PBF Logistics LP (NYSE: PBFX) announced today the execution of definitive agreements for the acquisition of the remaining fifty percent interest in Torrance Valley Pipeline Company LLC from an affiliate of PBF Energy Inc. (NYSE: PBF) for total consideration of approximately $200 million in cash. The Partnership and PBF Energy currently anticipate closing of the transaction to occur in the second quarter, subject to customary closing conditions. The acquisition is expected to be financed through a combination of $135 million of gross proceeds from PBFX's over-subscribed registered direct offering of common units to certain institutional investors announced today and a $65 million draw-down from the Partnership's senior secured revolving credit facility.
The acquisition of TVPC by the Partnership immediately doubles its position in one of its core assets and is immediately accretive to distributable cash flow. Pro forma for the transaction, the Partnership expects 2019 coverage to be consistent with its original guidance of approximately 1.05x based on current expectations. The Partnership reiterates its prior guidance of maintaining leverage in the three-to-four times run-rate EBITDA range and its commitment to a long-term coverage ratio of 1.15x.
PBFX and PBF Energy Chief Executive Officer Thomas Nimbley said, "The acquisition of the remaining 50 percent interest in TVPC reflects PBFX's ongoing commitment to deliver sustained growth to our unitholders by adding high-quality assets to our earnings base. The equity issuance and drop-down transaction were executed in response to high investor demand for investable opportunities in PBF Logistics." Mr. Nimbley continued, "With this transaction, in combination with our organic growth efforts, we exceed our near-term distribution growth funding requirements and achieve the flexibility to execute our strategic plan without accessing public equity to fund growth capital through 2020."
About the TVPC Transaction
TVPC owns the 189-mile San Joaquin Valley Pipeline system with a throughput capacity of approximately 110,000 barrels per day. The system is comprised of the M55, M1 and M70 pipelines which are the primary crude gathering and transportation lines that supply PBF Energy's Torrance refinery. The assets also include 11 pipeline stations with approximately one million barrels of combined storage capacity and truck unloading capability at two of the stations.
Pursuant to the agreement, upon closing, the Partnership would consolidate the existing ten-year term transportation services agreements with subsidiaries of PBF Energy containing minimum volume throughput commitments ("MVCs") of approximately 50,000 barrels per day for the M1 and M55 pipelines; increased MVCs of approximately 75,000 barrels per day for the M70 pipeline, from current MVCs of 70,000 bpd, and for storage capacity at certain tanks representing approximately 50 percent of the total available shell capacity of the storage facilities. Based on the TVPC ownership interest to be acquired, current cost structure, increased fees payable by PBF Energy under the amended M70 services agreement and the expected minimum throughput rates, the newly-acquired interests of TVPC would be expected to generate, on an annualized run-rate basis subsequent to closing the proposed acquisition, estimated annual net income of approximately $15.5 million based on revenues of approximately $44.0 million and estimated earnings before interest, taxes, depreciation and amortization ("EBITDA") of approximately $25.0 million. Annual maintenance capital expenditures for the Partnership's acquired interest would be expected to average approximately $1.5 million.
The terms of the potential transaction have been approved by the Conflicts Committee of the Board of Directors of the general partner of PBF Logistics. The Conflicts Committee is composed of independent directors and was advised by Piper, Jaffray & Co., its financial advisor, and Baker Botts LLP, its legal counsel.
First Quarter Interim Update
The preliminary financial data discussed below has been prepared by, and is the responsibility of, our management and has not been audited or reviewed by our independent registered public accounting firm. We have provided a range for our current preliminary unaudited estimates of revenue, net income, EBITDA and EBITDA attributable to PBFX discussed below because our financial closing procedures for the first quarter of fiscal year 2019 are not yet complete and are subject to final adjustments and other developments that may arise between now and the time the financial results for the first quarter of fiscal year 2019 are finalized.
The preliminary first quarter estimates are based upon assumptions we believe to be reasonable but include information from third parties that is subject to further review and verification. It is possible that our final reported results may not be within the ranges we currently estimate, and the difference may be material. We expect to report financial results related to the quarter ended March 31, 2019 on or about May 1, 2019.
About PBF Logistics LP
PBF Logistics LP (NYSE: PBFX), headquartered in Parsippany, New Jersey, is a fee-based, growth-oriented master limited partnership formed by PBF Energy to own or lease, operate, develop and acquire crude oil and refined petroleum products terminals, pipelines, storage facilities and similar logistics assets.
