What is the primary purpose of this new accounts receivable securitization facility?

The primary purpose of the new $1.3 billion accounts receivable securitization facility is to provide Marathon Petroleum Corporation (MPC) with enhanced liquidity and funding for its ongoing business operations. It replaces an existing facility that was nearing its expiration date and offers a similar, yet potentially more robust, mechanism for accessing capital by leveraging its accounts receivable.

How does this A/R Facility differ from the previous one?

The new A/R Facility has a larger capacity of $1.3 billion compared to the previous $1.0 billion facility. It is also a new three-year agreement, replacing the one that was set to expire on June 30, 2014. While the core mechanism of securitizing accounts receivable remains the same, the terms, counterparties, and specific provisions would have been updated in the new agreement.

Does Marathon Petroleum Corporation have any direct obligations related to the collectability of the receivables?

MPC's direct subsidiary, Marathon Petroleum Company LP (the Originator), does not guarantee the collectability of the trade receivables or the creditworthiness of the obligors. However, Marathon Petroleum Corporation itself has provided a performance guaranty in respect of the obligations of the Originator under the relevant agreements for the A/R Facility. This means MPC guarantees the performance of its subsidiary's obligations under the agreement.

What are the implications of terminating the previous A/R Facility?

The termination of the previous $1.0 billion accounts receivable securitization facility signifies a transition to the new, larger facility. This ensures continuity of access to funding and demonstrates MPC's proactive financial management in securing necessary liquidity ahead of the previous agreement's expiration. It also reflects the company's strategy in managing its debt and funding structure.

MPC 8-K: Material Agreements & Financial Events

Summary

Marathon Petroleum Corporation (MPC) has announced the establishment of a new three-year, $1.3 billion accounts receivable securitization facility (A/R Facility), effective December 18, 2013. This new facility replaces a previous one set to expire in June 2014 and is designed to enhance liquidity and support the ongoing operational needs of MPC and its subsidiaries. The A/R Facility involves MPC's subsidiary, Marathon Petroleum Company LP, selling its trade receivables to a special purpose entity, MPC Trade Receivables Company LLC, which then finances these receivables by selling interests to purchasers under the new agreement. This structure allows MPC to access additional funding and manage its working capital effectively. In conjunction with the new facility, MPC has terminated its prior $1.0 billion accounts receivable securitization agreement. The new A/R Facility includes provisions for the issuance of up to $1.25 billion in letters of credit and is secured by the assets of the special purpose entity. While the originating subsidiary is not guaranteeing collectability, MPC itself has provided a performance guaranty for the obligations under the agreements. This strategic move demonstrates MPC's commitment to maintaining strong financial flexibility.

Key Highlights

1Established a new $1.3 billion, three-year accounts receivable securitization facility (A/R Facility) on December 18, 2013.
2The new A/R Facility replaces a prior $1.0 billion facility that was set to expire in June 2014.
3The facility aims to provide additional liquidity and funding for ongoing business needs.
4Trade receivables are sold by Marathon Petroleum Company LP to a bankruptcy-remote special purpose entity (MPC Trade Receivables Company LLC).
5The special purpose entity can finance the acquired receivables by selling interests to purchasers under the new agreement.
6The facility allows for the issuance of letters of credit up to $1.25 billion.
7Marathon Petroleum Corporation has provided a performance guaranty for the obligations under the new agreements.

Marathon Petroleum Corp 8-K Report, Material Agreement (Dec 23, 2013)

Summary

Key Highlights

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