affiliate, MPLX.

Marathon Petroleum Corp 8-K Report, Material Agreement (Sep 20, 2012)

Summary

Key Highlights

Frequently Asked Questions