What is the purpose of the $700 million Term Loan Agreement?

The Term Loan Agreement is intended to finance a portion of the purchase price for Marathon Petroleum Corporation's acquisition of Hess Retail Holdings LLC by its subsidiary, Speedway LLC.

What are the key terms and conditions of the Term Loan Agreement?

The loan is a $700 million, five-year senior unsecured facility. Interest rates are variable, based on either the Adjusted LIBOR rate or the Base Rate, plus a margin determined by MPC's credit ratings. Key covenants include a maximum debt-to-capitalization ratio of 0.65:1.00 and restrictions on incurring further debt and affiliate transactions.

Is the loan funding guaranteed?

No, the funding of the loan is contingent upon the successful completion of the Hess Retail Holdings acquisition. If the acquisition is not completed by the tenth business day following the funding date, the loans must be repaid immediately. The loan may be prepaid at any time without penalty.

Who are the main parties involved in this loan agreement?

The primary parties are Marathon Petroleum Corporation (MPC) as the borrower, The Royal Bank of Scotland PLC as the administrative agent, and a syndicate including RBS Securities Inc., The Bank of Tokyo-Mitsubishi UFJ, Ltd., Barclays Bank PLC, Citigroup Global Markets Inc., Morgan Stanley Senior Funding, Inc., and other commercial lending institutions.

MPC 8-K: Material Agreements & Financial Events

Summary

Marathon Petroleum Corporation (MPC) announced on August 26, 2014, the execution of a $700 million five-year senior unsecured Term Loan Agreement. This financing is specifically earmarked to fund a portion of the acquisition of Hess Retail Holdings LLC by Speedway LLC, MPC's wholly-owned subsidiary. The agreement is with The Royal Bank of Scotland PLC as administrative agent and a syndicate of other financial institutions. The loan carries variable interest rates based on MPC's credit ratings, with options for Adjusted LIBOR plus a margin or a Base Rate plus a margin. Investors should note that the funding and continuation of this loan are contingent upon the successful and timely completion of the Hess Retail Holdings acquisition. The agreement includes customary covenants, such as a maximum Consolidated Net Debt to Total Capitalization ratio of 0.65 to 1.00, and restrictions on debt incurrence and affiliate transactions. The company will also pay certain customary fees associated with the agreement. This filing highlights MPC's strategic move to expand its retail footprint through a significant acquisition, supported by new debt financing.

Key Highlights

1MPC entered into a $700 million, five-year senior unsecured Term Loan Agreement on August 26, 2014.
2The primary purpose of the loan is to finance a portion of the acquisition of Hess Retail Holdings LLC by Speedway LLC.
3The loan agreement is with The Royal Bank of Scotland PLC as administrative agent and a syndicate of other lenders.
4Borrowings will bear interest at variable rates, either Adjusted LIBOR plus a margin (0.875%-1.75%) or Base Rate plus a margin (0%-0.75%), depending on MPC's credit ratings.
5Loan repayment is conditional on the successful consummation of the Hess Retail acquisition by a specific deadline.
6Covenants include maintaining a Consolidated Net Debt to Total Capitalization ratio of no greater than 0.65 to 1.00.
7The agreement restricts MPC's ability to incur additional debt, create liens, or engage in certain affiliate transactions.

Marathon Petroleum Corp 8-K Report, Material Agreement (Aug 29, 2014)

Summary

Key Highlights

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