DEBT | 12 Months Ended |
Dec. 31, 2013 |
Debt Disclosure [Abstract] | ' |
DEBT | ' |
DEBT |
|
On June 28, 2013, the Partnership entered into an amended and restated credit agreement which consists of a $400.0 million revolving loan facility. As of March 10, 2014, approximately $277.0 million of revolver borrowings and $0.5 million of letters of credit were outstanding under the credit facility, leaving the Partnership with approximately $122.5 million available capacity for additional revolver borrowings and letters of credit under the credit facility, although the Partnership’s ability to borrow such funds may be limited by the financial covenants in the credit facility. In connection with entering into the amended and restated credit agreement, the Partnership paid certain upfront fees to the lenders thereunder, and the Partnership paid certain arrangement and other fees to the arranger and administrative agent of the credit agreement. The proceeds of loans made under the amended and restated credit agreement may be used for working capital and other general corporate purposes of the Partnership. All references herein to the credit agreement on or after June 28, 2013 refer to the amended and restated credit agreement. |
|
The credit agreement is guaranteed by all of the Partnership’s existing subsidiaries (other than immaterial subsidiaries). Obligations under the credit agreement are secured by first priority liens on substantially all of the Partnership’s assets and those of the guarantors, including all material pipeline, gathering and processing assets, all material storage tanks and asphalt facilities, all material working capital assets and a pledge of all of the Partnership’s equity interests in its subsidiaries. |
|
The credit agreement includes procedures for additional financial institutions to become revolving lenders, or for any existing lender to increase its revolving commitment thereunder, subject to an aggregate maximum of $500.0 million for all revolving loan commitments under the credit agreement. |
|
The credit agreement will mature on June 28, 2018, and all amounts outstanding under the credit agreement will become due and payable on such date. The Partnership may prepay all loans under the credit agreement at any time without premium or penalty (other than customary LIBOR breakage costs), subject to certain notice requirements. The credit agreement requires mandatory prepayments of amounts outstanding thereunder with the net proceeds of certain asset sales, property or casualty insurance claims, and condemnation proceedings, unless the Partnership reinvests such proceeds in accordance with the credit agreement, but these mandatory prepayments will not require any reduction of the lenders' commitments under the credit agreement. |
|
Borrowings under the credit agreement bear interest, at the Partnership’s option, at either the reserve-adjusted eurodollar rate (as defined in the credit agreement) plus an applicable margin that ranges from 2.0% to 3.0% or the alternate base rate (the highest of the agent bank’s prime rate, the federal funds effective rate plus 0.5%, and the 30-day eurodollar rate plus 1%) plus an applicable margin that ranges from 1.0% to 2.0%. The Partnership pays a per annum fee on all letters of credit issued under the credit agreement, which fee equals the applicable margin for loans accruing interest based on the eurodollar rate, and the Partnership pays a commitment fee ranging from 0.375% to 0.5% on the unused commitments under the credit agreement. The credit agreement does not have a floor for the alternate base rate or the eurodollar rate. The applicable margins for the Partnership’s interest rate, the letter of credit fee and the commitment fee vary quarterly based on the Partnership’s consolidated total leverage ratio (as defined in the credit agreement, being generally computed as the ratio of consolidated total debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges). |
|
The credit agreement includes financial covenants that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter. |
|
The maximum permitted consolidated total leverage ratio is 4.50 to 1.00, provided that the maximum permitted consolidated total leverage ratio is 5.00 to 1.00 from and after (i) the last day of the fiscal quarter immediately preceding the fiscal quarter in which a specified acquisition (as defined in the credit agreement) occurs to and including the last day of the second full fiscal quarter following the fiscal quarter in which such specified acquisition occurred and (ii) the date on which the Partnership issues qualified senior notes (as defined in the credit agreement, but generally being unsecured indebtedness with no required principal payments prior to June 28, 2019) in an aggregate principal amount (when combined with all other qualified senior notes previously or concurrently issued) that equals or exceeds $200.0 million. |
The maximum permitted consolidated senior secured leverage ratio (as defined in the credit agreement, but generally computed as the ratio of consolidated total secured debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges) is 3.50 to 1.00, but this covenant is only tested from and after the date on which the Partnership issues qualified senior notes in an aggregate principal amount (when combined with all other qualified senior previously or concurrently issued) that equals or exceeds $200.0 million. |
|
The minimum permitted consolidated interest coverage ratio (as defined in the credit agreement, but generally computed as the ratio of consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges to consolidated interest expense) is 2.50 to 1.00. |
In addition, the credit agreement contains various covenants that, among other restrictions, limit the Partnership’s ability to: |
| |
• | create, issue, incur or assume indebtedness; |
| |
• | create, incur or assume liens; |
| |
• | engage in mergers or acquisitions; |
| |
• | sell, transfer, assign or convey assets; |
| |
• | repurchase the Partnership’s equity, make distributions to unitholders and make certain other restricted payments; |
| |
• | make investments; |
| |
• | modify the terms of certain indebtedness, or prepay certain indebtedness; |
| |
• | engage in transactions with affiliates; |
| |
• | enter into certain hedging contracts; |
| |
• | enter into certain burdensome agreements; |
| |
• | change the nature of the Partnership’s business; |
| |
• | enter into operating leases; and |
| |
• | make certain amendments to the Partnership’s partnership agreement. |
|
At December 31, 2013, the Partnership’s consolidated total leverage ratio was 3.63 to 1.00 and the consolidated interest coverage ratio was 7.80 to 1.00. The Partnership was in compliance with all covenants of its credit agreement as of December 31, 2013. |
|
The credit agreement permits the Partnership to make quarterly distributions of available cash (as defined in the Partnership’s partnership agreement) to unitholders so long as no default or event of default exists under the credit agreement on a pro forma basis after giving effect to such distribution. The Partnership is currently allowed to make distributions to its unitholders in accordance with this covenant; however, the Partnership will only make distributions to the extent it has sufficient cash from operations after establishment of cash reserves as determined by the Board of Directors (the “Board”) of Blueknight Energy Partners G.P., L.L.C. (the “General Partner”) in accordance with the Partnership’s cash distribution policy, including the establishment of any reserves for the proper conduct of the Partnership’s business. See Note 10 for additional information regarding distributions. |
|
Each of the following is an event of default under the credit agreement: |
| |
• | failure to pay any principal, interest, fees, expenses or other amounts when due; |
| |
• | failure to meet the quarterly financial covenants; |
| |
• | failure to observe any other agreement, obligation or covenant in the credit agreement or any related loan document, subject to cure periods for certain failures; |
| |
• | the failure of any representation or warranty to be materially true and correct when made; |
| |
• | the Partnership’s, or any of its restricted subsidiaries,’ default under other indebtedness that exceeds a threshold amount; |
| |
• | judgments against the Partnership or any of its restricted subsidiaries, in excess of a threshold amount; |
| |
• | certain ERISA events involving the Partnership or its restricted subsidiaries resulting in a material adverse effect on the Partnership; |
| |
• | bankruptcy or other insolvency events involving the General Partner, the Partnership or any of its restricted subsidiaries; and |
| |
• | a change of control (as defined in the credit agreement, but generally being (i) the General Partner ceasing to own 100% of the Partnership’s general partner interest or ceasing to control the Partnership, or (ii) Vitol Holding B.V. (together with its affiliates, “Vitol”) and Charlesbank Capital Partners, LLC (together with its affiliates, “Charlesbank”) ceasing to collectively own and control 50.0% or more of the membership interests of the General Partner). |
|
If an event of default relating to bankruptcy or other insolvency events occurs with respect to the General Partner or the Partnership, all indebtedness under the credit agreement will immediately become due and payable. If any other event of default exists under the credit agreement, the lenders may accelerate the maturity of the obligations outstanding under the credit agreement and exercise other rights and remedies. In addition, if any event of default exists under the credit agreement, the lenders may commence foreclosure or other actions against the collateral. |
|
If any default occurs under the credit agreement, or if the Partnership is unable to make any of the representations and warranties in the credit agreement, the Partnership will be unable to borrow funds or have letters of credit issued under the credit agreement. |
|
Upon the execution of the amended and restated credit agreement, the Partnership expensed $1.8 million of debt issuance costs related to the extinguished term loan, and the Partnership expensed $0.2 million in debt issuance costs related to its revolving loan facility, leaving a remaining balance of $0.5 million ascribed to those lenders with commitments under both the prior and the amended and restated credit facility. During the twelve months ended December 31, 2013, the Partnership capitalized debt issuance costs of $0.2 million related to the prior credit facility and $3.4 million related to the current credit facility. The Partnership did not incur any debt issuance costs in the twelve months ended December 31, 2012. The debt issuance costs are being amortized over the term of the amended and restated credit agreement. Interest expense related to debt issuance cost amortization for the twelve months ended December 31, 2011, 2012 and 2013 was $2.0 million, $1.8 million and $3.3 million, respectively. |
|
During the twelve months ended December 31, 2011, 2012 and 2013, the weighted average interest rate under the Partnership's credit agreement, excluding the $2.0 million of debt issuance costs related to the prior credit facility that was expensed in the twelve months ended December 31, 2013, was 5.38%, 5.22% and 5.99%, respectively, resulting in interest expense of approximately $12.8 million, $11.3 million and $10.7 million, respectively. As of December 31, 2013, borrowings under the Partnership’s amended and restated credit agreement bore interest at a weighted average interest rate of 3.42%. |
|
During the twelve months ended December 31, 2011 2012 and 2013, the Partnership capitalized interest of less than $0.1 million, $0.2 million and $1.0 million, respectively. |