Borrowing & Credit Agreements

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Our capital structure at March 31, 2014 was comprised of the following (in millions):
Debt, including current maturities:
March 31, 2014
Tesoro Corporation Revolving Credit Facility
$
TLLP Revolving Credit Facility
Term Loan Credit Facility
398
4.250% Senior Notes due 2017
450
5.875% TLLP Senior Notes due 2020
605
6.125% TLLP Senior Notes due 2021
550
5.375% Senior Notes due 2022
475
5.125% Senior Notes Due 2024
300
Capital lease obligations and other
57
Total debt
2,835
Total Equity
5,435
Total Capitalization
$ 8,270


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.

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.

5.125% Senior Notes due 2024

Effective March 18, 2014, we issued $300 million aggregate principal amount of 5.125% Senior Notes due April 2024 (the “2024 Notes”). The 2024 notes have a ten-year maturity and are subject to optional redemption by Tesoro beginning April 1, 2019 at premiums of 2.563% through March 31, 2020; 1.708% from April 1, 2020 through March 31, 2021; 0.854% from April 1, 2021 through March 31, 2022; and at par thereafter, or at a make-whole plus accrued and unpaid interest before April 1, 2019. In addition, at any time prior to April 1, 2017, we may redeem up to 35% of the aggregate principal amount at 105.125% of face value with proceeds from certain equity issuances. The terms of the 2024 Notes are generally less restrictive than those contained in our senior notes due in 2017 and 2022, and omit some limitations on restricted payments, asset sales and other transactions that are included in those senior notes. These notes are unsecured obligations and guaranteed by certain of our domestic subsidiaries, excluding TLGP and TLLP and its subsidiaries. The proceeds from the issuance of the 2024 Notes, together with cash on hand, were used to pay for fees and expenses related to the note issuance and to redeem all outstanding 2019 Notes for an aggregate purchase price of $329 million, including accrued interest and premiums. In connection with the redemption of the 2019 Notes, we incurred charges totaling $31 million comprised of premiums paid on the 2019 Notes of $19 million and non-cash charges associated with the expensing of $8 million and $4 million of unamortized debt discount and issuance costs, respectively. Our debt redemption charges for the 2019 Notes are recorded in net interest and financing costs in our condensed statements of consolidated operations.

Registration Rights Agreement and Exchange Offer

TLLP entered into a registration rights agreement in connection with the December 2013 private offering of $250 million of 5.875% Senior Notes due 2020 (the “Unregistered Notes”). On April 11, 2014, TLLP filed a registration statement related to an offer to exchange the Unregistered Notes for notes registered under the Securities Act of 1933, as amended (the “Exchange Notes”). The registration statement is not yet effective and the related exchange offering has not yet commenced. Once the offer has commenced, each holder of the Unregistered Notes will be entitled to receive Exchange Notes, which are identical in all material respects to the Unregistered Notes (including principal amount, interest rate, maturity and redemption rights), except that the Exchange Notes generally are not subject to transfer restrictions.

Share Repurchase Programs

We are authorized by our Board under previously disclosed programs to purchase shares of our common stock in open market transactions at our discretion, to offset the dilutive effect of stock-based compensation awards and to meet our obligations under employee benefit and compensation plans, including the exercise of stock options, vesting of restricted stock and to fulfill other stock compensation requirements. The Board’s authorization has no time limit and may be suspended or discontinued at any time. Under these programs, we purchased approximately 1.9 million shares and 2.6 million shares of our common stock for approximately $100 million and $135 million during the three months ended March 31, 2014 and 2013, respectively. We have $400 million remaining under our authorized programs at March 31, 2014, of which we have purchased approximately $35 million through April 30, 2014.

Cash Dividends

On February 5, 2014, our Board declared a quarterly cash dividend on common stock of $0.25 per share, payable on March 14, 2014 to shareholders of record at the close of business on February 28, 2014, which resulted in a cash payment of $33 million during the three months ended March 31, 2014. On April 30, 2014, our Board declared a cash dividend of $0.25 per share, payable on June 13, 2014 to shareholders of record on May 30, 2014.