Delek Logistics Partners, LP Announces Proposed Offering of $550 Million of Senior Notes

Rhea-AI Summary

Delek Logistics Partners, LP (DK) plans to offer $550 million senior notes due 2029 to repay existing debt and for general corporate purposes. The offering targets qualified institutional buyers and non-U.S. persons.

Insights

Financial Analyst

The announcement by Delek Logistics Partners, LP regarding its intention to offer $550 million in senior notes is a strategic financial move aimed at restructuring existing debt obligations. By repurchasing or redeeming the outstanding 6.75% Senior Notes due 2025, the company is likely seeking to take advantage of lower interest rates or more favorable terms available in the current market. This could potentially lead to reduced interest expenses and improved debt maturity profiles, which are crucial factors in financial stability and credit ratings.

Furthermore, the repayment of the term loan facility and the use of any remaining proceeds for general corporate purposes, including the repayment of borrowings under its revolving credit facility, indicate an effort to streamline the capital structure. Investors and analysts might view this positively as it could lead to improved liquidity and financial flexibility. However, the success of this offering is subject to market conditions, which could impact the interest rate and terms Delek Logistics is able to secure.

Legal Expert

From a legal standpoint, the private placement of senior notes to qualified institutional buyers and non-U.S. persons is a significant detail. The reliance on Rule 144A and Regulation S under the Securities Act of 1933 exempts Delek Logistics from the registration requirements normally imposed on public offerings. This allows the company to expedite the offering process and potentially reduce the costs associated with public offerings. However, it also limits the pool of potential investors to those who meet certain criteria, which could affect the demand and pricing of the notes.

Additionally, the press release's compliance with Rule 135c is a reminder of the strict regulations governing the communication of such offerings. It underscores the importance of adhering to legal guidelines to avoid potential violations that could lead to significant penalties or delays in the offering process.

Market Research Analyst

Analyzing the broader market implications, Delek Logistics' move to issue new senior notes may reflect a wider industry trend of energy-related companies looking to optimize their balance sheets amid fluctuating oil prices and market conditions. This strategic financial maneuvering is indicative of a company proactively managing its debt portfolio, which can be seen as a prudent approach in an industry known for its volatility.

The decision to address short-term debt and potentially reduce long-term obligations can make the company more resilient against market downturns. For stakeholders, this could signal a commitment to maintaining a strong financial foundation, which is often rewarded with investor confidence. Market conditions at the time of the offering will be a determining factor in the success of the placement and its impact on the company's stock performance.

BRENTWOOD, Tenn., Feb. 28, 2024 /PRNewswire/ -- Delek Logistics Partners, LP (NYSE: DKL) ("Delek Logistics") announced today that it, along with Delek Logistics Finance Corp., a subsidiary of Delek Logistics, intends to offer $550 million in aggregate principal amount of senior notes due 2029 (the "Notes") in a private placement to eligible purchasers, subject to market conditions.

Delek Logistics intends to use the net proceeds from the offering to (i) repurchase or redeem all of the outstanding 6.75% Senior Notes due 2025 (the "2025 Notes"), (ii) repay in full the outstanding borrowings under Delek Logistics' term loan facility and (iii) pay accrued and unpaid interest, premiums, fees and expenses related to such repurchases, repayments and redemptions. Delek Logistics intends to use any remaining net proceeds for general corporate purposes, which may include the repayment of a portion of the outstanding borrowings under its revolving credit facility.

The 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 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 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 Notes or any other securities in any jurisdiction in which such offer, solicitation or sale is unlawful. This press release does not constitute a notice of redemption under the optional redemption provisions of the indenture governing the 2025 Notes.

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. 

 

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SOURCE Delek Logistics Partners, LP

FAQ

What is Delek Logistics Partners, LP (DK) planning to do with the net proceeds from the offering?

Delek Logistics intends to use the net proceeds to repurchase or redeem outstanding 6.75% Senior Notes due 2025, repay borrowings under its term loan facility, and pay related expenses. Any remaining proceeds will be used for general corporate purposes.

Who are the target buyers for the Notes offering?

The Notes will be offered to qualified institutional buyers under Rule 144A and to non-U.S. persons outside the United States under Regulation S.

Are the Notes and related guarantees registered under the Securities Act?

No, the Notes and related guarantees have not been registered under the Securities Act or state securities laws and may not be offered or sold in the United States without registration or an applicable exemption.

Is this press release an offer to sell the Notes?

No, this press release is not an offer to sell or a solicitation of an offer to buy the Notes or any other securities. It does not constitute a notice of redemption under the optional redemption provisions of the indenture governing the 2025 Notes.