| Item 1.01 | Entry into a Material Definitive Agreement. |
On April 8, 2022, Holly Energy Partners, L.P. (the “Partnership”) and Holly Energy Finance Corp. (“Finance Corp.” and, together with the Partnership, the “Issuers”) issued $400 million aggregate principal amount of 6.375% senior notes due 2027 (the “Notes”) in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended (the “Securities Act”). The Notes were issued at par for net proceeds of approximately $393 million, after deducting the initial purchasers’ discounts and commissions and estimated offering expenses. The Partnership intends to use the net proceeds from the offering of the Notes to partially repay outstanding borrowings under its revolving credit agreement.
The Notes are governed by an Indenture, dated as of April 8, 2022 (the “Indenture”), entered into by the Issuers and certain subsidiary guarantors named therein (the “Guarantors”) with U.S. Bank Trust Company, National Association, as trustee (the “Trustee”). The Notes will mature on April 15, 2027. Interest on the Notes is payable semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2022. The Notes are guaranteed on a senior unsecured basis by certain of the Partnership’s subsidiaries.
On and after April 15, 2024, the Issuers may on any one or more occasions redeem all or part of the Notes at the redemption prices (expressed as percentages of principal amount) set forth below, plus any accrued and unpaid interest to the applicable redemption date on such Notes, if redeemed during the periods indicated below:
| | | | |
Period | | Percentage | |
2024 | | | 103.188 | % |
2025 | | | 101.594 | % |
2026 and thereafter | | | 100.000 | % |
At any time prior to April 15, 2024, the Issuers may on any one or more occasions redeem up to 40% of the aggregate principal amount of the Notes issued under the Indenture in an amount not greater than the net proceeds of a public equity offering at a redemption price of 106.375% of the principal amount of the Notes, plus any accrued and unpaid interest to the date of redemption, provided that: (1) at least 60% of the aggregate principal amount of the Notes issued under the Indenture (excluding notes held by the Partnership and its subsidiaries) remains outstanding immediately after the occurrence of each such redemption; and (2) the redemption occurs within 180 days of the date of closing of such public equity offering.
Prior to April 15, 2024, the Issuers may on any one or more occasions redeem all or part of the Notes at a redemption price equal to the sum of: (1) the principal amount thereof, plus (2) the “make-whole” premium, as defined in the Indenture, at the redemption date, plus any accrued and unpaid interest to the redemption date.
The Indenture contains covenants that, among other things, restrict the Partnership’s ability and the ability of certain of its subsidiaries to: (i) incur additional indebtedness; (ii) incur certain liens; (iii) pay distributions or dividends on equity securities, or purchase, redeem or otherwise acquire equity securities or redeem subordinated indebtedness; (iv) make investments; (v) restrict dividends, loans or other asset transfers from its restricted subsidiaries; (vi) consolidate with or merge with or into, or sell substantially all of its assets to, another person; (vii) sell or otherwise dispose of assets, including equity interests in subsidiaries; and (viii) enter into transactions with affiliates. These covenants are subject to important exceptions and qualifications. However, at any time when the Notes are rated investment grade by either of Moody’s Investors Service, Inc. or S&P Global Ratings and no Default or Event of Default, each as defined in the Indenture, has occurred and is continuing, many of these covenants will be suspended.
Upon the occurrence of certain change of control events, as defined in the Indenture, each holder of the Notes will have the right to require that the Partnership repurchase all or a portion of such holder’s Notes in cash at a purchase price equal to 101% of the aggregate principal amount thereof, plus any accrued and unpaid interest to the date of repurchase.
The foregoing description of the Indenture is qualified in its entirety by reference to the full text of the Indenture, a copy of which is filed as Exhibit 4.1 to this report and is incorporated herein by reference.
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