Par Pacific Announces Expected Term Loan Repricing
- Par Pacific expects to save over $3 million annually due to the repricing of its term loan credit agreement.
- Moody's upgraded Par Pacific's corporate family rating to Ba3 from B1.
- The amendment will reduce the Applicable Margin by 50 basis points, benefiting the company financially.
- Further ratings upgrade from S&P could lead to an additional 0.25% reduction in annual interest rates under the Term Loan Facility.
- None.
Insights
Par Pacific Holdings' decision to reprice its existing term loan credit agreement is a strategic financial move that is likely to resonate positively with investors and stakeholders. The reduction of the Applicable Margin by 50 basis points for both Base Rate and SOFR loans signifies a lowering of borrowing costs. This is a direct benefit to the company's bottom line, as it implies a decrease in interest expenses, thus potentially increasing net income and cash flows.
The removal of the Term SOFR Adjustment further simplifies the interest calculation and can be seen as a response to the recent upgrade in the corporate family rating by Moody's. This upgrade typically reflects improved creditworthiness, which can reduce the perceived risk for lenders and justify lower interest rates. The potential for an additional interest rate reduction with a further ratings upgrade creates an incentive for Par Pacific to maintain or improve its financial health.
From a financial perspective, the anticipated $3 million in annual cash savings, along with the $10 million from other financial restructuring activities, suggests a substantial improvement in financial flexibility. This could lead to reinvestment in the business, debt reduction, or other shareholder-friendly activities. However, it's important to monitor if these savings translate to tangible value creation over time.
Looking at Par Pacific's amendment from a credit risk perspective, the reduction in interest rates following a credit rating upgrade indicates a lower risk profile for the company. Credit rating agencies like Moody's assess the likelihood of a borrower defaulting on its obligations and an upgrade suggests enhanced confidence in the company's ability to meet its financial commitments.
The link between Par Pacific's interest rates and its credit ratings underscores the importance of credit risk management. It suggests that the company's management is actively working to improve its standing with rating agencies, which can lead to more favorable borrowing terms. This dynamic can create a virtuous cycle, where improved creditworthiness leads to lower costs of debt, which in turn can further strengthen the company's financial position.
Investors should consider the implications of these changes on the company's risk profile. While lower interest expenses are beneficial, they should also assess whether the company's operational performance can sustain the improved credit ratings in the long run. Any future downgrade could reverse the favorable terms obtained, impacting the company's cost structure and profitability.
In the context of the energy sector, Par Pacific Holdings' amendment to its term loan facility must be viewed against the backdrop of the industry's cyclical nature and volatility in commodity prices. The company's ability to secure lower interest rates may provide a competitive edge by freeing up cash that could be used for strategic investments or to weather downturns in the market.
Energy companies like Par Pacific often face significant capital expenditure requirements and regulatory challenges. The financial flexibility gained from reduced interest payments could enable the company to navigate these challenges more effectively. It's also worth noting that the energy sector is undergoing a transition towards more sustainable sources and companies are under pressure to adapt their business models accordingly.
The savings reported by Par Pacific could potentially be redirected towards investments in renewable energy or other initiatives to future-proof the business. However, it's critical for investors to watch how these savings are allocated, as the long-term success of the company will depend on strategic decisions that align with industry trends and regulatory developments.
HOUSTON, March 28, 2024 (GLOBE NEWSWIRE) -- Par Pacific Holdings, Inc. (NYSE: PARR) (“Par Pacific”) today announced it expects to reprice and allocate its existing term loan credit agreement due 2030 (the “Term Loan Facility”). The repricing amendment, which is subject to execution of definitive documentation and customary closing conditions, will reduce the Applicable Margin under the Term Loan Facility by 50 basis points, such that Base Rate loans and SOFR loans will bear interest at the applicable base rate plus
On March 22, 2024, Par Pacific announced that Moody’s Investors Service upgraded the company’s corporate family rating to Ba3 from B1. The amendment provides that if Par Pacific receives a further ratings upgrade from S&P, the annual interest rates under the Term Loan Facility will be reduced by an additional
“Our strong operating performance and record financial results over the past year have enabled us to reprice our term loan facility on improved terms,” said Shawn Flores, Chief Financial Officer of Par Pacific. “This amendment is expected to provide over
Forward-Looking Statements
This news release includes certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to qualify for the “safe harbor” from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. We may be unable to execute definitive documents related to the repricing of the Term Loan Facility on terms that are acceptable to us or at all. Definitive documents, if executed, may be executed later than we currently expect. In addition, these forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties, including (i) the execution of definitive documents relating to the foregoing, (ii) the satisfaction of any conditions precedent to the closing or effectiveness of such documents, (iii) the effects of the continued volatility of commodity prices and the related macroeconomic and political environment, (iv) risks and uncertainties related to the credit markets generally, and (v) other factors, many of which are outside our control, which could cause actual results to differ materially from such statements. We cannot provide assurances that the assumptions upon which these forward-looking statements are based will prove to have been correct. Should one of these risks materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expressed or implied in any forward-looking statements, and investors are cautioned not to place undue reliance on these forward-looking statements, which are current only as of this date. We do not intend to update or revise any forward-looking statements made herein or any other forward-looking statements as a result of new information, future events or otherwise. We further expressly disclaim any written or oral statements made by a third party regarding the subject matter of this news release.
About Par Pacific
Par Pacific Holdings, Inc. (NYSE: PARR), headquartered in Houston, Texas, is a growing energy company providing both renewable and conventional fuels to the western United States. In the Pacific Northwest and the Rockies, Par Pacific owns and operates 125,000 bpd of combined refining capacity across three locations and an extensive energy infrastructure network, including 7.6 million barrels of storage, and marine, rail, rack, and pipeline assets. In addition, Par Pacific operates the “nomnom” convenience store chain and supplies ExxonMobil-branded fuel retail stations in the region. Par Pacific owns and operates one of the largest energy infrastructure networks in Hawaii with 94,000 bpd of operating refining capacity, a logistics system supplying the major islands of the state and Hele-branded retail locations. Par Pacific also owns
For more information contact:
Ashimi Patel
VP, Investor Relations and Sustainability
(832) 916-3355
apatel@parpacific.com
FAQ
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