Buckeye Partners Credit Agreement: What You Need to Know

Buckeye Partners, L.P. (BPL) is a publicly-traded master limited partnership (MLP) that operates in the midstream energy industry. The company provides logistics and storage services for petroleum products, natural gas liquids, and other bulk liquids. In 2019, BPL entered into a new credit agreement with its lenders, which replaced its previous credit facility. Here’s what you need to know about the Buckeye Partners credit agreement.

What is a Credit Agreement?

A credit agreement is a legal contract between a borrower and a group of lenders. The borrower agrees to borrow a specific amount of money, known as the “commitment,” and to pay interest on the loan at a predetermined rate. The credit agreement specifies the terms and conditions of the loan, including the repayment schedule, collateral, covenants, and events of default.

Buckeye Partners` New Credit Agreement

BPL’s new credit agreement, which was signed in September 2019, is a $1.75 billion facility with a five-year term. The facility is provided by a group of 27 banks and financial institutions, led by JPMorgan Chase, Wells Fargo, and Barclays.

The credit agreement includes several key features that are designed to provide BPL with financial flexibility and to protect the lenders’ interests. The facility includes a $500 million revolving credit line that BPL can draw upon as needed. The facility also includes a $750 million term loan that BPL used to refinance its existing debt.

One important feature of the credit agreement is the financial covenants that BPL must adhere to. For example, the company must maintain a certain level of net debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio and a certain level of interest coverage ratio. These covenants ensure that BPL remains financially stable and that the lenders are repaid on time.

Why is the Credit Agreement Important?

The credit agreement is important for several reasons. First, it provides BPL with access to capital that it can use to fund its operations and growth initiatives. Second, it gives the company financial flexibility, as it can draw upon the revolving credit line as needed. Third, it provides reassurance to investors and lenders that BPL has a solid financial foundation and is committed to managing its debt.

In addition, the credit agreement is important for BPL’s credit rating. Credit rating agencies, such as Moody’s and S&P, evaluate companies’ ability to repay their debt. A strong credit rating allows BPL to borrow at lower interest rates, which reduces its cost of capital and improves its financial performance.

Conclusion

The Buckeye Partners credit agreement is a critical component of the company’s financial strategy. By securing a $1.75 billion facility with a five-year term, BPL has access to capital that it can use to fund its operations and growth initiatives. The credit agreement also provides financial flexibility and reassures investors and lenders that BPL has a solid financial foundation. With the support of its lenders, BPL can continue to execute on its strategic vision and achieve long-term success in the midstream energy industry.