Summary
ONEOK Inc. (OKE) announced on June 29, 2020, a material definitive agreement through the second amendment to its $2.5 billion revolving credit facility. This amendment, effective June 26, 2020, provides greater financial flexibility by temporarily modifying the leverage ratio covenant. Specifically, for the fiscal quarters ending June 30, 2020, September 30, 2020, and December 31, 2020, ONEOK can net up to $700 million in unrestricted cash against its consolidated indebtedness when calculating the leverage ratio. This modification is significant for investors as it eases near-term debt covenant requirements during a period of economic uncertainty. The original leverage ratio requires consolidated indebtedness to be no more than 5.0 to 1 times adjusted EBITDA, with an option to increase to 5.5 to 1 for specific acquisitions. The amendment offers a temporary buffer, potentially allowing the company more operational freedom or time to manage its debt levels without breaching covenants.
Key Highlights
- 1ONEOK entered into a second amendment to its $2.5 billion revolving credit agreement on June 26, 2020.
- 2The amendment modifies the leverage ratio covenant for a specific period.
- 3Up to $700 million in unrestricted cash can be netted against consolidated indebtedness for leverage ratio calculations.
- 4This temporary flexibility applies to the fiscal quarters ending June 30, 2020, September 30, 2020, and December 31, 2020.
- 5The original leverage ratio is no more than 5.0 to 1 (consolidated indebtedness to adjusted EBITDA).
- 6A higher leverage ratio of up to 5.5 to 1 is permitted during certain qualified acquisition periods.
- 7The amendment provides ONEOK with enhanced financial flexibility in the short term.