8-KMaterial AgreementsExhibits & Filings

ONEOK INC /NEW/ 8-K Report, Material Agreement (Jun 30, 2020)

Filed June 30, 2020For Securities:OKE

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.

Frequently Asked Questions

The primary impact is increased financial flexibility by allowing ONEOK to temporarily net up to $700 million of unrestricted cash against its consolidated debt when calculating its leverage ratio for the fiscal quarters ending June 30, September 30, and December 31, 2020. This eases near-term debt covenant requirements.

This change is important because it provides the company with a buffer against potentially breaching its debt covenants during a period of economic uncertainty. It signals that management is proactively managing its financial position to maintain operational flexibility.

The leverage ratio is a key financial metric used in debt covenants. It is calculated as consolidated indebtedness to adjusted EBITDA for a four-quarter period. ONEOK's agreement requires this ratio to be no more than 5.0 to 1, with an allowance to increase to 5.5 to 1 under specific acquisition circumstances. The amendment allows for the exclusion of up to $700 million of cash from the debt calculation for a limited time.

No, the amendment is temporary and specifically applies to the fiscal quarters ending June 30, 2020, September 30, 2020, and December 31, 2020. After these periods, the leverage ratio calculations will revert to the terms of the credit agreement without the cash netting provision.