Delek Logistics Partners, LP Announces Pricing of Offering of $200 Million of Additional 8.625% Senior Notes Due 2029

Rhea-AI Summary

Delek Logistics Partners, LP priced an offering of $200 million in additional 8.625% senior notes due 2029 at 101.250% of face value. The proceeds will be used to repay borrowings under its revolving credit facility. The offering is expected to close on April 17, 2024.

Insights

Financial Analyst

The pricing of Delek Logistics Partners' offering of an additional $200 million of 8.625% senior notes due 2029 provides a noteworthy moment for stakeholders. The choice of pricing at 101.250% of face value indicates confidence that investors will accept a slight premium over par value, suggesting underlying strength in the issuer's creditworthiness.

Moreover, the use of proceeds to repay outstanding borrowings under a revolving credit facility is a strategic move to optimize the capital structure. It indicates a focus on managing interest expenses and reducing reliance on variable-rate debt, which could be beneficial amid fluctuating interest rate environments. Investors should monitor how this decision affects Delek's leverage ratios and interest coverage metrics, as these are fundamental indicators of financial health in the energy logistics sector.

Debt Market Analyst

Issuing additional notes under the same indenture as the existing notes suggests a streamlined strategy for Delek Logistics to tap into its current investor base who are already familiar with the terms of the existing notes. This can reduce the complexity and potentially lower the cost of issuing new debt. However, the high interest rate of 8.625% reflects a relatively expensive cost of capital, which investors should weigh against the company's operational cash flow and long-term growth prospects within the energy sector.

It's important to consider the market's current appetite for high-yield debt, as this issuance may indicate broader trends in investor sentiment and risk tolerance. The exemption from registration targets sophisticated institutional investors and highlights the regulatory landscape impacting the accessibility and liquidity of the notes for the average investor.

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”), priced an offering of $200 million in aggregate principal amount of additional 8.625% senior notes due 2029 (the “Additional Notes”) at an offering price equal to 101.250% of their face value, plus accrued interest from March 13, 2024. 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 (the “Existing Notes”) and will form a part of the same series of notes as the Existing Notes.

The offering is expected to close on April 17, 2024, subject to the satisfaction of customary closing conditions. 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 are being 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 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 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/20240412245178/en/

Investor Relations Contacts:

Rosy Zuklic, Vice President of Investor Relations and Market Intelligence

investor.relations@delekus.com; rosy.zuklic@delekus.com

615-767-4344

Source: Delek Logistics Partners, LP

FAQ

What is the offering amount of the Additional Notes by Delek Logistics Partners, LP?

Delek Logistics Partners, LP priced an offering of $200 million in aggregate principal amount of additional 8.625% senior notes due 2029.

What is the offering price of the Additional Notes?

The offering price of the Additional Notes is equal to 101.250% of their face value.

When is the expected closing date of the offering?

The offering is expected to close on April 17, 2024, subject to the satisfaction of customary closing conditions.

How will Delek Logistics Partners, LP use the net proceeds from the offering?

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

In what form are the Additional Notes being offered?

The Additional Notes are being offered only to qualified institutional buyers in an offering exempt from registration under Rule 144A and to non-U.S. persons outside the United States in reliance on Regulation S.