8-KMaterial AgreementsOther EventsExhibits & Filings

Marathon Petroleum Corp 8-K Report, Material Agreement (Aug 1, 2019)

Filed August 1, 2019For Securities:MPC

Summary

Marathon Petroleum Corporation (MPC) and its master limited partnership, MPLX LP, have entered into significant financing arrangements concurrent with the closing of a merger. MPC secured a new $1 billion 364-day revolving credit facility to replace its existing similar facility, providing short-term liquidity with customary covenants, including a maximum debt-to-capitalization ratio of 65%. Simultaneously, MPLX finalized an amended and restated five-year, $3.5 billion revolving credit facility, which can be increased by up to an additional $1 billion. This facility replaces MPLX's prior agreement and also includes standard covenants, notably a maximum Debt-to-EBITDA ratio of 5.0x (or 5.5x during an Acquisition Period). The termination of certain prior credit agreements for ANDX (a subsidiary involved in the merger) was also noted, with all outstanding obligations paid in full. These actions indicate proactive financial management by MPC and MPLX to ensure robust liquidity and align their credit facilities with their post-merger operational and strategic objectives. The new agreements offer flexibility and maintain existing financial discipline through defined covenants, which should be reassuring to investors regarding the companies' financial stability and access to capital.

Key Highlights

  • 1MPC entered into a new $1 billion 364-day revolving credit agreement, set to become effective around September 30, 2019, replacing an existing facility.
  • 2MPLX entered into an amended and restated five-year, $3.5 billion revolving credit facility, effective July 30, 2019, with the option to increase capacity by an additional $1.0 billion.
  • 3The new MPC credit agreement includes a covenant requiring Consolidated Net Debt to Total Capitalization to not exceed 65%.
  • 4The MPLX credit agreement includes a covenant requiring Consolidated Total Debt to Consolidated EBITDA not to exceed 5.0x (or 5.5x during an Acquisition Period).
  • 5Both new credit agreements feature customary covenants, representations, warranties, and events of default, similar to prior agreements.
  • 6ANDX terminated its Third Amended and Restated Credit Agreement and its Drop-Down Credit Agreement on July 30, 2019, with all outstanding amounts paid in full.
  • 7An amendment to the Fourth Amended and Restated Omnibus Agreement (the "Omnibus Amendment") was executed to reflect changes related to Andeavor Logistics GP LLC's admission as general partner of ANDX and define "Partnership Change of Control" to provide continued control by MPC.

Frequently Asked Questions

The new credit agreements are primarily for general corporate purposes and to ensure continued access to liquidity. The MPC agreement replaces an expiring 364-day facility, while the MPLX agreement provides a renewed and potentially larger five-year credit line, supporting their respective operational and strategic needs, especially following the merger.

MPC's new 364-day credit agreement requires that its ratio of Consolidated Net Debt to Total Capitalization not exceed 65%. MPLX's amended and restated credit agreement requires its ratio of Consolidated Total Debt to Consolidated EBITDA not to exceed 5.0x (or 5.5x during an Acquisition Period). These covenants are designed to maintain financial discipline.

The termination of ANDX's previous credit agreements, along with the full payment of all outstanding borrowings and fees, signifies a restructuring or consolidation of debt following the merger. This is a standard procedure to align the capital structure with the new ownership and operational framework.

The filing details variable interest rates and commitment fees based on credit ratings for both MPC and MPLX, with specific ranges provided. While similar in structure to prior agreements, the exact rates and margins would depend on MPC's and MPLX's current credit ratings at the time of borrowing and may have minor adjustments based on market conditions and the specific terms negotiated in the new agreements.