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Debt
 12 Months Ended
Dec. 31, 2022
Debt Disclosure [Abstract]  
Debt

Note 11. DEBT

Our balances for long-term debt and finance lease obligations are as follows (in thousands):

 

 

 

December 31,

 

 

 

2022

 

 

2021

 

CAPL Credit Facility

 

$

606,137

 

 

$

630,575

 

JKM Credit Facility

 

 

158,980

 

 

 

182,460

 

Finance lease obligations

 

 

13,954

 

 

 

16,809

 

Total debt and finance lease obligations

 

 

779,071

 

 

 

829,844

 

Current portion

 

 

11,151

 

 

 

10,939

 

Noncurrent portion

 

 

767,920

 

 

 

818,905

 

Deferred financing costs, net

 

 

6,282

 

 

 

8,270

 

Noncurrent portion, net of deferred financing costs

 

$

761,638

 

 

$

810,635

 

 

As of December 31, 2022, future principal payments on debt and future minimum rental payments on finance lease obligations were as follows (in thousands):

 

 

Debt

 

 

Finance Lease Obligations

 

 

Total

 

2023

 

$

8,261

 

 

$

3,298

 

 

$

11,559

 

2024

 

 

617,152

 

 

 

3,396

 

 

 

620,548

 

2025

 

 

11,015

 

 

 

3,495

 

 

 

14,510

 

2026

 

 

128,689

 

 

 

3,596

 

 

 

132,285

 

2027

 

 

—

 

 

 

1,210

 

 

 

1,210

 

Total future payments

 

 

765,117

 

 

 

14,995

 

 

 

780,112

 

Less impact of discounting

 

 

—

 

 

 

1,041

 

 

 

1,041

 

Total future principal payments

 

 

765,117

 

 

 

13,954

 

 

 

779,071

 

Current portion

 

 

8,261

 

 

 

2,890

 

 

 

11,151

 

Long-term portion

 

$

756,856

 

 

$

11,064

 

 

$

767,920

 

 

CAPL Credit Facility

The CAPL Credit Facility is a $750 million senior secured revolving credit facility, maturing in April 2024. The facility can be increased from time to time upon our written request, subject to certain conditions, up to an additional $300 million. The aggregate amount of the outstanding loans and letters of credit under the CAPL Credit Facility cannot exceed the combined revolving commitments then in effect.

Borrowings under the credit facility bear interest, at the Partnership’s option, at (1) a rate equal to LIBOR for interest periods of one, two, three or six months (or, if consented to by all lenders, for such other period that is twelve months or a period shorter than one month), plus a margin ranging from 1.50% to 3.00% per annum depending on our consolidated leverage ratio (as defined in the credit facility) or (2) (a) a base rate equal to the greatest of, (i) the federal funds rate, plus 0.5% per annum, (ii) LIBOR for one month interest periods, plus 1.00% per annum or (iii) the rate of interest established by the agent, from time to time, as its prime rate, plus (b) a margin ranging from 0.50% to 2.00% per annum depending on our consolidated leverage ratio. In addition, we incur a commitment fee based on the unused portion of the credit facility at a rate ranging from 0.25% to 0.50% per annum depending on our consolidated leverage ratio.

We also have the right to borrow swingline loans under the CAPL Credit Facility in an amount up to $35.0 million. Swingline loans bear interest at the base rate plus the applicable base rate margin.

Standby letters of credit are permissible under the CAPL Credit Facility up to an aggregate amount of $65.0 million. Standby letters of credit are subject to a 0.125% fronting fee and other customary administrative charges. Standby letters of credit will accrue a fee at a rate based on the applicable margin of LIBOR loans.

Our CAPL Credit Facility is secured by substantially all of our assets, including our equity interest in an indirect wholly-owned subsidiary of CrossAmerica and the sole member of CAPL JKM Partners LLC named CAPL JKM Holdings LLC (“Holdings”), other than the assets of unrestricted subsidiaries designated as such under the CAPL Credit Facility. Holdings and its subsidiaries are unrestricted subsidiaries under the CAPL Credit Facility.

The maximum level for the consolidated leverage ratio financial covenant is generally 4.75 to 1.00 but increases to 5.50 to 1.00 for the quarter during a specified acquisition period (as defined in the CAPL Credit Facility) and the four quarters that follow. Upon the occurrence of a qualified note offering (as defined in the CAPL Credit Facility), the consolidated leverage ratio when not in a specified acquisition period is increased to 5.25 to 1.00, while the specified acquisition period threshold remains 5.50 to 1.00. Upon the occurrence of a qualified note offering, we are also required to maintain a consolidated senior secured leverage ratio (as defined in the CAPL Credit Facility) for the most recently completed four fiscal quarter period of not greater than 3.75 to 1.00. Such threshold is increased to 4.00 to 1.00 for the quarter during a specified acquisition period.

 

On November 9, 2022, in connection with our acquisition of assets from CSS, we entered into an amendment (the “Amendment”) to the CAPL Credit Facility. The Amendment, among other things, designates the acquisition of assets from CSS as a specified acquisition (as defined in the CAPL Credit Facility) which results in the maximum leverage ratio increasing to 5.50 to 1.00 through December 31, 2023.

 

We are also required to maintain a consolidated interest coverage ratio (as defined in the CAPL Credit Facility) of at least 2.50 to 1.00. These financial covenants and other covenants may restrict or limit our ability to make distributions, incur additional indebtedness, make certain capital expenditures or dispose of assets in excess of specified levels, among other restrictions. We were in compliance with our financial covenants at December 31, 2022.

If an event of default under the CAPL Credit Facility occurs and is continuing, the commitments thereunder may be terminated and the principal amount outstanding thereunder, together with all accrued unpaid interest and other amounts owed thereunder, may be declared immediately due and payable.

Taking the interest rate swap contracts described in Note 12 into account, our effective interest rate on our CAPL Credit Facility at December 31, 2022 was 4.2% (our applicable margin was 1.75% as of December 31, 2022).

Letters of credit outstanding at December 31, 2022 and December 31, 2021 totaled $3.8 million and $4.0 million, respectively. The amount of availability under the CAPL Credit Facility at December 31, 2022, after taking into consideration debt covenant restrictions, was $140.1 million.

JKM Credit Facility

 

On July 16, 2021, CAPL JKM Partners LLC (“Borrower”), an indirect wholly-owned subsidiary of CrossAmerica, entered into a Credit Agreement, as amended on July 29, 2021 (the “JKM Credit Facility”) among Borrower, Holdings and Manufacturers and Traders Trust Company, as administrative agent, swingline lender and issuing bank.

 

The JKM Credit Facility provides for a $200 million senior secured credit facility, consisting of a $185 million delayed draw term loan facility (the “Term Loan Facility”) and a $15 million revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility permits up to $7.5 million of swingline borrowings and $5.0 million in letters of credit. The interest rate applicable to loans outstanding under the JKM Credit Facility is equal to, at Borrower’s option, either (i) a base rate plus a margin (which will be determined based on Borrower’s consolidated leverage ratio) ranging from 0.50% to 1.50% per annum or (ii) LIBOR plus a margin (which will also be determined based on Borrower’s consolidated leverage ratio) ranging from 1.50% to 2.50% per annum. The Term Loan Facility will amortize in quarterly installments of $2.8 million, with the first payment due April 1, 2023 and the balance payable on the maturity date of the Term Loan Facility. Letters of credit are subject to a 0.125% fronting fee and other customary administrative charges. Standby letters of credit accrue a fee at a rate based on the applicable margin of LIBOR loans. In addition, beginning in October 2021, a commitment fee was charged based on the unused portion of the JKM Credit Facility at a rate ranging from 0.25% to 0.375% per annum depending on Borrower’s consolidated leverage ratio. The JKM Credit Facility will mature on July 16, 2026.

 

The obligations under the JKM Credit Facility are guaranteed by Holdings and its subsidiaries (other than Borrower) and secured by a lien on substantially all of the assets of Holdings and its subsidiaries (including Borrower). The obligations under the JKM Credit Facility are nonrecourse to CrossAmerica and its subsidiaries other than Holdings, Borrower and their respective subsidiaries.

 

The JKM Credit Facility also contains financial covenants requiring Borrower to comply with, as of the last day of each fiscal quarter of Borrower, commencing with Borrower’s fiscal quarter ending December 31, 2021, (i) a maximum consolidated leverage ratio of 6.25 to 1.00, with step-downs to 6.00 to 1.00, 5.75 to 1.00, 5.50 to 1.00 and 5.25 to 1.00 on March 31, 2022, March 31, 2023, March 31, 2024 and March 31, 2025, respectively, and (ii) a minimum fixed charge coverage ratio of 1.10 to 1.00. These financial covenants and other covenants may restrict or limit Holdings’ ability to incur additional indebtedness, make certain capital expenditures or dispose of assets in excess of specified levels, among other restrictions. We were in compliance with our financial covenants at December 31, 2022.

 

If an event of default under the JKM Credit Facility occurs and is continuing, the commitments thereunder may be terminated and the principal amount outstanding thereunder, together with all accrued unpaid interest and other amounts owed thereunder, may be declared immediately due and payable.

 

In February 2022, we borrowed $1.1 million under the Term Loan Facility to partially fund the acquisition of the final three sites from 7-Eleven.

 

Our borrowings under the JKM Credit Facility had a weighted-average interest rate of 6.5% as of December 31, 2022 (LIBOR plus an applicable margin, which was 2.25% as of December 31, 2022).

 

Letters of credit outstanding at both December 31, 2022 and December 31, 2021 totaled $0.8 million.

 

The amount of availability under the JKM Credit Facility at December 31, 2022 was $14.2 million.

Finance Lease Obligations

In May 2012, the Predecessor Entity entered into a 15-year master lease agreement with renewal options of up to an additional 20 years with Getty Realty Corporation. Since then, the agreement has been amended from time to time to add or remove sites. As of December 31, 2022, we lease 108 sites under this lease with a weighted-average remaining lease term of 4.3 years. We pay fixed rent, which increases 1.5% per year. In addition, the lease requires variable lease payments based on gallons of motor fuel sold.

Because the fair value of the land at lease inception was estimated to represent more than 25% of the total fair value of the real property subject to the lease, the land element of the lease was analyzed for operating or capital treatment separately from the rest of the property subject to the lease. The land element of the lease was classified as an operating lease and all of the other property was classified as a capital lease. This assessment was not required to be reassessed upon adoption of ASC 842–Leases. As such, future minimum rental payments are included in both the finance lease obligations table above as well as the operating lease table in Note 13.

The weighted-average discount rate for this finance lease obligation at December 31, 2022 and 2021 was 3.5%. Interest on this finance lease obligation amounted to $0.5 million, $0.6 million and $0.7 million for 2022, 2021 and 2020, respectively.