| Item 1.01 | Entry into a Material Definitive Agreement. |
Inventory Intermediation Agreement
On December 22, 2022, DK Trading & Supply, LLC (“DKTS”), an indirect subsidiary of Delek US Holdings, Inc. (the “Company”), acting on behalf of, and jointly and severally liable with, each of (i) Lion Oil Company, LLC (“Lion Oil”), (ii) Alon Refining Krotz Springs, Inc. (“ARKS”) and (iii) Alon USA, LP (“Alon” and together with each of Lion Oil and ARKS, the “Refinery Companies” and each a “Refinery Company”) entered into an inventory intermediation agreement (the “Inventory Intermediation Agreement”) with Citigroup Energy Inc. (“Citi”). Pursuant to the Inventory Intermediation Agreement, Citi will (i) purchase from and sell to DKTS crude oil and other petroleum feedstocks in connection with processing operations at certain refineries, (ii) purchase from and sell to DKTS all refined products produced by such refineries other than certain excluded products and (iii) in connection with such purchases and sales, DKTS will enter into certain market risk hedges in each case, on the terms and subject to the conditions set forth therein.
The Inventory Intermediation Agreement results in up to $800 million of working capital capacity for DKTS. The Inventory Intermediation Agreement has a term of 24 months, subject to extension by Citi for an additional 12 months. The Inventory Intermediation Agreement replaces the agreements described in Item 1.02 below, which agreements are scheduled to expire on December 30, 2022.
The foregoing description of the Inventory Intermediation Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Inventory Intermediation Agreement attached hereto as Exhibit 10.1 and incorporated herein by reference.
Pledge and Security Agreement
On December 22, 2022, in connection with entry into the Inventory Intermediation Agreement, DKTS and Citi entered into a pledge and security agreement (the “Pledge and Security Agreement”), pursuant to which DKTS agreed to grant to Citi, effective December 30, 2022 subject to certain conditions precedent, (i) in the case any transaction for the sale, assignment, delivery and transfer of ownership of the hydrocarbons pursuant to the Inventory Intermediation Agreement is found not be a true sale, a security interest in certain crude oil, refined petroleum products and other hydrocarbons at certain locations and (ii) a security interest in all business interruption insurance associated with the hydrocarbons sold.
The foregoing description of the Pledge and Security Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Pledge and Security Agreement attached hereto as Exhibit 10.2 and incorporated herein by reference.
Amendment to ABL Credit Agreement
On December 22, 2022, in connection with entry into the Inventory Intermediation Agreement, the Company entered into Amendment No. 1 (the “First Amendment”) to its Third Amended and Restated Credit Agreement (the “ABL Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent, the Company, as borrower, certain subsidiaries of the Company, as guarantors, and the other lenders party thereto. The First Amendment amended the ABL Credit Agreement to include the rights of business interruption insurance as collateral with respect to the Inventory Intermediation Agreements and any future intermediation arrangements.
The foregoing description of the First Amendment to the ABL Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Pledge and Security Agreement attached hereto as Exhibit 10.3 and incorporated herein by reference.
