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Item 1.01.
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Entry into a Material Definitive Agreement.
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On October 17, 2019 (the “Closing Date”), Energy Transfer Operating, L.P. (“ETO”) entered into a term loan credit agreement providing for a $2 billion three-year term loan credit facility (the “Term Loan Agreement”) with Toronto Dominion (Texas) LLC, as Administrative Agent, the other lenders party thereto and the other parties named therein. Borrowings under the Term Loan Agreement mature on October 17, 2022 and are available for working capital purposes and for general business purposes.
The Term Loan Agreement will be unsecured and will be guaranteed by Sunoco Logistics Partners Operations L.P. (the “Term Loan Agreement Guaranty”). The Term Loan Agreement Guaranty will remain in effect until such time as the execution and delivery to the Administrative Agent of appropriate documentation pursuant to which, when taken as a whole, ETO will acquire substantially all of the assets and assume substantially all of the liabilities of Sunoco Logistics Partners Operations L.P.
Borrowings under the Term Loan Agreement will bear interest at a eurodollar rate or a base rate, at ETO’s option, plus an applicable margin. The applicable margin and applicable rate used in connection with the interest rates are based on the credit ratings assigned to the senior, unsecured, non-credit enhanced long-term debt of ETO. The applicable margin for eurodollar rate loans ranges from 0.625%% to 1.500% for months 1-24 after the Closing Date and from 1.000% to 1.875% for months 25-36 after the Closing Date and the applicable margin for base rate loans ranges from 0.000% to 0.500% for months 1-24 after the Closing Date and from 0.000% to 0.875% for months 25-36 after the Closing Date.
The Term Loan Agreement contains customary representations, warranties and covenants, including limitations on incurrence of liens, new lines of business, mergers, transactions with affiliates and restrictive agreements. The Term Loan Agreement also includes covenants limiting, as of the last day of each fiscal quarter, the ratio of the Consolidated Funded Indebtedness (as defined in the Term Loan Agreement) to the Consolidated EBITDA (as defined in the Term Loan Agreement), in each case of ETO and its subsidiaries, measured for the preceding twelve months, to not more than 5.00 to 1.00. This requirement is subject to a provision for increases to 5.50 to 1.00 in connection with certain acquisitions. In addition, the Term Loan Agreement contains customary events of default, including, but not limited to, (i) default for failure to pay the principal on any loan when due and payable, (ii) failure to duly observe, perform or comply with certain specified covenants, (iii) a representation or warranty made in connection with any loan document proves to have been false or incorrect in any material respect on any date on or as of which made, and (iv) the occurrence of a change of control.
Concurrently with the execution of the Term Loan Agreement, ETO paid customary fees and other expenses relating to the Term Loan Agreement.
The foregoing descriptions of the Term Loan Agreement and the Term Loan Agreement Guaranty do not purport to be complete and are qualified in their entirety by reference to the Term Loan Agreement and the Term Loan Agreement Guaranty, which are attached hereto as Exhibits 10.1 and 10.2 and are incorporated herein by reference.