Debt and Financing Obligations

6 Months Ended

Jun. 30, 2023

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 2, 2026.

On February 2, 2023, the Partnership and certain of its subsidiaries entered into the eighth amendment to the third amended and restated credit agreement (the “Eighth Amendment”) which, among other things, permits the Partnership to request up to two reallocations per calendar year of the lending commitments among its facilities under the Credit Agreement (see “Eighth Amendment to the Credit Agreement” below). On May 2, 2023, the Partnership and certain of its subsidiaries entered into the ninth amendment to third amended and restated credit agreement and joinder (the “Ninth Amendment”) which, among other things, increased the applicable revolver rate by 25 basis points on borrowings under the revolving credit facility and extended the maturity date from May 6, 2024 to May 2, 2026. All other material terms of the Credit Agreement remain substantially the same as disclosed in Note 9 of Notes to Consolidated Financial Statements in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2022.

As of June 30, 2023, there were 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 $950.0 million; and

● a $600.0 million revolving credit facility to be used for general corporate purposes.

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 secured overnight financing rate (“SOFR”) plus a 0.10% SOFR adjustment plus a margin of 2.00% to 2.50% depending on the Utilization Amount (as defined in the Credit Agreement), or (2) the base rate plus a margin of 1.00% to 1.50% depending on the Utilization Amount.

Commencing May 2, 2023, borrowings under the revolving credit facility bear interest at (1) the Daily or Term SOFR plus a 0.10% SOFR adjustment plus a margin of 2.00% to 3.00%, depending on the Combined Total Leverage

Ratio (as defined in the Credit Agreement), or (2) the base rate plus a margin of 1.00% to 2.00% depending on the Combined Total Leverage Ratio.

The average interest rates for the Credit Agreement were 7.1% and 2.9% for the three months ended June 30, 2023 and 2022, respectively, and 6.8% and 2.6% for the six months ended June 30, 2023 and 2022, 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 June 30, 2023 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):

	June 30,		December 31,
	2023		2022
Total available commitments	$	1,550,000	$	1,550,000
Working capital revolving credit facility-current portion		89,400		153,400
Working capital revolving credit facility-less current portion		—		—
Revolving credit facility		119,000		99,000
Total borrowings outstanding		208,400		252,400
Less outstanding letters of credit		61,600		181,400
Total remaining availability for borrowings and letters of credit (1)	$	1,280,000	$	1,116,200

(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 June 30, 2023.

Please read Note 9 of Notes to Consolidated Financial Statements in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2022 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 Ninth Amendment, the Partnership capitalized additional financing fees of $8.0 million. Also in connection with the Ninth Amendment, the Partnership incurred expenses of approximately $0.5 million associated with the write-off of a portion of the related deferred financing fees. These expenses are included in interest expense in the accompanying consolidated statements of operations for each of the three and six months ended June 30, 2023. The Partnership had unamortized deferred financing fees of $19.1 million and $14.4 million at June 30, 2023 and December 31, 2022, respectively.

Unamortized fees related to the Credit Agreement are included in other current assets and other long-term assets and amounted to $10.5 million and $4.8 million at June 30, 2023 and December 31, 2022, 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 $8.1 million and $9.0 million at June 30, 2023 and December 31, 2022, 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 $0.5 million and $0.6 million at June 30, 2023 and December 31, 2022, respectively.

Amortization expense of approximately $1.4 million and $1.3 million for the three months ended June 30, 2023 and 2022, respectively, and $2.7 million for each of the six months ended June 30, 2023 and 2022 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):

	Six Months Ended
	June 30,
	2023		2022
Borrowings from working capital revolving credit facility	$	1,175,500	$	1,161,000
Payments on working capital revolving credit facility		(1,239,500)		(1,445,000)
Net payments on working capital revolving credit facility	$	(64,000)	$	(284,000)
Borrowings from revolving credit facility	$	59,500	$	384,000
Payments on revolving credit facility		(39,500)		(304,400)
Net borrowings from revolving credit facility	$	20,000	$	79,600

Eighth Amendment to the Credit Agreement

On February 2, 2023, the Partnership and certain of its subsidiaries entered into the Eighth Amendment which, among other things, permits the Partnership to request up to two reallocations per calendar year (each, a “Reallocation”) of a portion of the working capital revolving credit facility, the working capital interim facility and/or the revolving credit facility to the working capital revolving credit facility, the working capital interim facility and/or the revolving credit facility, as applicable. Each Reallocation shall be in a minimum amount of $50.0 million and, after giving effect to any such Reallocation, the amount of the aggregate commitments shall remain the same.

Pursuant to the terms of the Credit Agreement, the Partnership requested, and the lenders under the Credit Agreement agreed to, a Reallocation of $150.0 million of the working capital revolving credit facility to the revolving credit facility. After giving effect to such Reallocation, the working capital revolving credit facility is $950.0 million, and the revolving credit facility is $600.0 million.

Senior Notes

The Partnership had 7.00% senior notes due 2027 and 6.875% senior notes due 2029 outstanding at June 30, 2023 and December 31, 2022. Please read Note 9 of Notes to Consolidated Financial Statements in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2022 for additional information on these senior notes.

Financing Obligations

The Partnership had financing obligations outstanding at June 30, 2023 and December 31, 2022 associated with historical sale-leaseback transactions that did not meet the criteria for sale accounting. Please read Note 9 of Notes to

Consolidated Financial Statements in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2022 for additional information on these financial obligations.