Delek Logistics Partners, LP Announces Proposed Offering of $100 Million of Additional 8.625% Senior Notes Due 2029

Rhea-AI Summary

Delek Logistics Partners, LP (NYSE: DKL) has announced a proposed offering of $100 million in additional 8.625% senior notes due 2029. These Additional Notes will be issued under the same indenture as the existing $850 million in aggregate principal amount of 8.625% senior notes due 2029. The offering is subject to market conditions and will be made to eligible purchasers in a private placement.

The company intends to use the net proceeds from this offering to repay a portion of the outstanding borrowings under its revolving credit facility. The Additional Notes will only be offered to qualified institutional buyers and non-U.S. persons outside the United States, in compliance with Rule 144A and Regulation S under the Securities Act, respectively.

Positive

• Raising $100 million in additional capital through senior notes offering
• Potential reduction in revolving credit facility debt

Negative

• Increasing long-term debt obligations
• Additional interest expenses from new notes

Financial Analyst

Delek Logistics Partners' proposed $100 million additional notes offering is a strategic financial move. With an 8.625% interest rate, it's higher than typical investment-grade bonds, reflecting some risk. The intent to use proceeds to repay revolving credit suggests a debt restructuring strategy, potentially improving their debt profile. However, increasing total debt by $100 million could impact their leverage ratios. The market's reception to this third issuance in the series will be crucial, as it may indicate investor confidence in Delek's financial health and growth prospects. Investors should closely monitor the company's ability to service this additional debt and its impact on future cash flows.

Legal Expert

The offering's structure as a private placement under Rule 144A and Regulation S is significant. This approach allows Delek to access capital markets more quickly and with less regulatory scrutiny than a public offering. However, it limits the potential investor base to qualified institutional buyers and non-U.S. persons. The explicit statement that the notes are unregistered and cannot be sold without registration or exemption is a important legal disclaimer, protecting the company from potential securities law violations. Investors should be aware that these notes may have liquidity in the secondary market due to transfer restrictions. The company's careful wording about the offering being subject to market conditions provides legal flexibility if the issuance doesn't proceed as planned.

BRENTWOOD, Tenn.--(BUSINESS WIRE)-- Delek Logistics Partners, LP (NYSE: DKL) (“Delek Logistics”) announced today that it, along with Delek Logistics Finance Corp., a subsidiary of Delek Logistics (together with Delek Logistics, the “Issuers”), intends to offer $100 million in aggregate principal amount of additional 8.625% senior notes due 2029 (the “Additional Notes”) in a private placement to eligible purchasers, subject to market conditions. The Additional Notes will be issued under the same indenture as the $650 million in aggregate principal amount of 8.625% senior notes due 2029 issued by the Issuers on March 13, 2024 and the $200 million in aggregate principal amount of 8.625% senior notes due 2029 issued by the Issuers on April 12, 2024 (collectively, the “Existing Notes”) and will form a part of the same series of notes as the Existing Notes.

Delek Logistics intends to use the net proceeds from the offering to repay a portion of the outstanding borrowings under its revolving credit facility.

The Additional Notes will be offered only to persons reasonably believed to be qualified institutional buyers in an offering exempt from registration in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act. The Additional Notes and related guarantees have not been registered under the Securities Act or any state securities laws and may not be offered or sold in the United States without registration or an applicable exemption from the registration requirements of the Securities Act or any applicable state securities laws.

This press release is being issued pursuant to Rule 135c under the Securities Act, and is neither an offer to sell nor a solicitation of an offer to buy the Additional Notes or any other securities and shall not constitute an offer to sell or a solicitation of an offer to buy, or a sale of, the Additional Notes or any other securities in any jurisdiction in which such offer, solicitation or sale is unlawful.

About Delek Logistics Partners, LP

Delek Logistics is a midstream energy master limited partnership headquartered in Brentwood, Tennessee. Through its owned assets and joint ventures located primarily in and around the Permian Basin, the Delaware Basin and other select areas in the Gulf Coast region, Delek Logistics provides gathering, pipeline, transportation, and other services for its customers in crude oil, intermediates, refined products, natural gas, storage, wholesale marketing, terminalling, water disposal and recycling.

Delek US Holdings, Inc. (NYSE: DK) owns the general partner interest as well as a majority limited partner interest in Delek Logistics and is also a significant customer.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the offering and the anticipated use of the net proceeds therefrom. These statements may contain words such as “possible,” “believe,” “should,” “could,” “would,” “predict,” “plan,” “estimate,” “intend,” “may,” “anticipate,” “will,” “if,” “expect” or similar expressions, as well as statements in the future tense, are made as of the date they were first issued and are based on current expectations, estimates, forecasts and projections as well as the beliefs and assumptions of management. Forward-looking statements are subject to a number of risks and uncertainties, many of which involve factors or circumstances that are beyond Delek Logistics’ control. Delek Logistics’ actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including, but not limited to, market risks and uncertainties, including those which might affect the offering, and the impact of any natural disasters or public health emergencies. These and other potential risks and uncertainties that could cause actual results to differ from the results predicted are more fully detailed in Delek Logistics’ filings and reports with the Securities and Exchange Commission (“SEC”), including the Annual Report on Form 10-K for the year ended December 31, 2023 and other reports and filings with the SEC.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240812024524/en/

Investor Relations and Media/Public Affairs Contact:

investor.relations@delekus.com

Source: Delek Logistics Partners, LP

FAQ

What is the purpose of Delek Logistics Partners' (DKL) $100 million senior notes offering?

Delek Logistics Partners (DKL) intends to use the net proceeds from the $100 million senior notes offering to repay a portion of the outstanding borrowings under its revolving credit facility.

What is the interest rate and maturity date of DKL's proposed additional senior notes?

The proposed additional senior notes have an interest rate of 8.625% and are due in 2029.

How much in total senior notes due 2029 will DKL have outstanding after this proposed offering?

After the proposed $100 million offering, DKL will have a total of $950 million in aggregate principal amount of 8.625% senior notes due 2029 outstanding.

Who is eligible to purchase the additional senior notes offered by DKL?

The additional senior notes are only offered to qualified institutional buyers in reliance on Rule 144A and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act.