A Lot About Alon
Announces credit agreement, dividends, sale of pipelines
DALLAS -- Alon USA Energy Inc. said it has entered into an amended revolving credit agreement with Israel Discount Bank of New York, as administrative agent and co-arranger and Bank Leumi USA as co-arranger, through its operating subsidiary.
The total commitment under the credit facility is $240 million and is for, among other things, working capital, acquisitions and other general corporate purposes.
The initial size of the credit facility is $160 million with options to increase the size of the credit facility up to $240 million [image-nocss] to allow Alon greater flexibility in a prolonged high crude oil price environment and upon expansion of throughput capacity. Previously, the amount available under the credit facility was $141.6 million.
Under this new credit facility, the term was extended to January 2010; existing borrowing costs and letter of credits fees have been reduced; most covenants have been eased; there are substantially no limitations on incurrence of debt, distribution of dividends or investment activities absent existing or resulting default; and retail subsidiaries have been excluded from the facility. The facility is secured by cash, accounts receivable, inventory and related assets and all fixed assets previously securing the facility have been released.
Alon USA also said its board has declared its first quarterly cash dividend, of four cents per share, as well as a special cash dividend of 37 cents per share, on the company's common stock, payable on March 21, 2006, to stockholders of record at the close of business on March 1, 2006.
"We are pleased with the continuing improvement of our balance sheet and feel it is appropriate to share this improvement with our shareholders," said Jeff Morris, Alon's president and CEO. "With the significant cash balance remaining after the payment of these dividends, we are well positioned to take advantage of growth opportunities."
He added, "In 2006, we continue to move forward in our efforts to position the company for continued growth and to generate shareholder value. On Jan. 19, 2006, we announced the prepayment of the company's $100 million term loan, due Jan. 14, 2009, reducing the company's total debt outstanding to approximately $33 million. On Feb. 13, 2006, we announced the agreement to sell the company's Amdel and White Oil Pipelines for a total consideration of $68 million."
Alon USA's cash and cash equivalents and short-term investments as of Dec. 31, 2005, were $322 million (unaudited). On a pro-forma basis for the prepayment of the term loan and for the sale of the pipelines, Alon USA's cash and cash equivalents and short term investments as of Dec. 31, 2005, would have been approximately $266 million (unaudited).
Earlier this week, Alon USA announced that it has entered into an agreement to sell its Amdel and White Oil pipelines to an affiliate of Sunoco Logistics Partners LP.
The company said it anticipates that this transaction will close before the end of first-quarter 2006, following satisfaction of customary closing conditions. Upon closing, the company will recognize a one-time pretax gain on the disposition of the Pipelines of approximately $53 million.
Alon USA and Sunoco Logistics will enter into a 10-year pipeline throughput and deficiency agreement that will allow Alon USA to maintain its physically integrated system by retaining crude oil transportation rights on the pipelines from the Gulf Coast for an initial term of 10 years. Alon USA will commit to ship a minimum of 15,000 barrels per day on the pipelines. It also has the option to extend the agreement by four additional 30-month periods.
This transaction gives us increased flexibility in our ability to source crude oil and further strengthens our balance sheet, said Morris. As we move forward, we will continue to redeploy capital into areas where we have proven expertise including integrated refining, asphalt production and retail operations. In light of the recent developments regarding the Mesa Pipeline System, Sunoco Logistics has also agreed to provide Alon up to 40,000 bpd of shipping capacity of crude from Midland or Nederland to the Big Spring refinery. We are pleased to have such a strong partner to provide long term crude pipeline capabilities to Alon.
The startup of the Amdel pipeline is scheduled for June 1, 2006.
Dallas-based Alon USA is an independent refiner and marketer of petroleum products operating primarily in the Southwest and South Central United States. It owns and operates a refinery in Big Spring, Texas, which has a crude oil throughput capacity of 70,000 bpd. Alon USA markets gasoline and diesel products under the FINA brand name and is a leading producer of asphalt in the State of Texas. It operates convenience stores in West Texas and New Mexico under the 7-Eleven and FINA brand names and supplies motor fuels to these stores from its Big Spring refinery.