8-K: Delek Logistics Partners Secures $700 Million in Upsized Senior Notes Offering to Fuel Permian Growth

Delek Logistics Partners, LP and its finance subsidiary have successfully closed an upsized offering of $700 million in 7.375% senior notes due 2033, significantly boosting the company's financial liquidity for strategic growth initiatives.

Summary

• Delek Logistics Partners, LP (the "Partnership") and Delek Logistics Finance Corp. (together, the "Issuers") have closed an upsized offering of $700,000,000 aggregate principal amount of 7.375% senior notes due 2033 (the "2033 Notes").
• The 2033 Notes are general unsecured senior obligations of the Issuers and are unconditionally guaranteed jointly and severally on a senior unsecured basis by the Partnership's existing subsidiaries and will be by certain future subsidiaries.
• Interest on the 2033 Notes is payable semi-annually in arrears on June 30 and December 30, commencing December 30, 2025, with interest computed on a 360-day year basis.
• The Issuers may redeem up to 35% of the notes prior to June 30, 2028, at 107.375% of the principal amount plus accrued interest, using net cash proceeds from equity offerings, provided at least 65% of the notes remain outstanding.
• Prior to June 30, 2028, the Issuers may redeem all or part of the notes at a price equal to the principal amount plus a Make Whole Premium and accrued interest.
• On and after June 30, 2028, the notes are redeemable at declining percentages of principal amount: 103.688% in 2028, 101.844% in 2029, and 100.000% in 2030 and thereafter, plus accrued interest.
• A Change of Control Triggering Event allows holders to require the Partnership to repurchase notes at 101% of the principal amount plus accrued interest.
• The Partnership is required to make an Asset Sale Offer to repurchase notes at 100% of the principal amount plus accrued interest when Excess Proceeds from asset sales exceed $50.0 million.
• The Indenture includes covenants limiting the Partnership's and its restricted subsidiaries' ability to incur additional indebtedness, create liens, pay distributions, make investments, restrict subsidiary distributions, engage in mergers/consolidations, sell assets, and enter into affiliate transactions.

Sentiment

Score: 8

Explanation: The successful, upsized debt offering significantly enhances Delek Logistics' liquidity, providing substantial capital for strategic growth investments in the Permian Basin. This financial strengthening and clear strategic direction are strong positives for the company's outlook.

Positives

• The offering was upsized to $700 million, indicating strong market demand and successful capital acquisition.
• The transaction significantly increases Delek Logistics' financial liquidity to over one billion dollars.
• Enhanced liquidity positions the company to invest in significant growth opportunities, particularly in the Permian Basin.
• The capital raise supports Delek Logistics' strategy to complement its top-tier location and full-suite service offerings in the Permian Basin.

Risks

• Default for 30 days in the payment of interest on the notes.
• Default in the payment of principal or premium on the notes when due.
• Failure to comply with obligations to offer to repurchase notes under asset sale or change of control provisions.
• Failure to comply with reporting obligations for 180 days after notice.
• Failure to comply with any other agreements in the Indenture for 60 days after notice.
• Default under other indebtedness of $50.0 million or more, caused by payment failure or acceleration prior to maturity.
• Failure to pay final non-appealable judgments aggregating in excess of $50.0 million (not covered by insurance) for a period of 60 days.
• Bankruptcy or insolvency events with respect to the Company or any Significant Subsidiary.
• Any Subsidiary Guarantee being held unenforceable or invalid, or ceasing to be in full force and effect, or any Guarantor denying its obligations.
• Market risks and uncertainties that could affect actual results.
• Availability of growth opportunities, which could differ from predictions.

Future Outlook

The enhanced financial liquidity, now exceeding one billion dollars, is intended to enable Delek Logistics to continue investing in significant growth opportunities. This strategy aims to complement its existing top-tier location and full-suite service offerings within the Permian Basin.

Management Comments

• "We thank our investors for their confidence and look forward to continuing to create value for all of our stakeholders."

Industry Context

Delek Logistics Partners, LP operates in the midstream energy sector, primarily focusing on crude oil and natural gas gathering, transportation, storage, and wholesale marketing services. The successful debt offering provides capital for strategic investments, particularly in the Permian Basin, a key oil and gas producing region. This move aligns with broader industry trends of midstream companies seeking to expand infrastructure and service capabilities in high-growth production areas to support upstream activities and optimize supply chains.

Stakeholder Impact

• Shareholders/Unitholders: The increased liquidity and planned investments in growth opportunities could lead to long-term value creation, though the new debt ranks senior to equity.
• Noteholders: Will receive semi-annual interest payments at 7.375% and have specific redemption and repurchase rights, with the notes ranking equally with other senior unsecured indebtedness.
• Creditors: The new notes rank equally with existing and future senior indebtedness, potentially affecting the overall debt structure.
• Employees, Customers, and Suppliers: May indirectly benefit from the company's enhanced financial stability and ability to pursue strategic growth, potentially leading to more stable operations and expanded business opportunities.

Next Steps

• Continue to invest in significant growth opportunities, particularly in the Permian Basin, to complement the company's top-tier location and full-suite service strategy.

Key Dates

Recommendation

Keywords

Senior Notes, Debt Offering, Delek Logistics Partners, DKL, Permian Basin, Midstream Energy, Capital Raise, Liquidity, Corporate Finance, Indenture, SEC Filing, 7.375% Notes, 2033 Maturity, Unsecured Debt