Phillips 66 Seeks to Raise $1.8 Billion in Debt Instrument Sale

Phillips 66 Co. has entered into an agreement for an underwritten public offering of senior notes with a combined principal amount of $1.8 billion.

Expected to be finalized September 11, the agreement includes an extension to the $600 million worth of 2031 senior notes it issued February 28, 2024. Like the existing notes, the additional 2031 senior notes carry a 5.25 percent coupon, or semiannual interest, according to regulatory filings.

The remaining portion of the new offering consists of $600 million worth of notes due 2035 with a 4.95 percent coupon and $600 million worth of notes due 2055 with a 5.5 percent coupon.

The Houston, Texas-based refining company, which also transports oil and gas, will start semiannual interest payments in December 2024 for the additional 2031 notes and March 2025 for the 2035 and 2055 notes.

The terms allow the issuer to make redemptions at predetermined prices.

Supporting the debt financing as joint book-running managers are Barclays Capital Inc., BofA Securities Inc., Goldman Sachs & Co. LLC, JP Morgan Securities LLC, Mizuho Securities USA LLC, MUFG Securities Americas Inc., PNC Capital Markets LLC, RBC Capital Markets LLC, Scotia Capital (USA) Inc., SMBC Nikko Securities America Inc., TD Securities (USA) LLC and Truist Securities Inc.

In addition to the 12, the underwriting agreement also included 10 co-managers: Academy Securities Inc., CIBC World Markets Corp., Commerz Markets LLC, Credit Agricole Securities (USA) Inc., HSBC Securities (USA) Inc., ICBC Standard Bank PLC, Loop Capital Markets LLC, Standard Chartered Bank, UniCredit Capital Markets LLC and US Bancorp Investments Inc.

Each note is valued at least $2,000 and subscriptions exceeding the minimum must be in integral multiples of $1,000.

Phillips 66 intends to use proceeds to repay existing debt including outstanding notes and commercial paper borrowings.

In compliance with FINRA, a Congress-authorized non-governmental self-regulatory association of investors, Phillips 66 recognized a “conflict of interest” involving its backers in the new offering. “Certain of the underwriters and/or their respective affiliates may be holders of the Outstanding Notes and/or hold a portion of Phillips 66’s outstanding commercial paper”, the company told the United States Securities and Exchange Commission.

“Accordingly, to the extent we use a portion of the net proceeds to repay all or a portion of the Outstanding Notes or our outstanding commercial paper borrowings, such underwriters and/or their respective affiliates may receive at least 5 percent of the net proceeds of this offering, not including underwriting compensation, thus creating a ‘conflict of interest’ within the meaning of FINRA Rule 5121”.

As of the end of the second quarter, Phillips 66 accrued $2.8 billion of short-term debt. Current liabilities totaled $18.3 billion, according to its quarterly filing published July 31.

Its current assets at the time totaled $20.9 billion including $2.4 billion in cash and cash equivalents.

During the April–June 2024 quarter, Phillips 66 generated $1.9 billion in net cash from operating activities. Net profit landed at $1.9 billion, down from $3.8 billion compared to the same period last year as market crack spreads declined, offsetting higher volumes and lower costs.

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