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Debt Obligations
6 Months Ended
Jun. 30, 2022
Debt Disclosure [Abstract]  
Debt Obligations

Note 7 — Debt Obligations

 

 

 

June 30, 2022

 

 

December 31, 2021

 

Current:

 

 

 

 

 

 

 

 

Partnership accounts receivable securitization facility, due April 2023 (1)

 

$

400.0

 

 

$

150.0

 

Finance lease liabilities

 

 

14.6

 

 

 

12.8

 

Current debt obligations

 

 

414.6

 

 

 

162.8

 

 

 

 

 

 

 

 

 

 

Long-term:

 

 

 

 

 

 

 

 

TRGP senior revolving credit facility, variable rate, due February 2027 (2)

 

 

550.0

 

 

 

 

Senior unsecured notes issued by TRGP:

 

 

 

 

 

 

 

 

4.200% fixed rate, due February 2033

 

 

750.0

 

 

 

 

Unamortized discount

 

 

(1.4

)

 

 

 

4.950% fixed rate, due April 2052

 

 

750.0

 

 

 

 

Unamortized discount

 

 

(5.0

)

 

 

 

Senior unsecured notes issued by the Partnership: (3)

 

 

 

 

 

 

 

 

5.875% fixed rate, due April 2026 (4)

 

 

 

 

 

963.2

 

5.375% fixed rate, due February 2027 (5)

 

 

 

 

 

468.1

 

6.500% fixed rate, due July 2027

 

 

705.2

 

 

 

705.2

 

5.000% fixed rate, due January 2028

 

 

700.3

 

 

 

700.3

 

6.875% fixed rate, due January 2029

 

 

679.3

 

 

 

679.3

 

5.500% fixed rate, due March 2030

 

 

949.6

 

 

 

949.6

 

4.875% fixed rate, due February 2031

 

 

1,000.0

 

 

 

1,000.0

 

4.000% fixed rate, due January 2032

 

 

1,000.0

 

 

 

1,000.0

 

 

 

 

7,078.0

 

 

 

6,465.7

 

Debt issuance costs, net of amortization

 

 

(51.4

)

 

 

(45.0

)

Finance lease liabilities

 

 

19.6

 

 

 

13.7

 

Long-term debt (6)

 

 

7,046.2

 

 

 

6,434.4

 

Total debt obligations

 

$

7,460.8

 

 

$

6,597.2

 

Irrevocable standby letters of credit: (2)

 

 

 

 

 

 

 

 

Letters of credit outstanding under the TRGP senior revolving credit facility

 

$

44.8

 

 

$

 

Letters of credit outstanding under the Partnership senior

   secured revolving credit facility

 

 

 

 

 

71.3

 

 

 

$

44.8

 

 

$

71.3

 

 

(1)

As of June 30, 2022, the Partnership had $400.0 million of qualifying receivables under its $400.0 million accounts receivable securitization facility (“Securitization Facility”), resulting in zero availability.

(2)

In February 2022, we entered into a new $2.75 billion TRGP senior revolving credit facility, (the “TRGP Revolver”) which matures in February 2027. In connection with our entry into the TRGP Revolver, we terminated our previous TRGP senior secured revolving credit facility (the “Previous TRGP Revolver”) and the Partnership’s senior secured revolving credit facility (the “Partnership Revolver”). As of June 30, 2022, availability under the TRGP Revolver was $2.2 billion. As of December 31, 2021, we had no balance outstanding under the Previous TRGP Revolver or the Partnership Revolver.

(3)

As of February 2022, we guarantee all of the Partnership’s outstanding senior unsecured notes.

(4)

In April 2022, the Partnership redeemed all of the outstanding 5.875% Senior Notes due 2026 (the “5.875% Notes”).

(5)

In March 2022, the Partnership redeemed all of the outstanding 5.375% Senior Notes due 2027 (the “5.375% Notes”) with the available liquidity under the TRGP Revolver.

(6)

In July 2022, we completed an underwritten public offering of (i) $750.0 million aggregate principal amount of our 5.200% Senior Notes due 2027 (the “5.200% Notes”) and (ii) $500.0 million aggregate principal amount of our 6.250% Senior Notes due 2052 (the “6.250% Notes”), resulting in net proceeds of approximately $1.2 billion.

 

The following table shows the range of interest rates and weighted average interest rate incurred on our variable-rate debt obligations during the six months ended June 30, 2022:

 

 

 

Range of Interest Rates Incurred

 

Weighted Average Interest Rate Incurred

 

TRGP Revolver

 

1.5% - 3.1%

 

2.1%

 

Securitization Facility

 

1.1% - 1.7%

 

1.4%

 

 

 

Compliance with Debt Covenants

 

As of June 30, 2022, we were in compliance with the covenants contained in our various debt agreements.

 

In February 2022, we and certain of our subsidiaries entered into a parent guarantee whereby each party to the agreement unconditionally guarantees, jointly and severally, the payment of all of the obligations of the Partnership and Targa Resources Partners Finance Corporation (together with the Partnership, the “Partnership Issuers”) under the respective indentures governing the Partnership Issuers’ senior unsecured notes. As of June 30, 2022, $5.0 billion of the Partnership Issuers’ senior unsecured notes was outstanding.

 

Debt Obligations

 

TRGP Revolver

In February 2022, we entered into the TRGP Revolver with Bank of America, N.A., as the Administrative Agent, Collateral Agent and Swing Line Lender, and the other lenders party thereto. The TRGP Revolver provides for a revolving credit facility in an initial aggregate principal amount up to $2.75 billion (with an option to increase such maximum aggregate principal amount by up to $500.0 million in the future, subject to the terms of the TRGP Revolver), including a swing line sub-facility of up to $100.0 million. The TRGP Revolver matures on February 17, 2027. In connection with our entry into the TRGP Revolver, we terminated the Previous TRGP Revolver and the Partnership Revolver. In February 2022, TRGP and the Partnership received a corporate investment grade credit rating from Standard & Poor’s Financial Services LLC (“S&P”) and Fitch Ratings Inc., and in March 2022, the Partnership received a corporate investment grade credit rating from Moody’s Investors Service, Inc. (“Moody’s”). As a result, in accordance with the TRGP Revolver, the collateral under the TRGP Revolver was released from the liens securing our obligations thereunder. As a result of the termination of the Previous TRGP Revolver and the Partnership Revolver, we recorded a loss due to debt extinguishment of $0.8 million.

 

Partnership’s Accounts Receivable Securitization Facility

 

In April 2022, the Partnership amended the Securitization Facility to, among other things, extend the facility termination date to April 19, 2023 and replace the LIBOR-based interest rate option with SOFR-based interest rate options, including term SOFR and daily simple SOFR.

 

Senior Unsecured Notes Redemptions and Issuances

 

In March 2022, the Partnership redeemed all of the outstanding 5.375% Notes at a redemption price equal to $1,026.88 for each $1,000 principal amount of 5.375% Notes redeemed, plus accrued and unpaid interest to, but not including, March 30, 2022, or a maximum combined aggregate redemption price (exclusive of accrued and unpaid interest) of $480.7 million. The 5.375% Notes were redeemed with available liquidity under the TRGP Revolver. As a result of the redemption of the 5.375% Notes, we recorded a loss due to debt extinguishment of $15.0 million comprised of $12.6 million of premiums paid and a write-off of $2.4 million of debt issuance costs.

 

In April 2022, we completed an underwritten public offering of (i) $750.0 million aggregate principal amount of our 4.200% Senior Notes due 2033 (the “4.200% Notes”) and (ii) $750.0 million aggregate principal amount of our 4.950% Senior Notes due 2052 (the “4.950% Notes”), resulting in net proceeds of approximately $1.5 billion. The 4.200% Notes and the 4.950% Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by our subsidiaries that guarantee the TRGP Revolver, so long as such subsidiary guarantors satisfy certain conditions. The 4.200% Notes and the 4.950% Notes were issued pursuant to the Indenture, dated as of April 6, 2022, as supplemented by that certain First Supplemental Indenture, dated as of April 6, 2022, among us, such subsidiary guarantors and U.S. Bank Trust Company, National Association, as trustee.

 

A portion of the net proceeds from the issuance was used to fund the concurrent cash tender offer (the “March Tender Offer”) and the subsequent redemption payment of the Partnership’s 5.875% Notes, with the remainder of the net proceeds used for repayment of the outstanding borrowings under the TRGP Revolver. As a result of the March Tender Offer and the subsequent redemption of the 5.875% Notes, we recorded a loss due to debt extinguishment of $33.8 million comprised of $29.3 million of premiums paid and a write-off of $4.5 million of debt issuance costs.

 

In the future, we or the Partnership may redeem, purchase or exchange certain of our and the Partnership’s outstanding debt through redemption calls, cash purchases and/or exchanges for other debt, in open market purchases, privately negotiated transactions or otherwise. Such calls, repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

 

Shelf Registration

 

In March 2022, we filed with the SEC a universal shelf registration statement on Form S-3 that registers the issuance and sale of certain debt and equity securities from time to time in one or more offerings (the “March 2022 Shelf”). The March 2022 Shelf will expire in March 2025. See Note 10 – Common Stock and Related Matters.

 

Contractual Obligations

 

The following table summarizes payment obligations as of June 30, 2022, for debt instruments after giving effect to the debt extinguishments detailed above:

 

 

Payments Due By Period

 

 

 

 

 

 

 

Less Than

 

 

 

 

 

 

 

 

 

 

More Than

 

 

 

Total

 

 

1 Year

 

 

1-3 Years

 

 

3-5 Years

 

 

5 Years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt obligations (1)

 

$

7,084.4

 

 

$

 

 

$

 

 

$

550.0

 

 

$

6,534.4

 

Interest on debt obligations (2)

 

 

1,936.8

 

 

 

268.5

 

 

 

537.1

 

 

 

537.1

 

 

 

594.1

 

 

 

$

9,021.2

 

 

$

268.5

 

 

$

537.1

 

 

$

1,087.1

 

 

$

7,128.5

 

 

(1)

Represents scheduled future maturities of consolidated debt obligations for the periods indicated.

(2)

Represents interest expense on debt obligations based on both fixed debt interest rates and prevailing June 30, 2022 rates for floating debt.

 

Subsequent Events

 

Senior Unsecured Notes Issuances

 

In July 2022, we completed an underwritten public offering of (i) $750.0 million in aggregate principal amount of our 5.200% Notes and (ii) $500.0 million in aggregate principal amount of our 6.250% Notes, resulting in net proceeds of approximately $1.2 billion. The 5.200% Notes and the 6.250% Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by our subsidiaries that guarantee the TRGP Revolver, so long as such subsidiary guarantors satisfy certain conditions. The 5.200% Notes and the 6.250% Notes were issued pursuant to the Indenture, dated as of April 6, 2022, as supplemented by that certain Third Supplemental Indenture, dated as of July 7, 2022, among us, such subsidiary guarantors and U.S. Bank Trust Company, National Association, as trustee. We used the net proceeds from the issuance to fund a portion of the Lucid Acquisition.

 

Term Loan Facility

 

In July 2022, we entered into the Term Loan Agreement with Mizuho Bank, Ltd. (“Mizuho”) as the Administrative Agent and a lender, and other lenders party thereto (the “Term Loan Facility”). The Term Loan Facility provides for a three-year, $1.5 billion unsecured term loan facility. The Term Loan Facility matures in July 2025. We used the proceeds from the Term Loan Facility to fund a portion of the Lucid Acquisition.

 

The Term Loan Facility bears interest at the Company’s option at: (a) the Base Rate (as defined in the Term Loan Facility), which is the highest of the (i) federal funds rate plus 0.5%, (ii) Mizuho’s prime rate, and (iii) the Term SOFR (as defined in the Term Loan Facility) rate plus 1.0% (subject in each case to a floor of 0.0%), plus an applicable margin ranging from 0.125% to 0.75% dependent on the Company’s non-credit-enhanced senior unsecured long-term debt ratings (or, if no such debt is outstanding at such time, then the corporate, issuer or similar rating with respect to the Company that has been most recently announced) (the “Debt Rating”), or (b) Term SOFR plus 0.10% plus an applicable margin ranging from 1.125% to 1.75% dependent on the Debt Rating.

 

Our obligations under the Term Loan Facility are guaranteed by substantially all material wholly-owned domestic restricted subsidiaries of the Company, including the Partnership.

 

The Term Loan Facility requires the Company to maintain a Consolidated Leverage Ratio (as defined in the Term Loan Facility), determined as of the last day of each quarter for the four-fiscal quarter period ending on the date of determination, of no more than 5.50 to 1.00. For any four-fiscal-quarter-period during which a material acquisition or disposition occurs, the total leverage ratio will be determined on a pro forma basis as though such event had occurred as of the first day of such four-fiscal-quarter-period.

 

The Term Loan Facility limits the Company’s ability to make dividends to stockholders if an event of default (as defined in the Term Loan Facility) exists or would result from such distribution. In addition, the Term Loan Facility contains various covenants that may limit, among other things, the Company’s ability to incur subsidiary indebtedness, grant liens, make investments, merge or consolidate, and engage in transactions with affiliates.

 

 

Commercial Paper Program

 

In July 2022, we established an unsecured commercial paper note program (the “Commercial Paper Program”). Under the terms of the Commercial Paper Program, we may issue, from time to time, unsecured commercial paper notes with varying maturities of less than one year. Amounts available under the Commercial Paper Program may be issued, repaid and re-issued from time to time, with the maximum aggregate face or principal amount outstanding at any one time not to exceed $2.75 billion. The Commercial Paper Program is guaranteed by each subsidiary that guarantees the TRGP Revolver. We had no amounts outstanding under the Commercial Paper Program as of July 29, 2022.