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Delek to Sell Certain Trucking Assets to Delek Logistics Partners for $48M Cash

Delek US Holdings, Inc. (NYSE:DK) (“Delek US”) and Delek Logistics Partners, LP (NYSE:DKL) (“Delek Logistics”) today announced an agreement for the dropdown of certain trucking assets to Delek

Benzinga · 05/18/2020 12:19

Delek US Holdings, Inc. (NYSE:DK) (“Delek US”) and Delek Logistics Partners, LP (NYSE:DKL) (“Delek Logistics”) today announced an agreement for the dropdown of certain trucking assets to Delek Logistics for total consideration of $48 million in cash. The transaction is effective May 1, 2020, and is expected to be immediately accretive to Delek Logistics' distributable cash flow per unit.

These assets and services are projected to generate incremental annual earnings before interest, taxes, depreciation and amortization (EBITDA) of approximately $8 to $9 million. Approximately 80 – 85% of this EBITDA guidance is supported by a minimum revenue commitment from Delek US. Delek Logistics will finance this dropdown through cash on hand and borrowings from its revolving credit facility (the “Revolver”). Post-closing of this transaction, Delek Logistics will have approximately $107 million available on the Revolver. A reconciliation of forecasted incremental annualized EBITDA to forecasted incremental annualized net income under U.S. GAAP is provided below.

"This acquisition will complement Delek Logistics current trucking operations, adding scale and geographic diversity,” said Uzi Yemin, Chairman, President and Chief Executive Officer of Delek US and Delek Logistics’ general partner. “The trucking assets are currently part of Delek US Tyler, Texas and El Dorado, Arkansas refining operations and further strengthen Delek Logistics’ footprint as we continue to grow. The addition of these assets, along with the recent dropdown of the Big Spring gathering system, provides us with visibility for distribution coverage in the range of 1.4x to 1.5x and a leverage ratio below 4.0x by the end of this year. Once achieved, this should put Delek Logistics in an attractive position in terms of coverage and leverage ratios broadly in line with peers, while simultaneously delivering on our 5% distribution growth target in 2020.”

Asset and other information to consider:

  • The trucking assets are comprised of approximately 150 tractors and 150 trailers, which are primarily leased and owned, respectively. The Assets currently transport crude oil, asphalt and other refined products.
    • Prior to the dropdown, Delek Logistics owned or leased 123 tractors and 174 trailers
       
  • Minimum Revenue Commitment: Delek US, through a 10-year services agreement, will provide a trucking services agreement to Delek Logistics on the trucking assets.