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

Rhea-AI Summary

Delek Logistics Partners, LP (DKL) plans to offer $200 million in additional 8.625% senior notes due 2029 to repay borrowings under its revolving credit facility. The notes will be offered to qualified institutional buyers and non-U.S. persons, exempt from registration under the Securities Act.

Insights

Financial Analyst

The offering of $200 million in additional senior notes by Delek Logistics Partners is a strategic financial move aimed at optimizing the company's capital structure. The decision to repay a portion of the outstanding borrowings under its revolving credit facility using the net proceeds indicates a focus on debt management and interest cost reduction. Given the 8.625% interest rate, which is relatively high in the current market, the company may be signaling a conservative approach to its leverage or reflecting a premium for the perceived risk associated with the energy sector.

Investors should note the implications of such a debt issuance on the company's interest coverage ratio and overall debt-to-equity balance. While the immediate effect may be an increase in cash flow due to reduced credit facility borrowings, the long-term impact must be evaluated in terms of interest expense and potential dilution of earnings. Furthermore, the choice of a private placement to qualified institutional buyers suggests a targeted approach in fundraising, possibly due to the complexities and regulations associated with public offerings.

Market Research Analyst

Delek Logistics' move to issue additional senior notes under the same indenture as the existing notes could indicate a market appetite for high-yield debt within the energy logistics industry. The company's ability to secure funds at an 8.625% interest rate, despite the current low-interest-rate environment, could reflect investor confidence in its operational stability and future cash flows.

However, this confidence must be juxtaposed with the inherent volatility of the energy sector. Factors such as fluctuating oil prices, regulatory changes and the transition to renewable energy sources could affect Delek Logistics' financial performance. Investors should assess the company's hedging strategies and its adaptability to market changes to understand the potential risks associated with this investment.

Legal Expert

The legal framework surrounding the issuance of the Additional Notes, particularly the reliance on Rule 144A and Regulation S, is designed to facilitate capital raising while complying with securities laws. These rules allow for a more expedited process by limiting the offering to qualified institutional buyers and non-U.S. persons, bypassing the more stringent requirements of a public offering.

It's important for stakeholders to recognize the regulatory environment's role in shaping such transactions and the limitations it imposes on the liquidity of the notes, as they cannot be sold freely in the public market without registration or an exemption. This could impact the secondary market trading of the notes and, by extension, their pricing and attractiveness to potential investors.

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 $200 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 (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/20240412380005/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 Delek Logistics Partners, LP (DKL) planning to offer?

Delek Logistics Partners, LP (DKL) plans to offer $200 million in additional 8.625% senior notes due 2029.

Who are the intended purchasers of the Additional Notes?

The Additional Notes will be offered to qualified institutional buyers and non-U.S. persons.

How will Delek Logistics use the net proceeds from the offering?

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

Are the Additional Notes registered under the Securities Act?

The Additional Notes and related guarantees have not been registered under the Securities Act or any state securities laws.

Is the offering of the Additional Notes lawful in the United States?

The offering of the Additional Notes may not be offered or sold in the United States without registration or an applicable exemption from the registration requirements.