Long-Term Debt

6 Months Ended

Jun. 30, 2011

5. Long-Term Debt

Long-term debt consisted of the following:


	June 30,		December 31,
	2011		2010
Borrowings under senior secured first lien term loan with third-party lenders, extinguished in 2011	$	—	$	367,385
Borrowings under senior secured revolving credit agreement with third-party lenders, amended and restated in June 2011		—		10,832
Borrowings under amended and restated senior secured revolving credit agreement with third-party lenders, interest at prime plus 1.25% (4.50% at June 30, 2011), interest payments monthly, borrowings due June 2016		28,090		—
Borrowings under 2019 Notes, interest at a fixed rate of 9.375% at June 30, 2011, interest payments semiannually, borrowings due May 2019, effective interest rate of 9.95% for the quarter ended June 30, 2011		400,000		—
Capital lease obligations, at various interest rates, interest and principal payments quarterly through November 2013		1,292		1,781
Less unamortized discount on senior secured first lien term loan with third-party lenders, extinguished in 2011		—		(10,723	)

Total long-term debt		429,382		369,275
Less current portion of long-term debt		942		4,844

	$	428,440	$	364,431

During the quarter ended June 30, 2011, the Company restructured the majority of its outstanding long-term debt. The Company issued $400,000 in aggregate principal amount 9 3/8% senior notes due May 1, 2019 (the “2019 Notes”), amended its then current senior secured revolving credit agreement to allow for the issuance of the 2019 Notes, and used the majority of the proceeds from the 2019 Notes to repay borrowings under, and subsequently extinguish, the senior secured first lien term loan. The Company also amended certain of its master derivative contracts and entered into a collateral sharing agreement with its hedging counterparties. Further, the Company amended and restated its revolving credit agreement to increase the credit facility from $375,000 to $550,000, as well as amend covenants and contractual terms. Each of these activities is discussed in further detail in the following paragraphs.

9 3/8% Senior Notes

On April 21, 2011, the Company issued and sold the 2019 Notes in a private placement pursuant to Rule 144A under the Securities Act to eligible purchasers. The 2019 Notes were resold to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to persons outside the United States pursuant to Regulation S under the Securities Act. The Company received proceeds of $389,038 net of underwriters’ fees and expenses, which the Company used to repay in full borrowings outstanding under its existing senior secured first lien term loan, as well as all accrued interest and fees, and for general partnership purposes. Interest on the 2019 Notes will be paid semiannually in arrears on May 1 and November 1 of each year, beginning on November 1, 2011. The 2019 Notes will mature on May 1, 2019, unless redeemed prior to maturity. The 2019 Notes are guaranteed on a senior unsecured basis by all of the Company’s operating subsidiaries and the Company’s future operating subsidiaries.

At any time prior to May 1, 2014, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of the 2019 Notes with the net proceeds of a public or private equity offering at a redemption price of 109.375% of the principal amount, plus any accrued and unpaid interest to the date of redemption, provided that: (1) at least 65% of the aggregate principal amount of 2019 Notes issued remains outstanding immediately after the occurrence of such redemption and (2) the redemption occurs within 120 days of the date of the closing of such public or private equity offering.

On and after May 1, 2015, the Company may on any one or more occasions redeem all or a part of the 2019 Notes at the redemption prices (expressed as percentages of principal amount) set forth below, plus any accrued and unpaid interest to the applicable redemption date on such 2019 Notes, if redeemed during the twelve-month period beginning on May 1 of the years indicated below:


Year	Percentage
2015		104.688	%
2016		102.344	%
2017 and at any time thereafter		100.000	%

Prior to May 1, 2015, the Company may on any one or more occasions redeem all or part of the 2019 Notes at a redemption price equal to the sum of: (1) the principal amount thereof, plus (2) a make-whole premium (as set forth in the indenture governing the 2019 Notes) at the redemption date, plus any accrued and unpaid interest to the applicable redemption date.

The indenture governing the 2019 Notes contains covenants that, among other things, restrict the Company’s ability and the ability of certain of the Company’s subsidiaries to: (i) sell assets; (ii) pay distributions on, redeem or repurchase the Company’s common units or redeem or repurchase its subordinated debt; (iii) make investments; (iv) incur or guarantee additional indebtedness or issue preferred units; (v) create or incur certain liens; (vi) enter into agreements that restrict distributions or other payments from the Company’s restricted subsidiaries to the Company; (vii) consolidate, merge or transfer all or substantially all of the Company’s assets; (viii) engage in transactions with affiliates and (ix) create unrestricted subsidiaries. These covenants are subject to important exceptions and qualifications. At any time when the 2019 Notes are rated investment grade by either of Moody’s Investors Service, Inc. or Standard & Poor’s Ratings Services and no Default or Event of Default, each as defined in the indenture governing the 2019 Notes, has occurred and is continuing, many of these covenants will be suspended.

Upon the occurrence of certain change of control events, each holder of the 2019 Notes will have the right to require that the Company repurchase all or a portion of such holder’s 2019 Notes in cash at a purchase price equal to 101% of the principal amount thereof, plus any accrued and unpaid interest to the date of repurchase.

In connection with the notes offering on April 21, 2011, the Company’s then current senior secured revolving credit agreement was amended on April 15, 2011, to among other things, (i) permit the issuance of the 2019 Notes; (ii) upon consummation of the issuance of the 2019 Notes and the termination of the senior secured first lien credit agreement, release the revolving credit facility lenders’ second priority lien on the collateral securing the senior secured first lien credit facility; and (iii) change the interest rate pricing on the revolving credit facility.

Registration Rights Agreement

On April 21, 2011, in connection with the issuance and sale of the 2019 Notes, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the initial purchasers of the 2019 Notes obligating the Company to use reasonable best efforts to file an exchange registration statement with the SEC, so that holders of the 2019 Notes can offer to exchange the 2019 Notes issued in the April 2011 offering for registered notes having substantially the same terms as the 2019 Notes and evidencing the same indebtedness as the 2019 Notes. The Company must use reasonable best efforts to cause the exchange offer registration statement to become effective by April 20, 2012 and remain effective until 180 days after the closing of the exchange. Additionally, the Company has agreed to commence the exchange offer promptly after the exchange offer registration statement is declared effective by the SEC and use reasonable best efforts to complete the exchange offer not later than 60 days after such effective date. Under certain circumstances, in lieu of a registered exchange offer, the Company must use reasonable best efforts to file a shelf registration statement for the resale of the 2019 Notes. If the Company fails to satisfy these obligations on a timely basis, the annual interest borne by the 2019 Notes will be increased by up to 1.0% per annum until the exchange offer is completed or the shelf registration statement is declared effective.

Senior Secured First Lien Credit Agreement

The Company’s $435,000 senior secured first lien credit facility (the “term loan facility”) included a $385,000 term loan and a $50,000 prefunded letter of credit facility to support crack spread hedging. The Company extinguished this facility on April 21, 2011 in connection with the issuance and sale of the 2019 Notes, as further discussed above. The term loan bore interest at a rate equal to (i) with respect to a LIBOR Loan, the LIBOR Rate (as defined in the senior secured first lien credit agreement) plus 400 basis points and (ii) with respect to a Base Rate Loan, the Base Rate (as defined in the senior secured first lien credit agreement) plus 300 basis points. At December 31, 2010, the term loan bore interest at 4.29%. Please refer to “Amendments to Master Derivative Contracts” below for information on termination of the $50,000 prefunded letter of credit to support crack spread hedging.

Lenders under the term loan facility generally had a first priority lien on the Company’s fixed assets and a second priority lien on its cash, accounts receivable, inventory and certain other personal property. The term loan facility required quarterly principal payments of $963 through September 30, 2014, with the remaining balance due at maturity on January 3, 2015.

On April 21, 2011, the Company used approximately $369,486 of the net proceeds from the issuance and sale of the 2019 Notes to repay in full its term loan, as well as accrued interest and fees, and terminated the entire senior secured first lien credit facility, including the term loan and $50,000 prefunded letter of credit. The Company did not incur any material early termination penalties in connection with its termination of the senior secured first lien credit facility. Further, in the second quarter of 2011 the Company recorded approximately $15,130 of extinguishment charges related to the writeoff of the unamortized debt issuance costs and the unamortized discount associated with the term loan.

Amendments to Master Derivative Contracts

In connection with the termination of the term loan facility and the amendment of the senior secured revolving credit agreement, on April 21, 2011, the Company entered into amendments to certain of the Company’s master derivatives contracts (“Amendments”) to provide new credit support arrangements to secure the Company’s payment obligations under these contracts following the termination of the term loan facility and the amendment and restatement of the senior secured revolving credit agreement. Under the new credit support arrangements, the Company’s payment obligations under all of the Company’s master derivatives contracts for commodity hedging generally are secured by a first priority lien on the Company’s real property, plant and equipment, fixtures, intellectual property, certain financial assets, certain investment property, commercial tort claims, chattel paper, documents, instruments and proceeds of the foregoing (including proceeds of hedge arrangements). The Company also issued to one counterparty a $25,000 standby letter of credit under the amended and restated senior secured revolving credit facility to replace a prefunded $50,000 letter of credit previously issued under the senior secured first lien credit facility. In the event that such counterparty’s exposure to the Company exceeds $150,000, the Company will be required to post additional collateral support in the form of either cash or letters of credit with the counterparty to enter into additional crack spread hedges. In addition to the $25,000 standby letter of credit posted to one counterparty, as of June 30, 2011 the Company had cash collateral posted with another counterparty of $11,900. The Company’s master derivatives contracts continue to impose a number of covenant limitations on the Company’s operating and financing activities, including limitations on liens on collateral, limitations on dispositions of collateral and collateral maintenance and insurance requirements.

In connection with the Amendments, on April 21, 2011, the Company entered into a collateral sharing agreement among each of its secured hedging counterparties and an administrative agent for the benefit of the secured hedging counterparties, which governs how the secured hedging counterparties will share collateral pledged as security for the payment obligations owed by the Company to the secured hedging counterparties under their respective master derivatives contracts. Subject to certain conditions set forth in the collateral trust agreement, the Company has the ability to add secured hedging counterparties thereto.

Amended and Restated Senior Secured Revolving Credit Agreement

On June 24, 2011, the Company entered into an amended and restated senior secured revolving credit agreement which increased the maximum availability of credit from $375,000 to $550,000, subject to borrowing base limitations, and includes a $300,000 incremental uncommitted expansion feature. The revolving credit agreement, which is the Company’s primary source of liquidity for cash needs in excess of cash generated from operations, matures in June 2016 and currently bears interest at a rate equal to prime plus a basis points margin or LIBOR plus a basis points margin, at the Company’s option. As of June 30, 2011, the margin was 125 basis points for prime and 250 basis points for LIBOR; however the margin fluctuates quarterly based on the Company’s average availability for additional borrowings under the revolving credit agreement in the preceding calendar quarter as follows:


Quarterly Average	Margin on Base Rate			Margin on LIBOR
Availability Percentage	Revolving Loans			Revolving Loans
≥ 66%		1.00	%		2.25	%
≥ 33% and < 66%		1.25	%		2.50	%
< 33%		1.50	%		2.75	%

The borrowing capacity at June 30, 2011 under the revolving credit facility was $402,231. As of June 30, 2011, the Company borrowed $28,090, leaving $194,668 available for additional borrowings based on collateral and specified availability limitations. The lenders under the revolving credit agreement have a first priority lien on the Company’s cash, accounts receivable, inventory and certain other personal property.

In addition, the amended and restated senior secured revolving credit agreement contains various covenants that limit, among other things, the Company’s ability to: incur indebtedness; grant liens; dispose of certain assets; make certain acquisitions and investments; redeem or prepay other debt or make other restricted payments such as distributions to unitholders; enter into transactions with affiliates; and enter into a merger, consolidation or sale of assets. Further, the amended and restated senior secured revolving credit agreement contains one springing financial covenant which provides that only if the Company’s availability under the amended and restated senior secured revolving credit agreement falls below the greater of (i) 12.5% of the lesser of (a) the Borrowing Base (as defined in the credit agreement) (without giving effect to the LC Reserve (as defined in the credit agreement)) and (b) the credit agreement commitments then in effect and (ii) $30,000, then the Company will be required to maintain as of the end of each fiscal quarter a Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of at least 1.0 to 1.0.

As of June 30, 2011, maturities of the Company’s long-term debt are as follows:


Year	Maturity
2011	$	505
2012		551
2013		236
2014		—
2015		—
Thereafter		428,090

Total	$	429,382