Martin Midstream prepares for growth mode by shoring up its liquidity

By Susanna Moon

Chicago, May 13 - Martin Midstream Partners LP will tap into $50 million to $100 million of growth capital for potential opportunities this year after bolstering its credit profile in the spring, Joe McCreery, vice president of finance and head of investor relations for the company, said during a presentation Thursday at the National Association of Publicly Traded Partnerships.

"We're going to be pretty aggressive on that," McCreery said. He spoke at the 2010 Annual Master Limited Partnership Investor Conference in Greenwich, Conn.

"Really this is a new day for Martin in that we have a strengthened balance sheet and ample liquidity."

Martin Midstream completed an equity offering in February and closed its first high-yield senior note issuance in March, which provided liquidity and helped pay down debt from its revolving credit facility.

In conjunction with the high-yield offering, the company amended its revolving credit facility, decreasing the commitment size to $275 million from $350 million, bifurcating the financial covenants to a funded debt, total debt and senior secured debt covered package, and reducing pricing on its grid by 50 basis points.

"Really the key driver with the high-yield notes [was that] we had some pretty strenuous capital expenditure restrictions that were lifted in associated with this high-yield offering," McCreery said.

Martin Midstream has managed its leverage conservatively by seeking growth opportunities in a disciplined manner through acquisitions of modest size followed up with "equities to keep the leverage in check," he said.

"We have maintained a target leverage between 3 and 3.5 times, and we've been successful doing that by tapping the equity window each and every time we've made an acquisition and, of course, we had a follow-on offering in February of this year to delever on the heels of an acquisition we made in January," McCreery noted.

The company also maintains a strong commodity-risk management strategy with very little direct commodity exposure, he noted.

Diversified operations provide strength

Ruben Martin, president and chief executive officer of the company, noted during the presentation that one of the company's strengths is its diversified operations with four distinct business lines.

"There's a lot of commonality that binds the business lines but they do have separate drivers...so if there's any one problem in any one of the business segments for that particular time, the effect is greatly reduced on the overall partnership income," Martin said.

"We're touching the barrel in a lot of different aspects, and it gives us a lot of flexibility concerning our fees."

The CEO said he likes the company's growth prospects, with a focus on the lowest multiple, highest return projects.

"Credit's good now that we have the deal," Martin said. "We have the funds available for the growth capex and for our acquisitions if the right one comes along."

The Kilgore, Texas-based company has diverse energy operations focused primarily in the U.S. Gulf Coast region.

The company's business lines include terminalling and storage services for petroleum products and by-products, natural gas gathering and processing and NGL distribution services. It also provides sulfur and sulfur-based products processing, manufacturing, marketing and distribution.

In addition Martin Midstream provides marine transportation services for petroleum products and byproducts.

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