HollyFrontier 2013 Annual Report Download - page 49

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41
HEP Credit Agreement
HEP has a $650 million senior secured revolving credit facility that matures in November 2018 (the “HEP Credit Agreement”)
and is available to fund capital expenditures, investments, acquisitions, distribution payments and working capital and for general
partnership purposes. It is also available to fund letters of credit up to a $50 million sub-limit. At December 31, 2013, HEP was
in compliance with all of its covenants, had outstanding borrowings of $363.0 million and no outstanding letters of credit under
the HEP Credit Agreement.
Indebtedness under the HEP Credit Agreement bears interest, at their option, at either a reference rate announced by the
administrative agent plus an applicable margin or at a rate equal to LIBOR plus an applicable margin. In each case, the applicable
margin is based upon the ratio of HEP’s funded debt to earnings before interest, taxes, depreciation and amortization (as defined
in the HEP Credit Agreement). The interest rates in effect on HEP’s Credit Agreement borrowings were 2.163% and 2.456% at
December 31, 2013 and 2012, respectively.
HEP’s obligations under the HEP Credit Agreement are collateralized by substantially all of HEP’s assets (presented parenthetically
in our consolidated balance sheets). Indebtedness under the HEP Credit Agreement involves recourse to HEP Logistics Holdings,
L.P., its general partner, and is guaranteed by HEP’s wholly-owned subsidiaries. Any recourse to the general partner would be
limited to the extent of HEP Logistics Holdings, L.P.’s assets, which other than its investment in HEP, are not significant. HEP’s
creditors have no recourse to our other assets. Furthermore, our creditors have no recourse to the assets of HEP and its consolidated
subsidiaries.
HollyFrontier Senior Notes
Our 6.875% senior notes ($150.0 million principal amount maturing November 2018) (the “HollyFrontier Senior Notes”) are
unsecured and impose certain restrictive covenants, including limitations on our ability to incur additional debt, incur liens, enter
into sale-and-leaseback transactions, pay dividends, enter into mergers, sell assets and enter into certain transactions with affiliates.
Additionally, we have certain redemption rights under the HollyFrontier Senior Notes.
At any time, following notice to the trustee, that the HollyFrontier Senior Notes are rated investment grade by both Moody's and
Standard & Poor's and no default or event of default exists, we are not subject to many of the foregoing covenants (a "Covenant
Suspension"). As of December 31, 2013, the HollyFrontier Senior Notes were rated investment grade (BBB-) by Standard & Poor's
and also investment grade (Baa3) by Moody's. As a result, we are under the Covenant Suspension pursuant to the terms of the
indenture governing the HollyFrontier Senior Notes.
In June 2013, we redeemed our $286.8 million aggregate principal amount of 9.875% senior notes maturing June 2017.
HollyFrontier Financing Obligation
We have a financing obligation that relates to a sale and lease-back of certain crude oil tankage that we sold to an affiliate of Plains
All American Pipeline, L.P. (“Plains”) in October 2009 for $40.0 million. Monthly lease payments are recorded as a reduction in
principal over the 15-year lease term ending in 2024.
HEP Senior Notes
HEP’s senior notes consist of the following:
• 8.25% HEP senior notes ($150 million principal amount maturing March 2018)
• 6.5% HEP senior notes ($300 million principal amount maturing March 2020)
The 8.25% and 6.5% HEP senior notes (collectively, the “HEP Senior Notes”) are unsecured and impose certain restrictive
covenants, including limitations on HEP’s ability to incur additional indebtedness, make investments, sell assets, incur certain
liens, pay distributions, enter into transactions with affiliates, and enter into mergers. At any time when the HEP Senior Notes are
rated investment grade by both Moody’s and Standard & Poor’s and no default or event of default exists, HEP will not be subject
to many of the foregoing covenants. Additionally, HEP has certain redemption rights under the HEP Senior Notes. On February
12, 2014, HEP announced that it will redeem all of its outstanding 8.25% senior notes. The redemption price will be equal to
104.125% of the principal amount for a total payment to the holders of the notes of approximately $156.2 million plus accrued
interest. The redemption of the 8.25% senior notes is scheduled to occur on March 15, 2014. HEP plans to fund the redemption
with borrowings under the HEP Credit Agreement.
Indebtedness under the HEP Senior Notes involves recourse to HEP Logistics Holdings, L.P., its general partner, and is guaranteed
by HEP’s wholly-owned subsidiaries. However, any recourse to the general partner would be limited to the extent of HEP Logistics
Holdings, L.P.’s assets, which other than its investment in HEP, are not significant. HEP’s creditors have no other recourse to our
assets. Furthermore, our creditors have no recourse to the assets of HEP and its consolidated subsidiaries.
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