NOTE 10: Debt

Credit Facilities

On July 1, 2011, we entered into a $1 billion senior secured credit agreement (the "HollyFrontier Credit Agreement") with Union Bank, N.A. as administrative agent and BNP Paribas as syndication agent, and certain lenders from time to time party thereto, and terminated our previous $400 million credit agreement. Additionally, Frontier terminated its previous $500 million credit agreement. The HollyFrontier Credit Agreement matures in July 2016 and may be used to fund working capital requirements, capital expenditures, acquisitions and general corporate purposes. Obligations under the HollyFrontier Credit Agreement are collateralized by our inventory, accounts receivables and certain deposit accounts and guaranteed by our material, wholly-owned subsidiaries.

We were in compliance with all covenants at September 30, 2011. At September 30, 2011 we had no outstanding borrowings and outstanding letters of credit totaled $160.6 million under the HollyFrontier Credit Agreement. At that level of usage, the unused commitment was $839.4 million at September 30, 2011.

Indebtedness under the HollyFrontier Credit Agreement bears interest, at our option, at either (a) the reference rate as announced by the administrative agent plus an applicable margin (ranging from 0.50% to 1.50%) or (b) at a rate equal to LIBOR plus an applicable margin (ranging from 1.50% to 2.50%). We incur a commitment fee on the unused portion of the HollyFrontier Credit Agreement at a rate ranging from 0.375% to 0.50% based upon the credit ratings of our long-term, unsecured, senior debt. At September 30, 2011, we are subject to a 0.375% commitment fee on the $839.4 million unused portion of the credit agreement.

The $275 million HEP Credit Agreement is available to fund capital expenditures, investments, acquisitions, distribution payments and working capital and for general partnership purposes. In February 2011, HEP amended its previous credit agreement (expiring in August 2011), extended the expiration date and slightly reduced the size of the credit facility from $300 million to $275 million. The size was reduced based on management's review of past and forecasted utilization of the facility. The HEP Credit Agreement expires in February 2016; however, in the event that the HEP 6.25% Senior Notes (discussed below) are not repurchased, refinanced, extended or repaid prior to September 1, 2014, the HEP Credit Agreement shall expire on that date. At September 30, 2011, HEP had outstanding borrowings totaling $202 million under the HEP Credit Agreement, with unused borrowing capacity of $73 million.

HEP's obligations under the HEP Credit Agreement are collateralized by substantially all of HEP's assets (presented parenthetically in our Consolidated Balance Sheets). Indebtedness under the HEP Credit Agreement is recourse to HEP Logistics Holdings, L.P., its general partner, and guaranteed by HEP's material, wholly-owned subsidiaries. Any recourse to the general partner would be limited to the extent of HEP Logistics Holdings, L.P.'s assets, which other than its investment in HEP, are not significant. HEP's creditors have no other recourse to our assets. Furthermore, our creditors have no recourse to the assets of HEP and its consolidated subsidiaries.

HollyFrontier Senior Notes

Our senior notes consist of the following:

•

9.875% Senior Notes ($300 million principal amount maturing June 2017)

•

6.875% Senior Notes ($150 million principal amount maturing November 2018)⁽¹⁾

•

8.5% Senior Notes ($200 million principal amount maturing September 2016)⁽¹⁾

(1)	Represent senior notes assumed upon our July 1, 2011 merger with Frontier.

These notes (collectively, the "HollyFrontier Senior Notes") are unsecured and impose certain restrictive covenants, including limitations on our ability to incur additional debt, incur liens, enter into sale-and-leaseback transactions, pay dividends, enter into mergers, sell assets and enter into certain transactions with affiliates. At any time when the HollyFrontier Senior Notes are rated investment grade by both Moody's and Standard & Poor's and no default or event of default exists, we will not be subject to many of the foregoing covenants. Additionally, we have certain redemption rights under the HollyFrontier Senior Notes.

HollyFrontier Financing Obligation

In October 2009, we sold approximately 400,000 barrels of crude oil tankage at our Tulsa Refinery west facility as well as certain crude oil pipeline receiving facilities to Plains All American Pipeline, L.P. ("Plains") for $40 million in cash. In connection with this transaction, we entered into a 15-year lease agreement with Plains, whereby we agreed to pay a fixed monthly fee for the exclusive use of this tankage as well as a fee for volumes received at the receiving facilities purchased by Plains. Additionally, we have a margin sharing agreement with Plains under which we will equally share contango profits for crude oil purchased by them and delivered to our Tulsa Refinery west facility for storage. Due to our continuing involvement in these assets, this transaction has been accounted for as a financing obligation. As a result, we retained these assets on our books and recorded a liability representing the $40 million in proceeds received.

HEP Senior Notes

HEP's senior notes consist of the following:

•

6.25% Senior Notes ($185 million principal amount maturing March 2015)

•

8.25% Senior Notes ($150 million principal amount maturing March 2018)

These notes (collectively, the "HEP Senior Notes") are unsecured and impose certain restrictive covenants, including limitations on HEP's ability to incur additional indebtedness, make investments, sell assets, incur certain liens, pay distributions, enter into transactions with affiliates, and enter into mergers. At any time when the HEP Senior Notes are rated investment grade by both Moody's and Standard & Poor's and no default or event of default exists, HEP will not be subject to many of the foregoing covenants. Additionally, HEP has certain redemption rights under the HEP Senior Notes.

Indebtedness under the HEP Senior Notes is recourse to HEP Logistics Holdings, L.P., its general partner, and guaranteed by HEP's wholly-owned subsidiaries. However, any recourse to the general partner would be limited to the extent of HEP Logistics Holdings, L.P.'s assets, which other than its investment in HEP, are not significant. HEP's creditors have no other recourse to our assets. Furthermore, our creditors have no recourse to the assets of HEP and its consolidated subsidiaries.

The carrying amounts of long-term debt are as follows:


	September 30, 2011			December 31, 2010
	(In thousands)
9.875% Senior Notes
Principal	$	300,000		$	300,000
Unamortized discount		(9,619	)		(10,491	)

		290,381			289,509
6.875% Senior Notes
Principal		150,000			—
Unamortized premium		6,792			—

		156,792			—
8.5% Senior Notes
Principal		199,985			—
Unamortized premium		12,692			—

		212,677			—
Financing obligation
Principal		37,924			38,781

Total HollyFrontier long-term debt		697,774			328,290


HEP Credit Agreement		202,000			159,000

HEP 6.25% Senior Notes
Principal		185,000			185,000
Unamortized discount		(8,988	)		(10,961	)
Unamortized premium – dedesignated fair value hedge		1,184			1,444

		177,196			175,483
HEP 8.25% Senior Notes
Principal		150,000			150,000
Unamortized discount		(1,983	)		(2,212	)

		148,017			147,788

Total HEP long-term debt		527,213			482,271

Total long-term debt	$	1,224,987		$	810,561

We capitalized interest attributable to construction projects of $5.8 million and $3 million for the three months ended September 30, 2011 and 2010, respectively, and $13.6 million and $5 million for the nine months ended September 30, 2011 and 2010, respectively.