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HollyFrontier and Holly Energy Partners Announce IDR Simplification Agreement

DALLAS–(BUSINESS WIRE)–HollyFrontier Corporation (NYSE: HFC) (“HollyFrontier”) and Holly Energy
Partners, L.P. (NYSE: HEP) (“Holly Energy”) announced today that Holly
Energy and HEP Logistics Holdings, L.P. (“HEP GP”), a wholly-owned
subsidiary of HollyFrontier and the general partner of HEP, have entered
into a definitive agreement to eliminate the incentive distribution
rights held by HEP GP and convert HEP GP’s 2% general partner interest
in Holly Energy into a non-economic interest in exchange for the
issuance by Holly Energy of 37,250,000 of its common units to HEP GP,
representing total equity value of $1.25 billion based on Holly Energy’s
previous closing day price of $33.56. In addition, HollyFrontier has
agreed to waive $2.5 million of limited partner cash distributions for
each of twelve consecutive quarters beginning with the first quarter the
units issued as consideration are eligible to receive distributions.
Upon closing of the transaction, HollyFrontier will hold approximately
59.6 million Holly Energy common units, representing approximately 59%
of the outstanding common units, with a market value of $2.0 billion
based on Holly Energy’s previous closing day price.


The terms of the transaction were unanimously approved by the Board of
Directors of HollyFrontier based on the unanimous approval and
recommendation of its Audit Committee, which is comprised of independent
directors. The terms of the transaction were also unanimously approved
by the Board of Directors of Holly Logistic Services, L.L.C., a
wholly-owned subsidiary of HollyFrontier and the general partner of HEP
GP (“HEP GP LLC”), based on the unanimous approval and recommendation of
its Conflicts Committee, which is comprised of independent directors.

The transaction is subject to customary closing conditions, including
expiration or termination of the Hart-Scott Rodino antitrust waiting
period. Closing of the transaction is expected to occur in the fourth
quarter of 2017.

George Damiris, President and Chief Executive Officer of Holly Energy,
commented, “We are pleased to announce this important transaction for
both Holly Energy and HollyFrontier. Eliminating the general partner’s
IDRs and the economic GP interest will strongly enhance Holly Energy’s
ability to pursue growth opportunities and manage its business over the
long-term by decreasing its cost of capital, and providing increased
transparency on the value of HollyFrontier’s ownership in Holly Energy.”

HollyFrontier and Holly Energy have scheduled a conference call to
discuss the restructuring for October 19, 2017 at 8:30 am Eastern time.
The conference call may be accessed by webcast at: https://event.webcasts.com/starthere.jsp?ei=1166751&tp_key=6c5a60ca42

About HollyFrontier Corporation:

HollyFrontier Corporation, headquartered in Dallas, Texas, is an
independent petroleum refiner and marketer that produces high value
light products such as gasoline, diesel fuel, jet fuel and other
specialty products. HollyFrontier operates through its subsidiaries a
135,000 barrels per stream day ("bpsd") refinery located in El Dorado,
Kansas, a 125,000 bpsd refinery in Tulsa, Oklahoma, a 100,000 bpsd
refinery located in Artesia, New Mexico, a 52,000 bpsd refinery located
in Cheyenne, Wyoming and a 45,000 bpsd refinery in Woods Cross, Utah.
HollyFrontier markets its refined products principally in the Southwest
U.S., the Rocky Mountains extending into the Pacific Northwest and in
other neighboring Plains states. In addition, HollyFrontier, through its
subsidiary, owns Petro-Canada Lubricants Inc., whose Mississauga,
Ontario facility produces 15,600 barrels per day of base oils and other
specialized lubricant products, and owns a 36% interest (including a 2%
general partner interest) in Holly Energy Partners, L.P.

About Holly Energy Partners, L.P.:

Holly Energy Partners, L.P., headquartered in Dallas, Texas, provides
petroleum product and crude oil transportation, terminalling, storage
and throughput services to the petroleum industry, including
HollyFrontier Corporation subsidiaries. The Partnership, through its
subsidiaries and joint ventures, owns and/or operates petroleum product
and crude gathering pipelines, tankage and terminals in Texas, New
Mexico, Arizona, Washington, Idaho, Oklahoma, Utah, Nevada, Wyoming and
Kansas as well as refinery processing units in Kansas and Utah.

Advisors:

Morgan, Lewis & Bockius LLP is serving as legal advisor to
HollyFrontier. Barclays is serving as exclusive financial advisor and
Potter Anderson & Corroon LLP is serving as legal advisor to the Audit
Committee of the Board of Directors of HollyFrontier. Bracewell LLP and
Vinson & Elkins LLP are serving as legal advisors to HEP. Jefferies LLC
is serving as exclusive financial advisor and Akin Gump Strauss Hauer &
Feld LLP and Morris, Nichols, Arsht & Tunnell LLP are serving as legal
advisors to the Conflicts Committee of the Board of Directors of HEP GP
LLC.

HFC & HEP Forward Looking Statement:

The statements contained herein relating to matters that are not
historical facts are "forward-looking statements" within the meaning of
the federal securities laws. These statements are based on
HollyFrontier's and Holly Energy’s beliefs and assumptions using
currently available information and expectations as of the date hereof,
are not guarantees of future performance and involve certain risks and
uncertainties. Although HollyFrontier and Holly Energy believe that such
expectations reflected in such forward-looking statements are
reasonable, HollyFrontier and Holly Energy cannot give assurance that
such expectations will prove to be correct. Therefore, actual outcomes
and results could materially differ from what is expressed, implied or
forecast in these statements. Any differences could be caused by a
number of factors including, but not limited to:

  • failure of HEP GP and Holly Energy to successfully close the
    transaction;
  • failure to receive required governmental approvals to close the
    transaction;
  • the availability and cost of additional debt and equity financing;
  • the possibility of reductions in production or shutdowns at
    HollyFrontier refineries;
  • the effects of current and future government regulations and policies;
  • HollyFrontier’s and Holly Energy’s operational efficiency in carrying
    out routine operations and capital construction projects;
  • the possibility of terrorist attacks and the consequences of any such
    attacks;
  • general economic conditions; and
  • other financial, operations and legal risks and uncertainties detailed
    from time to time in HollyFrontier’s and Holly Energy’s Securities and
    Exchange Commission filings.

The forward-looking statements speak only as of the date made and, other
than as required by law, we undertake no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.

Contacts

HollyFrontier Corporation
Holly Energy Partners, L.P.
Craig
Biery, 214-954-6510
Director, Investor Relations
or
Jared
Harding, 214-954-6510
Investor Relations