Delek Logistics Partners, LP Announces Closing of Public Offering of Common Units and Full Exercise of Underwriters’ Option to Purchase Additional Units

Rhea-AI Summary

Delek Logistics Partners, LP (NYSE: DKL) has closed its public offering of 4,423,075 common units, including 576,922 units from the underwriters' full exercise of their option. The units were priced at $39.00 each, generating gross proceeds of approximately $166 million. The company plans to use the funds to redeem outstanding convertible preferred units and repay borrowings under its revolving credit agreement.

Notably, Avigal Soreq, the company's President, and other executives purchased 7,177 units at the public offering price. BofA Securities, Barclays, and RBC Capital Markets served as joint book-running managers for the offering, which was made under an effective shelf registration statement filed with the SEC.

Positive

• Successful closing of public offering with full exercise of underwriters' option
• Gross proceeds of approximately $166 million raised
• Funds to be used for redeeming convertible preferred units and repaying credit agreement borrowings
• Company executives participated in the offering, demonstrating confidence

Negative

• Potential dilution of existing shareholders due to issuance of new common units

Insights

Financial Analyst

The closing of Delek Logistics Partners' public offering of 4,423,075 common units at $39.00 per unit, including the full exercise of the underwriters' option, is a significant capital raise event. The gross proceeds of approximately $166 million will be used strategically to redeem outstanding convertible preferred units and repay revolving credit borrowings, potentially improving the company's capital structure and reducing interest expenses.

This move could enhance DKL's financial flexibility and balance sheet strength. The participation of company executives in the offering, albeit small, signals confidence in the company's prospects. However, investors should note that this equity issuance will dilute existing unitholders' ownership. The impact on distributable cash flow per unit and the partnership's ability to maintain or grow distributions will be important to monitor in upcoming quarters.

The successful completion of this offering, especially with full exercise of the underwriters' option, suggests strong investor interest in DKL, which is positive for market sentiment. However, the use of proceeds for debt reduction rather than growth initiatives may indicate near-term expansion opportunities.

Market Research Analyst

Delek Logistics Partners' successful public offering demonstrates robust market demand for midstream energy assets in the current economic environment. The pricing at $39.00 per unit and full exercise of the underwriters' option indicate strong investor confidence in DKL's business model and future prospects.

The timing of this offering is noteworthy, as it comes amid volatile energy markets and increasing focus on clean energy transitions. DKL's ability to raise significant capital suggests that investors still see value in traditional energy infrastructure assets, particularly those with stable cash flows.

The use of proceeds to redeem convertible preferred units and repay revolving credit borrowings is a prudent financial management move. This could potentially lower DKL's cost of capital and improve its financial metrics, which may be viewed favorably by rating agencies and investors alike. However, it's important to monitor how this capital restructuring affects DKL's growth strategy and ability to compete in an evolving energy landscape.

BRENTWOOD, Tenn.--(BUSINESS WIRE)-- Delek Logistics Partners, LP (NYSE: DKL) (“Delek Logistics”) announced today that it has closed its previously announced underwritten public offering of 4,423,075 common units representing limited partner interests in Delek Logistics, including 576,922 common units sold pursuant to the underwriters’ full exercise of their option to purchase additional common units, at a price of $39.00 per unit. Delek Logistics intends to use the gross proceeds of approximately $166 million, after underwriting fees and commissions and before other offering-related expenses, to redeem its outstanding convertible preferred units and to repay outstanding borrowings under its revolving credit agreement.

Avigal Soreq, our President, and certain other of our executives, purchased 7,177 of the common units offered in the offering at the price offered to the public.

The offering was made pursuant to an effective shelf registration statement previously filed with the Securities and Exchange Commission (the “SEC”). A prospectus supplement relating to the offering has also been filed with the SEC.

BofA Securities, Barclays, and RBC Capital Markets acted as joint book-running managers for the offering. A copy of the prospectus supplement and accompanying base prospectus relating to the offering may be obtained from any of the underwriters, including BofA Securities, NC1-022-02-25 at 201 North Tryon Street, Charlotte, North Carolina 28255, Attention: Prospectus Department or by email at dg.prospectus_requests@bofa.com; Barclays Capital Inc. at c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, NY 11717, or by email at Barclaysprospectus@broadridge.com, or by telephone at (888)-603-5847; and RBC Capital Markets, LLC, attention: Equity Capital Markets, 200 Vesey Street, New York, NY 10281, or by telephone at (877)-822-4089 or by email at equityprospectus@rbcm.com. You may also obtain these documents for free when they are available by visiting the SEC’s website at www.sec.gov.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. The offering may be made only by means of a prospectus and related prospectus supplement meeting the requirements of Section 10 of the Securities Act of 1933, as amended (the “Securities Act”).

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, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, including statements regarding the closing of 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 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/20241010942278/en/

Investor Relations and Media/Public Affairs Contact:

investor.relations@delekus.com

Source: Delek Logistics Partners, LP

FAQ

How many common units did Delek Logistics Partners (DKL) offer in its public offering?

Delek Logistics Partners (DKL) offered 4,423,075 common units in its public offering, including 576,922 units from the underwriters' full exercise of their option to purchase additional units.

What was the price per unit in Delek Logistics Partners' (DKL) public offering?

The price per unit in Delek Logistics Partners' (DKL) public offering was $39.00.

How much did Delek Logistics Partners (DKL) raise in gross proceeds from the offering?

Delek Logistics Partners (DKL) raised approximately $166 million in gross proceeds from the offering, after underwriting fees and commissions but before other offering-related expenses.

How does Delek Logistics Partners (DKL) plan to use the proceeds from the offering?

Delek Logistics Partners (DKL) plans to use the proceeds to redeem its outstanding convertible preferred units and to repay outstanding borrowings under its revolving credit agreement.

Who were the joint book-running managers for Delek Logistics Partners' (DKL) public offering?

BofA Securities, Barclays, and RBC Capital Markets acted as joint book-running managers for Delek Logistics Partners' (DKL) public offering.