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

Rhea-AI Summary

Delek Logistics Partners, LP (NYSE: DKL) has priced an upsized offering of $200 million in additional 8.625% senior notes due 2029. The offering, initially announced at $100 million, was increased and priced at 103.250% of face value. These Additional Notes will be part of the same series as the $850 million in Existing Notes issued earlier in 2024. The offering is expected to close on August 16, 2024, subject to customary conditions.

Delek Logistics plans to use the net proceeds to repay a portion of its revolving credit facility. The Additional Notes are being offered only to qualified institutional buyers and non-U.S. persons, and have not been registered under the Securities Act, limiting their sale and transfer.

Positive

• Successful upsizing of the offering from $100 million to $200 million, indicating strong investor demand
• Priced at 103.250% of face value, suggesting favorable market reception
• Proceeds will be used to repay revolving credit facility, potentially improving the company's debt structure

Negative

• Increased debt load with the addition of $200 million in senior notes
• Higher interest expense due to the 8.625% coupon rate on the new notes

Financial Analyst

Delek Logistics Partners' upsized offering of $200 million in additional senior notes signals strong investor demand and improved liquidity. The 8.625% yield and 103.250% offering price suggest a favorable market reception, albeit at a higher cost of capital. This move to refinance revolving credit facility debt with longer-term notes could enhance financial flexibility. However, the increased interest expense may impact future distributable cash flow. The upsizing from $100 million to $200 million indicates confidence in market conditions and potentially larger refinancing needs. Investors should monitor the impact on the company's leverage ratios and interest coverage metrics post-transaction.

Credit Risk Analyst

The issuance of additional notes at a premium (103.250%) reflects strong demand but also increases Delek Logistics' debt burden. While refinancing revolving credit with fixed-rate notes can provide stability, the 8.625% coupon is relatively high, potentially straining future cash flows. The company's ability to upsize the offering suggests good market access, but it's important to assess how this impacts the overall capital structure. Investors should examine the post-issuance debt-to-EBITDA ratio and interest coverage to gauge financial health. The Rule 144A offering limits liquidity but may have allowed for faster execution. Overall, this move presents a mixed credit profile with improved liquidity against higher leverage.

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 upsized 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 103.250% of their face value, plus accrued interest from March 13, 2024. The aggregate principal amount of the offering was increased from the previously announced offering size of $100 million.

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 additional $200 million in aggregate principal amount of 8.625% senior notes due 2029 issued by the Issuers on April 17, 2024 (collectively, the “Existing Notes”). The Additional Notes will form a part of the same series of notes as the Existing Notes.

The offering is expected to close on August 16, 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, the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024, and other reports and filings with the SEC.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240813400006/en/

Investor Relations and Media/Public Affairs Contact:

investor.relations@delekus.com

Source: Delek Logistics Partners, LP

FAQ

What is the size and price of Delek Logistics Partners' (DKL) new senior notes offering?

Delek Logistics Partners (DKL) priced an upsized offering of $200 million in additional 8.625% senior notes due 2029 at 103.250% of face value, plus accrued interest from March 13, 2024.

When is the expected closing date for Delek Logistics Partners' (DKL) new notes offering?

The offering of Delek Logistics Partners' (DKL) additional senior notes is expected to close on August 16, 2024, subject to customary closing conditions.

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

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

What is the total amount of 8.625% senior notes due 2029 issued by Delek Logistics Partners (DKL) after this offering?

After this offering, the total amount of 8.625% senior notes due 2029 issued by Delek Logistics Partners (DKL) will be $1.05 billion, including $850 million in Existing Notes and the new $200 million offering.