| Item 1.01 |
Entry into a Material Definitive Agreement. |
Credit Agreement
On February 17, 2022, Targa Resources Corp. (the “Company”) entered into the Credit Agreement (the “Credit Agreement”) with Bank of America, N.A., as the Administrative Agent, Collateral Agent and Swing Line Lender, and the other lenders party thereto. The Credit Agreement provides for a revolving credit facility in an initial aggregate principal amount up to $2,750,000,000 (with an option to increase such maximum aggregate principal amount by up to $500,000,000 in the future, subject to the terms of the Credit Agreement) and a swing line sub-facility of up to $100,000,000. The Credit Agreement matures on February 17, 2027.
The Credit Agreement provides for, among other things, certain changes to occur upon the occurrence of an “Investment Grade Event,” including the release of all security interests in all “Collateral” at the request of the Company.
The revolving credit facility bears interest at the Company’s option at: (a) the Base Rate, which is the highest of Bank of America’s prime rate, the federal funds rate plus 0.5% and the Term SOFR rate plus 1.0% (subject in each case to a floor of 0.0%), plus an applicable margin (i) prior to the occurrence of an Investment Grade Event, ranging from 0.25% to 1.25% dependent on the Company’s ratio of consolidated funded indebtedness to consolidated adjusted EBITDA (the “Consolidated Leverage Ratio”) and (ii) upon and after the occurrence of an Investment Grade Event, ranging from 0.125% to 0.75% dependent on the Company’s non-credit-enhanced senior unsecured long-term debt ratings (or, if no such debt is outstanding at such time, then the corporate, issuer or similar rating with respect to the Company that has been most recently announced) (the “Debt Rating”), or (b) Term SOFR plus an applicable margin (i) prior to the occurrence of an Investment Grade Event, ranging from 1.25% to 2.25% dependent on the Company’s Consolidated Leverage Ratio and (ii) upon and after the occurrence of an Investment Grade Event, ranging from 1.125% to 1.75% dependent on the Company’s Debt Rating.
The Company is required to pay a commitment fee equal to an applicable rate ranging from (a) prior to the occurrence of an Investment Grade Event, 0.20% to 0.35% (dependent on the Company’s Consolidated Leverage Ratio) and (b) upon and after the occurrence of an Investment Grade Event, 0.125% to 0.35% (dependent on the Company’s Debt Rating), in each case times the actual daily unused portion of the revolving credit facility.
The obligations under the Credit Agreement are guaranteed by substantially all material wholly-owned domestic subsidiaries of the Company, including by Targa Resources Partners LP and, prior to the occurrence of an Investment Grade Event, secured by substantially all personal property assets of, and certain material real property owned by, the Company and the guarantors.
The Credit Agreement requires the Company to maintain a Consolidated Leverage Ratio, determined as of the last day of each quarter for the four-fiscal quarter period ending on the date of determination, of no more than 5.50 to 1.00. Prior to the occurrence of an Investment Grade Event, the Credit Agreement also requires the Company to maintain an interest coverage ratio of no less than 2.25 to 1.00 determined as of the last day of each quarter for the four-fiscal quarter period ending on the date of determination. For any four-fiscal-quarter-period during which a material acquisition or disposition occurs, the total leverage ratio and interest coverage ratio (prior to the occurrence of an Investment Grade Event) will be determined on a pro forma basis as though such event had occurred as of the first day of such four-fiscal-quarter-period.
The Credit Agreement restricts the Company’s ability to make dividends to stockholders if a default or an event of default (as defined in the Credit Agreement) exists or would result from such distribution and if, before the Investment Grade Event, the Company is not in pro forma compliance with the financial covenants. In addition, the Credit Agreement contains various covenants that may limit, among other things, the Company’s ability to incur indebtedness, grant liens, make investments, repay or amend the terms of certain other indebtedness, merge or consolidate, sell assets, and engage in transactions with affiliates.
The description of the Credit Agreement is qualified in its entirety by reference to the Credit Agreement, a copy of which is filed as Exhibit 10.1 to this Form 8-K and is incorporated in this Item 1.01 by reference.