Item 1.01
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Entry into a Material Definitive Agreement.
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First Amendment to Credit Agreement
On June 29, 2018, Targa Resources Corp. (the Company) entered into the First Amendment to Credit Agreement (the First
Amendment) among the Company, the guarantors party thereto, the lenders party thereto, and Bank of America, N.A., as administrative agent and collateral agent. The First Amendment amends the terms of that certain Credit Agreement (the
Credit Agreement), dated as of February 27, 2015, among the Company, each lender from time to time party thereto and Bank of America, N.A. as administrative agent, collateral agent, swing line lender and letter of credit issuer.
Among other amendments to the Credit Agreement, the First Amendment (a) removes certain lenders from the Credit Agreement and includes other new lenders, (b) extends the maturity date of the revolving credit facility from February 26,
2020, to June 29, 2023, (c) memorializes the prior prepayment in full of term loans (the Term Loans) by the Company, (d) sets the applicable margin for Revolving Loans until the delivery of financial statements for the
quarter ending June 30, 2018 to, at the Companys option, 1.75% for LIBOR loans or 0.75% for base rate loans and (e) sets the commitment fee for Revolving Loans until the delivery of financial statements for the quarter ending
June 30, 2018 to 0.375%,
The foregoing description of the First Amendment is qualified in its entirety by reference to the First
Amendment, 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.
Certain of
the lenders or their respective affiliates have performed investment banking, financial advisory and commercial banking services for the Company and certain of the Companys affiliates, for which they have received customary compensation, and
they may continue to do so in the future. In addition, certain of the lenders or their respective affiliates hold positions in the Companys common stock.
Fourth Amended and Restated Credit Agreement
On June 29, 2018, Targa Resources Partners LP (the Partnership), a subsidiary of the Company, entered into the Third Amendment
and Restatement Agreement (the Restatement Agreement) to effectuate the Fourth Amended and Restated Credit Agreement (the Partnership Credit Agreement) with Bank of America, N.A., as Administrative Agent, Collateral Agent and
Swing Line Lender, and the lenders party thereto. The Partnership Credit Agreement amends and restates the Partnerships existing credit facility to provide for a revolving credit facility in an initial aggregate principal amount up to
$2,200,000,000 (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 Partnership Credit Agreement) and a swing line sub-facility of up to $100,000,000. The Partnership
Credit Agreement matures on June 29, 2023.
The Partnership 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 Partnership.
The revolving credit facility bears interest at the Partnerships option, at (a) the highest of Bank of Americas prime rate,
the federal funds rate plus 0.5% and the one-month LIBOR rate plus 1.0% (subject in each case to a floor of 0.0%), plus an applicable margin (i) before the collateral release date, ranging from 0.25% to 1.25% dependent on the Partnerships
ratio of consolidated funded indebtedness to consolidated adjusted EBITDA and (ii) upon and after the collateral release date, ranging from 0.125% to 0.75% dependent on the Partnerships non-credit-enhanced senior unsecured long-term debt
ratings, or (b) LIBOR plus an applicable margin (i) before the collateral release date, ranging from 1.25% to 2.25% dependent on the Partnerships ratio of consolidated funded indebtedness to consolidated adjusted EBITDA and
(ii) upon and after the collateral release date, ranging from 1.125% to 1.75% dependent on the Partnerships non-credit-enhanced senior unsecured long-term debt ratings.
The Partnership is required to pay a commitment fee equal to an applicable rate ranging from (a) before the collateral release date,
0.25% to 0.375% (dependent on the Partnerships ratio of consolidated funded indebtedness to consolidated adjusted EBITDA) and (b) upon and after the collateral release date, 0.125% to 0.35% (dependent on the Partnerships
non-credit-enhanced senior unsecured long-term debt ratings), in each case times the actual daily unused portion of the revolving credit facility.
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The Partnership Credit Agreement requires the Partnership to maintain a total leverage ratio (the
ratio of consolidated indebtedness to the Partnerships consolidated adjusted EBITDA, in each case as defined in the Partnership Credit Agreement), 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 (a) before the collateral release date, 5.50 to 1.00 and (b) upon and after the collateral release date, 5.25 to 1.00 (or 5.50 to 1.00 during a specified acquisition period). The Partnership Credit
Agreement generally removes the requirement that the Partnership maintain a maximum senior leverage ratio (the ratio of consolidated indebtedness, excluding indebtedness arising in connection with certain unsecured debt and debt under any permitted
receivables financing, to consolidated adjusted EBITDA) of no more than 4.00 to 1.00, except that the Partnership may not incur second lien indebtedness or consummate an acquisition of, or investment in, any unrestricted subsidiary that would cause
the Partnerships senior leverage ratio to exceed 4.00 to 1.00 and the Partnership may not redeem its preferred units if doing so would cause its senior leverage ratio to exceed 3.50 to 1.00. The Partnership Credit Agreement also requires the
Partnership 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 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 Partnership Credit Agreement restricts the Partnerships ability to make distributions of available cash to unitholders if a default
or an event of default (as defined in the Partnership Credit Agreement) exists or would result from such distribution. In addition, the Partnership Credit Agreement contains various covenants that may limit, among other things, the
Partnerships 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 (in each case, subject to the
Partnerships right to incur indebtedness or grant liens in connection with, and convey accounts receivable as part of, a permitted receivables financing, the aggregate principal of which shall not exceed $400,000,000).
The description of the Partnership Credit Agreement is qualified in its entirety by reference to the Partnership Credit Agreement, a copy of
which is attached as Exhibit A to the Restatement Agreement filed as Exhibit 10.2 to this Form 8-K and is incorporated in this Item 1.01 by reference.
Certain of the lenders or their respective affiliates have performed investment banking, financial advisory and commercial banking services
for the Partnership and certain of the Partnerships affiliates, for which they have received customary compensation, and they may continue to do so in the future. The Partnership has entered into derivative financial transactions with
affiliates of Bank of America, N.A., and certain of the other lenders on terms it believes to be customary in connection with these transactions.