Borrowing & Credit Agreements

Home » Investors » Debtholder Information » Borrowing & Credit Agreements

Our capital structure at December 31, 2013 was comprised of the following (in millions):
Debt, including current maturities:
December 31, 2013
Tesoro Corporation Revolving Credit Facility
$
TLLP Revolving Credit Facility
Term Loan Facility
398
4.250% Senior Notes due 2017
450
9.750% Senior Notes due 2019 (net of unamortized discount of $8)
292
5.875% TLLP Senior Notes due 2020 (including unamortized premium of $6)
606
6.125% TLLP Senior Notes due 2021
550
5.375% Senior Notes due 2022
475
Capital lease obligations and other
58
Total debt
2,829
Total Equity
5,485
Total Capitalization
$ 8,314


4.250% Senior Notes due 2017 and 5.375% Senior Notes due 2022

In September 2012, we issued $450 million aggregate principal amount of 4.250% Senior Notes due 2017 and $475 million aggregate principal amount of 5.375% Senior Notes due 2022. The 2017 and 2022 Senior Notes contain terms, events of default and covenants that are customary for notes of this nature. These notes are unsecured obligations and guaranteed by certain of our domestic subsidiaries, excluding TLGP and TLLP and its subsidiaries.

9.750% Senior Notes due 2019

In 2009, we issued $300 million aggregate principal amount of 9.750% Senior Notes, due June 2019, for general corporate purposes. The notes were issued at 96.172% of face value at an effective interest rate of 10.375%. The notes have a ten-year maturity and are subject to optional redemption by Tesoro beginning June 1, 2014 at premiums of 4.875% through May 31, 2015; 3.25% from June 1, 2015 through May 31, 2016; 1.625% from June 1, 2016 through May 31, 2017; and at par thereafter. The indenture for the notes contains covenants and restrictions that are customary for notes of this nature. Substantially all of these covenants will terminate before the notes mature if one of two specified ratings agencies assigns the notes an investment grade rating and no events of default exist under the indenture. The terminated covenants will not be restored even if the credit rating assigned to the notes subsequently falls below investment grade. The notes are unsecured and are guaranteed by substantially all of our domestic subsidiaries.

5.875% TLLP Senior Notes due 2020

Effective December 17, 2013, TLLP completed a private offering of $250 million aggregate principal amount of the 5.875% Senior Notes due 2020 (the “December 2013 TLLP Debt Offering”) pursuant to a private placement transaction conducted under Rule 144A and Regulation S of the Securities Act of 1933, as amended. The December 2013 TLLP Debt Offering was issued under the Indenture governing the $350 million of TLLP’s 5.875% Senior Notes due 2020 issued on September 14, 2012 (the “September 2012 TLLP Debt Offering”) and has the same terms as the September 2012 TLLP Debt Offering (together with the December 2013 TLLP Debt Offering, the “TLLP 2020 Notes”). The December 2013 TLLP Debt Offering was issued at 102.25% of face value for an effective rate of 5.334%. The proceeds of the December 2013 TLLP Debt Offering were used (i) to repay the amounts outstanding under the TLLP Revolving Credit Facility, which were used to fund a portion of its acquisition of the Los Angeles Logistics Assets, (ii) to pay for the fees and expenses related to the December 2013 TLLP Debt Offering and (iii) for general partnership purposes.
The TLLP 2020 Notes have no sinking fund requirements. TLLP may redeem some or all of the TLLP 2020 Notes, prior to October 1, 2016, at a make-whole price plus accrued and unpaid interest. On or after October 1, 2016, the TLLP 2020 Notes may be redeemed at premiums equal to 2.938% through October 1, 2017; 1.469% from October 1, 2017 through October 1, 2018; and at par thereafter, plus accrued and unpaid interest in all circumstances. TLLP will have the right to redeem up to 35% of the aggregate principal amount at 105.875% of face value with proceeds from certain equity issuances through October 1, 2015. The TLLP 2020 Notes are unsecured and guaranteed by all of TLLP’s domestic subsidiaries, except Tesoro Logistics Finance Corp., the co-issuer, and are non-recourse to Tesoro, except for TLGP. The TLLP 2020 Notes also contain customary terms, events of default and covenants for an issuance of non-investment grade securities.

6.125% TLLP Senior Notes due 2021

TLLP completed a private offering of $550 million aggregate principal amount of the 6.125% Senior Notes due 2021 (the “TLLP 2021 Notes”) effective August 1, 2013. The proceeds of this offering were used to repay the amounts outstanding under the TLLP Revolving Credit Facility, which were used to fund a significant portion of TLLP’s acquisition of the Los Angeles Terminal Assets, and to pay a portion of the fees and expenses related to the offering of the TLLP 2021 Notes.
The TLLP 2021 Notes have no sinking fund requirements. TLLP may redeem some or all of the TLLP 2021 Notes, prior to October 15, 2016, at a make-whole price plus accrued and unpaid interest, if any. On or after October 15, 2016, the TLLP 2021 Notes may be redeemed at premiums equal to 4.594% through October 15, 2017; 3.063% from October 15, 2017 through October 15, 2018; 1.531% from October 15, 2018 through October 15, 2019; and at par thereafter, plus accrued and unpaid interest in all circumstances. TLLP will have the right to redeem up to 35% of the aggregate principal amount at 106.125% of face value with proceeds from certain equity issuances through October 15, 2016. The TLLP 2021 Notes are unsecured and guaranteed by all of TLLP’s domestic subsidiaries, except Tesoro Logistics Finance Corp., the co-issuer, and are non-recourse to Tesoro, except for TLGP. The TLLP 2021 Notes also contain customary terms, events of default and covenants for an issuance of non-investment grade securities.

Registration Rights Agreement and Exchange Offer

TLLP completed an offer on September 12, 2013 to exchange $350 million of the TLLP 2020 Notes from the September 2012 TLLP Debt Offering and the TLLP 2021 Notes (the “Unregistered Notes”) for an equal principal amount of 5.875% Senior Notes due 2020 and 6.125% Senior Notes due 2021 (the “Exchange Notes”), respectively, that were registered under the Securities Act of 1933, as amended. The terms of the Exchange Notes are identical in all material respects (including principal amount, interest rate, maturity and redemption rights) to the Unregistered Notes for which they were exchanged, except that the Exchange Notes generally are not subject to transfer restrictions. The exchange offer fulfills all of the requirements of the registration rights agreements for such Unregistered notes.
The $250 million aggregate principal amount of the TLLP 2020 Notes that were issued in the December 2013 TLLP Debt Offering are subject to registration rights agreements whereby TLLP has agreed to exchange the notes for registered publicly traded notes having substantially identical terms as the unregistered notes.

Share Repurchase Programs

Management is permitted to purchase Tesoro common stock at its discretion in the open market under a share repurchase program. The program was originally authorized by our Board in 2012 in the amount of $500 million, and increased to $1.0 billion by our Board on November 6, 2013. The shares will continue to be purchased at management’s discretion in the open market.
The authorization has no time limit and may be suspended or discontinued at any time. We purchased approximately 7.8 million shares and 2.5 million shares of our common stock under this program, for $400 million and $100 million during the years ended December 31, 2013 and 2012, respectively.
Our Board approved a program designed to offset the dilutive effect of stock-based compensation awards during 2011. We used this program to purchase approximately 0.6 million shares of our common stock for approximately $36 million during 2013, and 1.0 million shares of our common stock for approximately $26 million during 2012.

Cash Dividends

We paid cash dividends on common stock totaling $121 million and $38 million during the years ended December 31, 2013 and 2012, respectively. We did not pay any cash dividends during 2011. Our Board declared a quarterly cash dividend on common stock of $0.25 per share on February 5, 2014. The dividend is payable on March 14, 2014 to holders of record at the close of business on February 28, 2014.