TravelCenters of America (TA) is being acquired by British Petroleum.
TA has 3 high yield baby bonds outstanding which can be seen here.
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TravelCenters to Be Acquired
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11/21/2024
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TNT Thank you. More info than I posted. I’m not in the preferred. I’m holding the bonds. They are having a blowout qtr.
Charles. Bonds should be good. I invest with this space thru the net leases. They have been great investments. When Berkshire announced acquisition, I was rewarded with a great public credit rating vs. private company for my tenant. I sold one at nice profit.
My hesitation about this space is the EV charging which is still the wild frontier. Tesla is forced by the GOV to open its fast charging stations to all. The biggest unknown threat is the utility companies. My local utility is this year announcing it will provide high speed internet to my city. We have had this for a decade!! Doesn’t matter the powers to be approve the rate increase justifying to help the poor. NVM the poor already struggle to pay their utility bill. I expect the utilities to claim EV space and ratepayers will suffer. My point is BP can afford to be wrong; I cannot.
Anyone want to weigh in on the meaning of this language as far as it pertains to TANNI, TANNL and TANNZ? p 58 – https://www.sec.gov/Archives/edgar/data/1378453/000110465923022894/tm237083d2_defa14a.htm#ex10-1
Treatment of Certain Indebtedness. Prior to the Closing, the Company shall, and shall cause its Subsidiaries to, (a) deliver notices of prepayment and notices of termination of commitments (including any certifications or calculations to be provided therewith), as applicable, with respect to the agreements related to indebtedness set forth in Section 6.8 of the Company Disclosure Letter and (b) at Parent’s request prior to Closing, shall use reasonable best efforts to deliver notices of prepayment and notices of termination of commitments (including any certifications or calculations to be provided therewith), as applicable, with respect to any other agreements related to indebtedness or notes of the Company or any of its Company (clauses (a) and (b), collectively, (the “Company Indebtedness”), in each case, within the time periods required thereby and as necessary to pay in full outstanding indebtedness under the Company Indebtedness by the Closing. The Company shall, and shall cause its Subsidiaries to, each use their reasonable best efforts to (i) obtain and deliver to Parent prior to the Closing payoff letters in customary form from the lenders (or their applicable representative) with respect to the Company Indebtedness stating the amounts required to pay in full all indebtedness thereunder at the Closing, (ii) obtain and deliver to Parent documents in customary form acknowledging the termination of obligations and release of Liens related to the Company Indebtedness that are in the form of notes from the collateral agent with respect thereto, (iii) arrange the payoff or prepayment in full, as applicable, of all such indebtedness as of the Effective Time, the termination of the Company Indebtedness and (iv) take, or cause to be taken, all actions, and do, or cause to be done, and to assist and cooperate with Parent and Merger Subsidiary in doing, all things necessary in connection with the Merger and the other transactions contemplated hereby with respect to the indebtedness under the Company Indebtedness, including providing timely notice to the appropriate parties of the Merger and the transactions contemplated hereby, and, as promptly as practicable, making all filings and notifications and entering into all necessary agreements as reasonably requested by Parent or Merger Subsidiary.
I don’t have time to get a law degree today. Any lawyers in the house that can interpret this?
Not sure, but pursuant to the entire paragraph posted above, there is a punctuation error at the beginning, after the word Indebtedness; should be a (i) colon (:) , instead of a (ii) period(.).
That probably nullifies the whole contract. Glad I did not become an attorney.
Holding the few Z shares I have.
Joel, I agree about the legaleez. Same as Latin to me. But looks like a good place to park some money and collect at least one dividend and maybe a partial if not more.
BP is not a Brookfield. I don’t have any worries about the preferred going dark.
Bought 500 sh @ 25.25
Hah! After my experience with NEWT and their Stock Purchase Agreement language, Joel, you could be right! LOL…..
My father was an admiralty lawyer and his father was a patent attorney… I remember as a kid there was a 6′ tall by probably 8′ long book case filled with volume after volume of law books at the bottom of the stairs into the basement on the way to the ping pong table and kiddie’s TV area. Right then and there, probably at about age 10, I knew I was not going to follow in my father’s footsteps….. I got pretty good at ping pong though.
All I know is these baby bonds sure should be considered TA indebtedness and if I as a humanoid non-lawyer try to cut thru the legalese to figure out what the bottom line is, it sure seems as though they’re saying we’re calling all TA debt when this is all said and done….. BTW, there’s also language later on that seems to state that this definitively constitutes a change of control, so that should also mean that at worse case, these become assumed by BP after the fact…
This is not drafted very clearly, but I think what they are trying to say is the debts listed in the Disclosure Letter (which will not be filed with the SEC) will be paid before closing. I doubt this would include the publicly traded notes and suspect it is some sweetheart related party stuff.
None of the remaining debt must be paid off at closing, but BP can request it. As a practical matter, I don’t think TA has enough cash to take out all 3 publicly traded notes prior to closing. But I agree BP would probably take them out immediately or shortly thereafter.
Thanks. 730 for your take… I had tried to find what “indebtedness set forth in Section 6.8 of the Company Disclosure Letter” actually meant specifically, what it included and what it did not, but found nothing. I guess you found out why. But then it goes on to seemingly include anything not covered by the Company Disclosure Letter (a) as (b) with (a) and (b) “(clauses (a) and (b), collectively being the “Company Indebtedness”). It’s certainly not in question that the 3 baby bonds are debt instruments, so when it goes on to say, “arrange the payoff or prepayment in full, as applicable, of ALL [emphasis added] such indebtedness as of the Effective Time,” then you would think it has to include these three, right? It even includes language that specifically includes the subs so it seems to be covering all possible types of company indebtedness… “The Company shall, and shall cause its Subsidiaries to…..”
Either way, I agree – BP takes them out quickly if all this legalese fails to….. When the additional language seems to confirm that this constitutes a change of control that should mean that worst case is they get assumed by BP.
The most recent financials for TA are at https://investors.ta-petro.com/investors/financials-and-filings/financial-reports/default.aspx . Looking at their Q3,2022 Form 10-Q, as of 9/30/2022 the company had $467M in cash and cash equivalents, $640M in current liabilities, and $524M in long term debt. Presumably that long term debt includes the $320M from TANNI, TANNL, and TANNZ. My sense is that TA can’t pay off all its long term debt before closing, and it could only pay it off at closing if BP were to bring cash to the table. I’m frequently wrong, but my guess is that BP will close the deal leaving TANNI, TANNL, and TANNZ outstanding. In a week or two following closing, BP will likely quickly review the books and then issue the required 30 day notice to call the securities.
This was probably drafted by a hunior lawyer at 3 am, so the language is a bit dense.
That said, it looks like the goal was to meet the disclosure requirement and to document the actions to be taken – all without actually telling anything useful to people who don’t have the “disclosure letter”
I could try to decipher it for you, but you wouldn’t want to pay my hourly rate for that…
The going rate around this site seems to be a promised never delivered steak dinner.. how’s that sound? ha
Hi all,
How long an acquisition can finish from the announcement to the acquired company’s delisting? I guess it usually takes half ~ one year.
If you’re talking about the delisting of the common shares, the estimate projected time for completion was announced as mid-year 2023…. That sounds aggressive imho, but that’s what the press release stated….
Last big acquisition in this space was when Buffett bought out Flying J.
Buffet bought Pilot which previously merged Flying J when it got into trouble. The Haslam family retains 20%. You will not see a big investment into EV until it is proven profitable or the US GOV subsidies more. BP will not have the discipline of the Pilot management team. If one looks at the NNN leases offered on the market for a Pilot location; one can somewhat justify the BP purchase price but not fully.
EV charging stations are a loss leader and margins are only slightly better in selling fuel. But that difference in margin is made up for the fact that charging takes longer (even fast charging) and that means more opportunity for the main driver of gas station profit — convenience store sales.
Taken from TANNL prospectus as an example –
Existence
We will do or cause to be done all things necessary to preserve and keep in full force and effect our existence, rights and franchises; provided, however that we will not be required to preserve any such right or franchise if our Board of Directors determines that the preservation thereof is no longer desirable in the conduct of our business and that the loss thereof is not disadvantageous in any material respect to our ability to make payments under the Indenture. In addition, the Indenture does not restrict our ability to merge or consolidate, or sell, convey, transfer or otherwise dispose of all or substantially all of our assets, provided that any successor or acquirer of the properties and assets of the Company substantially as an entirety must assume all of our obligations under the Indenture and the Notes.
also
Provision of Financial Information
If, at any time, we are no longer subject to the periodic reporting requirements of the Exchange Act for any reason, we agree that we will continue to prepare the financial statements and a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” substantially similar to that which would have been required to be included in an annual report on Form 10-K and a quarterly report on Form 10-Q if we had been subject to such Exchange Act reporting requirements (with all such financial statements prepared in accordance with Regulation S-X (or any successor regulation) promulgated by the SEC and all such annual financial statements including a report thereon from our certified independent accountants) and post copies thereof to our website for public availability within 15 days after the time periods that would have been applicable to filing such reports with the SEC in the rules and regulations applicable to such reports if we had been required to file those reports with the SEC; provided, however, that if we are no longer subject to the periodic reporting requirements of the Exchange Act, we will not be required to comply with Section 302 or Section 404 of the Sarbanes-Oxley Act of 2002, or related Items 307 and 308 of Regulation S-K (or any successor regulation) promulgated by the SEC, or Item 10(e) of Regulation S-K with respect to any non-GAAP financial measures contained therein (or any successor regulation) or any similar requirement under any other regulation.
IMHO – This language seems pretty clear that BP will have to assume the debt of TA to close this deal…. It also implies that they will have to continue to report financials as if they were still outstanding even if assumed. Doesn’t that pretty well take the risk of going dark off the table? That requirement alone, plus assumption by a company with an A-2 unsecured debt rating would seem to make it pretty likely these will all be called on or quickly after closing and if not, these are not long maturity bonds anyway. Why would BP want to keep A2 rated 8% and 8.25% notes due in less than 7 years on the books?
If playing this game be sure to pay attention to coupon payment dates if you’re assuming a short-term call… For example, even though TANNZ and TANNL are both 8% coupon, they do not pay out on the same schedule and to complicate it a bit more TANNL does not pay on a schedule that coincides with its maturity date of 12/15. It pays on 2/28, 5/31, 8/31 and 11/30 and just passed x-div date…. TANNZ does currently have accrued which TANNL does not, so it should be worth slightly more imho, even though it has the longer maturity… TANNI is 8.25% coupon and it started the day being out of line high if you’re expecting these all to be called simultaneously within the next 6 months. That’s why it was dinged 2.50% today while the other two were essentially unchanged
I bot TANNZ today at average of 28.288. Stripped, I believe that gives a 7.089% yield to an assumed 7/15/23 call and a 7.937% YTM… The press release says they’re targeting “the closing of this acquisition by mid-year 2923.” If they last longer than 7/15, you do better, so a delay doesn’t hurt. TA common was up 70% today to 84.43 due to cash offer @ $86. That 1.8% discount to acquistion price seems to be in line with pretty strong belief in this deal getting done and done in a timely manner. My guess is they will not get it done that quickly but that’s just speculation on my part.
“Why would BP want to keep A2 rated 8% and 8.25% notes due in less than 7 years on the books?”
To help NewToThis2015 get some income.
TA is going to install 1000 EV charging stations at it’s locations. Most are located along major highways. Time to get a quick charge means captive customers maybe spending money
For electric vehicles these days a quick charge is an oxymoron. Agree, folks will have plenty of time spend cash in the TA convenience store. The US/EV infrastructure needs to be built out somehow though, and it looks like BP is thinking ahead.
So will the Baby bonds be called or another delisting, screw the bond holders?
March 17, 2023 is the next call date? I guess time will tell.
Page 1 of TANNI prospectus:
We may, at our option, at any time on or after January 15, 2016, redeem some or all of the Notes by paying 100% of the principal amount of the Notes to be redeemed plus accrued but unpaid interest, if any, to, but not including, the redemption date, as described under “Description of Notes—Optional Redemption.”
More on page S-12:
Optional Redemption
We may, at our option, at any time on or after January 15, 2016, redeem some or all of the Notes by paying 100% of the principal amount of the Notes to be redeemed plus accrued but unpaid interest, if any, to, but not including, the redemption date.
We are required to give notice of such a redemption not less than 30 days nor more than 60 days prior to the redemption date to each holder’s address appearing in the securities register maintained by the Trustee. In the event we elect to redeem less than all of the Notes, the particular Notes to be redeemed will be selected by the Trustee by such method as the Trustee shall deem fair and appropriate.
I didn’t check TANNL or TANNZ but I’m guessing they are similar.
TANNZ a reliable high rate payer for years. If only my shares were convertable today…..
TA is one of the few major players that has the ability to acquire competing brands and grow by acquisition. Pilot would have great difficulty doing so as it will be deemed anti-competitive by the GOV. Interesting BP acquired and pure speculation, BP may be acquiring other brands. The profits are purely from the non fuel merchandise, etc.
TA had short sellers that are hurting today.
TNT there is another major player who has been buying up stations but your going to have a K-1
Charles, Both GLP and CAPL’s price shot up on day of announcement. Only CAPL is sustained. I know little about either; as Siska family controls the former and Mr. Topper the latter. Unless I truly understand the controlling families, I am hesitant to invest. The Haslam’s are top notch and Jimmy never follows a trend but a proven and well underwritten investment. I broke my rule with Facebook and sold shares (some at a nice profit others at a loss). Zuckerberg truly controls and I do not know him. Will not make that mistake again. If you have thoughts would appreciate hearing.
I guess I should have bought the TA common instead of TANNL.
Who knew? Not me, that’s for sure.
I personally avoided any investment linked to the RMR Group.