8-K: UGI Subsidiary, Mountaineer Gas, Secures $150 Million Credit Agreement, Refinancing Existing Debt

Mountaineer Gas Company, a UGI Corporation subsidiary, entered into a $150 million credit agreement with The Huntington National Bank to refinance its 2019 credit agreement and support working capital needs.

Summary

• Mountaineer Gas Company, a wholly-owned subsidiary of UGI Corporation, entered into a new credit agreement on May 16, 2025, with The Huntington National Bank as the administrative agent.
• The agreement provides a $150 million revolving credit facility, including a $20 million sublimit for letters of credit.
• Mountaineer has the option to increase the commitments by up to an additional $100 million, bringing the total potential facility to $250 million, subject to lender commitments and agreement terms.
• Borrowings under the agreement will bear interest at either a base rate or an adjusted term SOFR rate, plus an applicable margin based on Mountaineer's debt rating.
• The base rate is defined as the highest of the prime rate, the federal funds rate plus 0.50%, and the adjusted term SOFR rate for a one-month tenor plus 1%.
• The applicable margin for base rate loans ranges from 0% to 1.25%, and for SOFR loans from 1.00% to 2.25%, depending on Mountaineer's debt rating.
• The credit agreement matures on May 16, 2030, with options for Mountaineer to request extensions to May 16, 2031, and then to May 16, 2032, subject to lender consent and specified conditions.
• Mountaineer may voluntarily prepay borrowings without premium or penalty.
• The borrowings are unsecured, with obligations guaranteed by material subsidiaries of Mountaineer.
• Proceeds will be used to refinance existing debt, finance working capital, and for general corporate purposes.
• The agreement includes customary covenants, including financial covenants requiring a total debt to total capitalization ratio of not more than 0.65 to 1.00 and a Consolidated EBITDA to Consolidated Interest Expense ratio of not less than 2.00 to 1.00.
• Customary events of default are outlined, including nonpayment, incorrect representations, covenant breaches, cross-defaults, bankruptcy, and ERISA defaults.

Sentiment

Score: 7

Explanation: The document is a standard financial agreement announcement. The sentiment is neutral to positive as it secures financing for the company, but there are also risks and obligations associated with the agreement.

Positives

• The new credit agreement refinances Mountaineer's existing 2019 credit agreement.
• Mountaineer has the option to increase the commitments by up to $100 million, providing additional financial flexibility.
• Mountaineer may voluntarily prepay its borrowings under the Mountaineer Credit Agreement, in whole or in part, without any premium or penalty.

Negatives

• The borrowings under the Mountaineer Credit Agreement are unsecured, and the obligations under the Mountaineer Credit Agreement are guaranteed by any material subsidiaries of Mountaineer.

Risks

• The adjusted term SOFR rate is subject to replacement, which could impact interest rates.
• Mountaineer must abide by certain financial covenants, and failure to do so could trigger an event of default.
• Customary events of default are outlined, including nonpayment, incorrect representations, covenant breaches, cross-defaults, bankruptcy, and ERISA defaults.

Future Outlook

Mountaineer has the option to increase the commitments under the Mountaineer Credit Agreement by up to an additional $100 million, to a total of $250 million, upon the receipt of commitments from one or more lenders and subject to the terms and conditions of the Mountaineer Credit Agreement. Mountaineer has the option, with the consent of the lenders, to request extension of the maturity date to May 16, 2031, and then to May 16, 2032, upon fulfillment of specified conditions precedent.

Industry Context

In the utility sector, revolving credit facilities are commonly used to manage short-term liquidity needs, fund capital expenditures, and refinance existing debt. The terms of this agreement, including interest rates and financial covenants, are typical for companies with similar credit ratings in the industry.

Comparison to Industry Standards

• Comparable companies in the natural gas distribution sector, such as Atmos Energy Corporation and Southwest Gas Holdings, also utilize revolving credit facilities.
• Atmos Energy has a \$3.0 billion revolving credit facility maturing in 2026, used for general corporate purposes.
• Southwest Gas Holdings has a \$2.2 billion revolving credit facility, also used for general corporate purposes and acquisitions.
• The financial covenants in Mountaineer's credit agreement, such as the debt-to-capitalization and interest coverage ratios, are standard metrics used by lenders to assess the financial health and risk profile of utility companies.

Stakeholder Impact

• Shareholders: The refinancing provides financial stability and flexibility for Mountaineer Gas.
• Employees: The credit facility supports ongoing operations and job security.
• Customers: The financing helps ensure reliable service and infrastructure maintenance.
• Creditors: The new credit agreement establishes a clear framework for debt repayment.

Next Steps

• Mountaineer Gas will utilize the credit facility for refinancing existing debt and supporting working capital needs.
• Mountaineer Gas will need to comply with the financial covenants outlined in the agreement.
• Mountaineer Gas may consider exercising its option to increase the commitments or extend the maturity date in the future.

Key Dates

Keywords

credit agreement, Mountaineer Gas, UGI Corporation, refinancing, revolving credit, financial covenants, Huntington National Bank, debt