Debt and Financing Obligations

9 Months Ended

Sep. 30, 2022

Debt and Financing Obligations

Debt and Financing Obligations

Note 7.    Debt and Financing Obligations

Credit Agreement

Certain subsidiaries of the Partnership, as borrowers, and the Partnership and certain of its subsidiaries, as guarantors, have a $1.55 billion senior secured credit facility (the “Credit Agreement”). The Credit Agreement matures on May 6, 2024.

On March 9, 2022, the Partnership and certain of its subsidiaries entered into a sixth amendment to the Credit Agreement (the “Sixth Amendment”) which, among other things, amended certain terms and provisions of the Credit Agreement to provide for $200.0 million of working capital interim commitments which increased the total aggregate commitment from $1.35 billion to $1.55 billion. On March 30, 2022, the Partnership and certain of its subsidiaries entered into a seventh amendment to the Credit Agreement (the “Seventh Amendment”) which, among other things, (i) increased the working capital revolving credit facility by $200.0 million and simultaneously reduced the working capital interim commitments to $0; (ii) refreshed the accordion feature under the Credit Agreement to permit the Partnership to request increases of up to $300.0 million in the total credit facility; and (iii) replaced the Cost of Funds (as defined in the Credit Agreement) pricing option with a Daily secured overnight financing rate (“SOFR”) pricing option. All other material terms of the Credit Agreement remain substantially the same as disclosed in Note 8 of Notes to

Consolidated Financial Statements in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2021.

There are two facilities under the Credit Agreement:

● a working capital revolving credit facility to be used for working capital purposes and letters of credit in the principal amount equal to the lesser of the Partnership’s borrowing base and $1.1 billion; and

● a $450.0 million revolving credit facility to be used for general corporate purposes.

In addition, the Credit Agreement has an accordion feature whereby the Partnership may request on the same terms and conditions then applicable to the Credit Agreement, provided no Event of Default (as defined in the Credit Agreement) then exists, an increase to the working capital revolving credit facility, the revolving credit facility, or both, by up to another $300.0 million, in the aggregate, for a total credit facility of up to $1.85 billion. Any such request for an increase must be in a minimum amount of $25.0 million. The Partnership cannot provide assurance, however, that its lending group will agree to fund any request by the Partnership for additional amounts in excess of the total available commitments of $1.55 billion.

In addition, the Credit Agreement includes a swing line pursuant to which Bank of America, N.A., as the swing line lender, may make swing line loans in U.S. dollars in an aggregate amount equal to the lesser of (a) $75.0 million and (b) the Aggregate WC Commitments (as defined in the Credit Agreement). Swing line loans will bear interest at the Base Rate (as defined in the Credit Agreement). The swing line is a sub-portion of the working capital revolving credit facility and is not an addition to the total available commitments of $1.55 billion.

Availability under the working capital revolving credit facility is subject to a borrowing base which is redetermined from time to time and based on specific advance rates on eligible current assets. Availability under the borrowing base may be affected by events beyond the Partnership’s control, such as changes in petroleum product prices, collection cycles, counterparty performance, advance rates and limits and general economic conditions.

Borrowings under the working capital revolving credit facility bear interest at (1) the Daily or Term SOFR plus a 0.10% SOFR adjustment plus 2.00% to 2.50%, or (2) the base rate plus 1.00% to 1.50%, each depending on the Utilization Amount (as defined in the Credit Agreement). Borrowings under the revolving credit facility bear interest at (1) the Daily or Term SOFR plus a 0.10% SOFR adjustment plus 1.75% to 2.75%, or (2) the base rate plus 0.75% to 1.75%, each depending on the Combined Total Leverage Ratio (as defined in the Credit Agreement).

The average interest rates for the Credit Agreement were 4.1% and 2.3% for the three months ended September 30, 2022 and 2021, respectively, and 3.1% and 2.5% for the nine months ended September 30, 2022 and 2021, respectively.

The Partnership classifies a portion of its working capital revolving credit facility as a current liability and a portion as a long-term liability. The portion classified as a long-term liability represents the amounts expected to be outstanding throughout the next twelve months based on an analysis of historical daily borrowings under the working capital revolving credit facility, the seasonality of borrowings, forecasted future working capital requirements and forward product curves, and because the Partnership has a multi-year, long-term commitment from its bank group. Accordingly, at September 30, 2022 the Partnership estimated working capital revolving credit facility borrowings will equal or exceed $0 over the next twelve months.

The table below presents the total borrowings and availability under the Credit Agreement (in thousands):

	September 30,		December 31,
	2022		2021
Total available commitments	$	1,550,000	$	1,350,000
Working capital revolving credit facility—current portion		—		204,700
Working capital revolving credit facility—less current portion		—		150,000
Revolving credit facility		99,000		43,400
Total borrowings outstanding		99,000		398,100
Less outstanding letters of credit		205,200		156,000
Total remaining availability for borrowings and letters of credit (1)	$	1,245,800	$	795,900

(1) Subject to borrowing base limitations.

The Credit Agreement imposes financial covenants that require the Partnership to maintain certain minimum working capital amounts, a minimum combined interest coverage ratio, a maximum senior secured leverage ratio and a maximum total leverage ratio. The Partnership was in compliance with the foregoing covenants at September 30, 2022.

Please read Note 8 of Notes to Consolidated Financial Statements in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information on the Credit Agreement.

Deferred Financing Fees

The Partnership incurs bank fees related to its Credit Agreement and other financing arrangements. These deferred financing fees are capitalized and amortized over the life of the Credit Agreement or other financing arrangements. In connection with the Sixth Amendment and Seventh Amendment, the Partnership capitalized additional financing fees of $1.0 million. The Partnership had unamortized deferred financing fees of $15.7 million and $18.8 million at September 30, 2022 and December 31, 2021, respectively.

Unamortized fees related to the Credit Agreement are included in other current assets and other long-term assets and amounted to $5.7 million and $7.5 million at September 30, 2022 and December 31, 2021, respectively. Unamortized fees related to the senior notes are presented as a direct deduction from the carrying amount of that debt liability and amounted to $9.4 million and $10.7 million at September 30, 2022 and December 31, 2021, respectively. Unamortized fees related to the Partnership’s sale-lease transactions are presented as a direct deduction from the carrying amount of the financing obligation and amounted to $0.6 million at both September 30, 2022 and December 31, 2021.

Amortization expense of approximately $1.3 million and $1.2 million for the three months ended September 30, 2022 and 2021, respectively, and $4.1 million and $3.8 million for the nine months ended September 30, 2022 and 2021, respectively is included in interest expense in the accompanying consolidated statements of operations.

Supplemental cash flow information

The following table presents supplemental cash flow information related to the Credit Agreement for the periods presented (in thousands):

	Nine Months Ended
	September 30,
	2022		2021
Borrowings from working capital revolving credit facility	$	1,641,800	$	1,573,700
Payments on working capital revolving credit facility		(1,996,500)		(1,505,200)
Net (payments on) borrowings from working capital revolving credit facility	$	(354,700)	$	68,500
Borrowings from revolving credit facility	$	423,000	$	10,000
Payments on revolving credit facility		(367,400)		(88,600)
Net borrowings from (payments on) revolving credit facility	$	55,600	$	(78,600)

Senior Notes

The Partnership had 7.00% senior notes due 2027 and 6.875% senior notes due 2029 outstanding at September 30, 2022 and December 31, 2021. Please read Note 8 of Notes to Consolidated Financial Statements in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information on these senior notes.

Financing Obligations

The Partnership had financing obligations outstanding at September 30, 2022 and December 31, 2021 associated with historical sale-leaseback transactions that did not meet the criteria for sale accounting. Please read Note 8 of Notes to Consolidated Financial Statements in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information on these financial obligations.