Sec Form 13D Filing - REH Co filing for HOLLY ENERGY PARTNERS LP (HEP) - 2022-03-24

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

(Amendment No.     )*

Holly Energy Partners, L.P.

(Name of Issuer)

Common Units

(Title of Class of Securities)

435763107

(CUSIP Number)

The Sinclair Companies

550 East South Temple

Salt Lake City, Utah 84102

Attn: General Counsel

with a copy to:

Scott Wulfe

Alan Beck

Vinson & Elkins LLP

845 Texas Avenue, Suite 4700

Houston, TX 77002

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

March 14, 2022

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box.  ☐

Note. Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of section 18 of the Securities Exchange Act of 1934, as amended (the “Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No. 435763107

CUSIP No. 435763107

SCHEDULE 13D

This Schedule 13D is being filed with respect to the common units representing limited partnership interests (“Common Units”) of Holly Energy Partners, L.P., a Delaware limited partnership (the “Issuer”). The address of the principal executive offices of the Issuer is 2828 N. Harwood, Suite 1300, Dallas, Texas 75201.

On August 2, 2021, the Issuer, Sinclair, and Sinclair Transportation Company, then a Wyoming corporation and wholly owned subsidiary of Sinclair (“STC”), entered into a Contribution Agreement (as amended, the “Contribution Agreement”) pursuant to which the Issuer acquired all of the outstanding units of STC in exchange for 21,000,000 newly issued Common Units and cash consideration equal to $325 million (the “HEP Transactions”). The HEP Transactions closed on March 14, 2022. Among the units issued at closing, 5,290,000 units are currently held in escrow to secure Sinclair’s obligations under Section 6.22 of the Business Combination Agreement dated August 2, 2021 (as amended), by and among HF Sinclair Corporation (f/k/a Hippo Parent Corporation), Sinclair and the other parties thereto. During the term of the escrow, Sinclair has voting power but lacks investment power over the escrowed units until any such units are released from the escrow. The foregoing description of the escrow does not purport to be complete and is qualified in its entirety by reference to the Escrow Agreement dated as of March 14, 2022, by and among HF Sinclair Corporation, Sinclair and American Stock Transfer & Trust Company, LLC, which is filed as Exhibit 10.2 hereto and incorporated by reference herein. The issuance of Common Units to Sinclair was exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).

The foregoing summary description of the Contribution Agreement and the HEP Transactions contemplated thereby is subject to and qualified in its entirety by reference to the Contribution Agreement, which is filed as Exhibit 2.1 hereto and incorporated by reference herein.

The information contained in Items 3 and 6 is incorporated herein by reference.

The Reporting Persons acquired the Common Units in connection with the closing of the HEP Transactions.

Subject to the terms of the Unitholders Agreement (as defined below), the Reporting Persons may acquire additional Common Units or dispose of any or all of the Common Units it owns depending upon an ongoing evaluation of the investment in the Common Units, prevailing market conditions, other investment opportunities, other investment considerations and/or other factors.

Pursuant to the Unitholders Agreement, the Reporting Persons have certain nomination rights, as further described in Item 6 below.

The Reporting Persons evaluate their investments in the Common Units on a continual basis. The Reporting Persons have no plans or proposals as of the date of this filing, which relate to, or would result in, any of the actions enumerated in Item 4 of the instructions to Schedule 13D. The Reporting Persons may, at any time and from time to time, review or reconsider their position and/or change their purpose and/or formulate plans or proposals with respect thereto.

(a.) – (b.)    The aggregate number and percentage of Common Units beneficially owned by the Reporting Persons (on the basis of a total of 126,440,201 Common Units outstanding as of March 14, 2022 as reported in the Issuer’s Registration Statement on Form S-3, filed with the SEC on March 21, 2022):

A. The Sinclair Corporation

Percentage: 16.6%

B. Carol Orme Holding

Percentage: 16.6%

The units set forth above are directly owned by Sinclair and not Mrs. Holding. Sinclair is the primary and direct beneficial owner of the units indicated above, and the board of directors of Sinclair has all voting and investment power with respect to such units. However, as a result of her relationship with Sinclair, Mrs. Holding may be deemed to also beneficially own such units under applicable securities law and SEC guidance. Mrs. Holding, however, does not intend ever to own such units directly for investment purposes in the future and expressly disclaims such beneficial ownership to the maximum extent permitted by law.

The Reporting Persons have entered into a Joint Filing Agreement, a copy of which is filed with this Schedule 13D as Exhibit 1.1, pursuant to which the Reporting Persons have agreed to file this Schedule 13D jointly in accordance with the provisions of Rule 13d-1(k)(1) under the Act.

(c.)    To the best knowledge of the Reporting Persons, no transactions were effected by the Reporting Persons during the past 60 days other than the transactions described herein.

(d.)    No other person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, any of the Common Units beneficially owned by the Reporting Persons, other than as described herein.

(e.)    Not applicable.

The information contained in Item 3 above is incorporated herein by reference.

Unitholders Agreement

On August 2, 2021, in connection with the Contribution Agreement, HEP, Holly Logistic Services, L.L.C. (“HLS”) and Navajo Pipeline Co., L.P., the sole member of HLS (the “Sole Member”) entered into a unitholders agreement (the “Unitholders Agreement”) by and among HEP, HLS, the Sole Member, Sinclair and the stockholders of Sinclair (each a “Unitholder” and collectively, the “Unitholders,” and along with Sinclair and each of their permitted transferees, the “Sinclair Parties”), which became effective at the closing of the HEP Transactions on March 14, 2022.

Pursuant to the Unitholders Agreement, the Sinclair Parties have the right to nominate one person to the HLS board of directors at the closing until such time that (x) the Sinclair Parties beneficially own less than 10.5 million Common Units or (y) the Common Units beneficially owned by the Sinclair Parties constitute less than 5% of all outstanding Common Units.

The Unitholders Agreement also subjects 15,750,000 of the Common Units issued to the Sinclair Parties (the “Restricted Units”) to a “lock-up” period commencing on the closing date, during which the Sinclair Parties are prohibited from selling the Restricted Units, except for certain permitted transfers. One-third of such Restricted Units were released from such restrictions on the date that is six months after the closing, one-third of the Restricted Units will be released from such restrictions on the first anniversary of the closing date, and the remainder will be released from such restrictions on the date that is 15 months from the closing date.

In addition, the Unitholders Agreement contains customary registration rights, requiring the Issuer to file, within five business days following the closing date of the HEP Transactions, a shelf registration statement under the Securities Act, to permit the public resale of all the registrable securities held by the Sinclair Parties and to use commercially reasonable efforts to cause such shelf registration statement to be declared effective immediately upon filing, or if the form of such shelf registration statement would not permit immediate effectiveness, to be declared effective as soon as reasonably practicable after the initial filing of the shelf registration statement, but in any event within ninety days following the filing of a registration statement on Form S-1 and within forty-five days after filing of a registration statement (if such Form S-3 is not immediately effective upon filing).

The foregoing description of the Unitholders Agreement does not purport to be complete and is qualified in its entirety by reference to the Unitholders Agreement, which is filed as Exhibit 10.1 hereto and incorporated by reference herein.

SIGNATURES

After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct.

March 24, 2022