Delek Logistics Partners, LP Announces Proposed Public Offering of Common Units

Rhea-AI Summary

Delek Logistics Partners, LP (NYSE: DKL) has announced a proposed public offering of $150,000,000 of common units representing partner interests. The company intends to grant underwriters a 30-day option to purchase up to an additional $22,500,000 of common units. BofA Securities, Barclays, and RBC Capital Markets are acting as joint book-running managers for the offering.

The net proceeds will be used to redeem outstanding convertible preferred units and repay borrowings under the revolving credit agreement. Company executives have expressed interest in purchasing up to $300,000 of the offered units. The offering is subject to market conditions, and there is no assurance of its completion or final terms.

Positive

• Potential to raise up to $172,500,000 through the offering
• Proceeds to be used for redeeming convertible preferred units and repaying debt
• Company executives showing confidence by expressing interest in purchasing units

Negative

• Potential dilution of existing shareholders' ownership
• Increased outstanding units may negatively impact earnings per unit

Insights

Financial Analyst

Delek Logistics Partners' proposed $150 million public offering of common units is a significant move that could reshape its capital structure. The potential $22.5 million additional option adds flexibility. This offering aims to redeem outstanding convertible preferred units and repay revolving credit borrowings, which could improve the company's balance sheet and reduce interest expenses.

The involvement of major underwriters like BofA Securities, Barclays and RBC Capital Markets lends credibility to the offering. However, investors should note that the offering is subject to market conditions, introducing some uncertainty. The executives' interest in purchasing up to $300,000 of units may be seen as a vote of confidence, but it's not a binding commitment.

For DKL, with a market cap of $2.04 billion, this offering represents about 7.4% of its current value. The impact on existing unitholders will depend on the pricing and market reception. While it may lead to some dilution, the potential benefits of debt reduction and improved financial flexibility could outweigh this in the long term.

Legal Expert

This proposed offering by Delek Logistics Partners raises several legal considerations. The use of an effective shelf registration statement and the filing of a preliminary prospectus supplement indicate compliance with SEC regulations, specifically Section 10 of the Securities Act of 1933. This approach allows for a more streamlined offering process.

The disclosure about the executives' interest in purchasing units is noteworthy from a legal perspective. It's prudently framed as a non-binding indication, avoiding any potential issues related to insider trading or preferential treatment. The clear statement that the underwriters may choose not to sell units to the executives further reinforces this arm's length approach.

The offering's contingency on market conditions and the explicit statement that there's no assurance of completion or terms protects the company from potential legal challenges if the offering doesn't proceed as initially proposed. This cautionary language is important for managing investor expectations and mitigating legal risks associated with forward-looking statements.

BRENTWOOD, Tenn.--(BUSINESS WIRE)-- Delek Logistics Partners, LP (NYSE: DKL) (“Delek Logistics”) announced today that it has commenced an underwritten public offering of $150,000,000 of common units representing limited partner interests in Delek Logistics pursuant to an effective shelf registration statement previously filed with the Securities and Exchange Commission (the “SEC”). A preliminary prospectus supplement relating to the offering will also be filed with the SEC. Delek Logistics intends to grant the underwriters a 30-day option to purchase up to an additional $22,500,000 of common units. The offering is subject to market and other conditions, and there can be no assurance as to whether or when the offering may be completed, or as to the actual size or terms of the offering.

Delek Logistics intends to use the net proceeds from the offering (including any net proceeds from the underwriters’ exercise of their option to purchase additional common units) to redeem its outstanding convertible preferred units and to repay outstanding borrowings under its revolving credit agreement.

Avigal Soreq, our President and Chief Executive Officer, and certain other of our executives (collectively, the “Executives”), have indicated an interest in purchasing up to $300,000 of the common units offered in the offering at the price offered to the public. Because this indication is not a binding agreement or commitment to purchase, the Executives may elect not to purchase any units in the offering, or the underwriters may elect not to sell any units in the offering to the Executives.

BofA Securities, Barclays, and RBC Capital Markets are acting as joint book-running managers for the offering. A copy of the preliminary prospectus supplement and accompanying base prospectus relating to this offering may be obtained from any of the underwriters, including BofA Securities at 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, Barclaysprospectus@broadridge.com, (888)-603-5847; and RBC Capital Markets, LLC, Attention: Equity Capital Markets, 200 Vesey Street, New York, NY 10281, by telephone at 877-822-4089 or by email at equityprospectus@rbccm.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 Holdings (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 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/20241008136241/en/

Investor Relations and Media/Public Affairs Contact:

investor.relations@delekus.com

Source: Delek Logistics Partners, LP

FAQ

What is the size of Delek Logistics Partners' (DKL) proposed public offering?

Delek Logistics Partners (DKL) has announced a proposed public offering of $150,000,000 of common units, with an additional 30-day option for underwriters to purchase up to $22,500,000 more units.

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

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

Who are the underwriters for Delek Logistics Partners' (DKL) public offering?

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

Are Delek Logistics Partners' (DKL) executives participating in the public offering?

Company executives have indicated an interest in purchasing up to $300,000 of the common units offered in the public offering, although this is not a binding commitment.