Global Partners LP's Strategic Debt Maneuver: A Bondholder's Dilemma

Global Partners LP (NYSE: GLP) has launched a cash tender offer for its $400 million outstanding 7.00% Senior Notes due 2027, paired with a concurrent private offering of senior notes due 2033. This move represents a deliberate strategy to optimize its debt structure while balancing costs and risks. For bondholders, the decision to participate hinges on understanding the financial incentives, the mechanics of the tender's pricing, and the broader implications of GLP's capital management approach.

Tender Offer Mechanics: Yield Calculation and Timing
The tender offer, which expires June 16, 2025, aims to repurchase any and all of the 2027 notes at a price determined by referencing a U.S. Treasury Reference Security (0.250% UST due July 31, 2025). The purchase price for each $1,000 principal amount will be calculated as follows:
- Fixed Spread: 7.00% (matching the coupon rate of the existing notes).
- Treasury Yield: The yield on the UST reference as of June 16, 2025, at 2:00 p.m. ET.
- Redemption Assumption: The notes are treated as if redeemed on August 1, 2025, at par (100% of principal).

This formula ensures the tender price reflects a yield that combines the Treasury's benchmark rate with the notes' coupon spread. Holders will also receive accrued interest up to the settlement date (expected June 23). The guaranteed delivery provision allows participants to tender notes until June 18, even after the June 16 expiration.

Financial Incentives for Bondholders
The critical question for bondholders is whether the tender price exceeds the value of holding until August 2025. If the tender succeeds, those who participate avoid the risk of holding a note that will be redeemed at par in two months. The Treasury reference's low yield (0.25% for a July 2025 maturity) means the tender price is likely to be above par. For instance, if the Treasury's quoted yield on June 16 is 0.25%, the total yield becomes 7.25%, resulting in a purchase price slightly higher than 100. Even a modest Treasury yield increase would amplify this premium.

Conversely, bondholders who reject the tender face a binary outcome:
1. If the private offering succeeds: The tender proceeds, and non-participating holders see their notes redeemed at par in August.
2. If the private offering fails: The tender collapses, and holders must wait until 2027 for maturity, locking in below-market yields as interest rates rise.

The latter scenario is unlikely given GLP's strong credit profile (Fortune 500 status, $400 million in cash, and a robust energy terminal network). Still, the tender's conditional success on the private offering adds a layer of uncertainty.

Funding Strategy: The Private Offering's Role
The concurrent $400 million private offering of 2033 notes—structured under Rule 144A/Regulation S—serves dual purposes:
- Liquidity Injection: Funds will cover the tender's cost and reduce near-term debt obligations.
- Cost Optimization: The 2033 notes likely carry a lower coupon than the 7% rate on the 2027 notes, extending GLP's weighted average debt maturity while lowering interest expenses.

This shift aligns with GLP's stated focus on energy transition and financial discipline. By retiring higher-cost debt early, the company improves its interest coverage ratio, a critical metric for its energy terminal and retail operations.

Risks and Considerations
1. Private Offering Risk: Though GLP's creditworthiness reduces this, a failed private offering would leave bondholders with no tender option, forcing them to hold until August.
2. Market Volatility: Treasury yields could spike between now and June 16, compressing the tender's premium. Conversely, falling yields might widen the gap between tender and hold values.
3. Regulatory Hurdles: The SEC's scrutiny of concurrent offerings could delay the private placement, though GLP's seasoned capital markets team mitigates this risk.

Investment Implications
For bondholders:
- Act Quickly: The tender's June 16 expiration and June 18 guaranteed delivery deadline require prompt action.
- Analyze the Numbers: Use the Treasury reference yield and the 7% spread to model the tender price. If it exceeds 100.5–101, participation is rational.
- Consider Liquidity: Early redemption avoids the risk of holding a note in a rising rate environment.

For GLP shareholders:
- The tender reflects proactive management of debt costs, potentially boosting equity returns.
- The 2033 notes' longer maturity aligns with the company's infrastructure-heavy business model, which benefits from steady cash flows.

Conclusion
Global Partners' tender offer is a calculated move to optimize its balance sheet amid evolving energy markets. Bondholders are incentivized to tender now unless they have a high-risk tolerance or alternative uses for liquidity. The strategic timing—just before the August 2025 call date—minimizes GLP's costs while offering holders a chance to realize above-par value. As always, monitoring the Treasury reference's yield and the private offering's progress will be critical to final decisions.

In this game of debt management, GLP holds the cards—but bondholders must play theirs wisely.