What is the primary impact of the amendments to Targa's credit agreement?

The primary impact is increased financial flexibility. The amendments allow for a higher percentage of project-specific EBITDA adjustments to count towards financial covenants and permit the inclusion of cash distributions from unrestricted subsidiaries in EBITDA calculations, which could improve the company's ability to meet its debt obligations and pursue growth opportunities.

Why was the Material Project EBITDA Adjustment percentage temporarily increased?

While not explicitly stated, the temporary increase from 20% to 30% likely provides Targa with more flexibility to account for large, project-specific earnings that may arise from significant capital projects during the specified period (June 2019 to June 2020). This can help the company manage its leverage ratios during periods of substantial project development or ramp-up.

How do the new rules for including cash distributions from unrestricted subsidiaries affect Targa?

Including cash distributions from unrestricted subsidiaries allows Targa to potentially enhance its reported Consolidated EBITDA. This can be beneficial for meeting debt covenants and demonstrating stronger financial performance, especially if these unrestricted entities generate significant cash flows that can be upstreamed to the borrower.

Is this amendment a permanent change to Targa's credit agreement?

No, the increase in the Material Project EBITDA Adjustment percentage is temporary. It is only applicable for fiscal periods ending between June 30, 2019, and June 30, 2020, after which it reverts to the previous 20% limit. The inclusion of cash distributions from unrestricted subsidiaries appears to be a permanent change to the calculation methodology.

TRGP 8-K: Material Agreements & Financial Events

Summary

Targa Resources Corp. (TRGP), through its subsidiary Targa Resources Partners LP, has filed an 8-K detailing amendments to its credit agreement, executed on June 7, 2019. The primary focus for investors is the modification of covenants related to its credit facility, specifically concerning the calculation of Consolidated EBITDA and the inclusion of certain cash distributions from unrestricted subsidiaries. These changes aim to provide greater financial flexibility for the company, particularly as it relates to project development and capital expenditures. The key amendments include an increase in the permissible percentage of Consolidated EBITDA that can be attributed to Material Project EBITDA Adjustments, raised from 20% to 30% for a defined period (June 30, 2019, through June 30, 2020), after which it reverts to 20%. Additionally, the amendment allows for the inclusion of specific cash distributions received from unrestricted subsidiaries in the Consolidated EBITDA calculation, provided they are received by the calculation date. These adjustments could positively impact Targa's ability to meet its financial covenants and support its strategic growth initiatives.

Key Highlights

1Targa Resources Partners LP amended its Fourth Amended and Restated Credit Agreement on June 7, 2019.
2The amendment temporarily increases the allowable percentage for Material Project EBITDA Adjustments from 20% to 30% of Consolidated EBITDA.
3This increased allowance for Material Project EBITDA Adjustments is effective from the fiscal period ending June 30, 2019, through the fiscal period ending June 30, 2020.
4Following the specified period, the maximum percentage for Material Project EBITDA Adjustments will revert to 20%.
5The credit agreement calculation for Consolidated EBITDA will now include certain cash distributions received from unrestricted subsidiaries.
6These distributions are eligible if received by the date of EBITDA calculation.
7The filing incorporates by reference the full text of the First Amendment to the credit agreement as an exhibit.

Targa Resources Corp. 8-K Report, Material Agreement (Jun 11, 2019)

Summary

Key Highlights

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