Summit Midstream plans $35 million loan, suspension of distributions

By Wendy Van Sickle

Columbus, Ohio, May 4 – Summit Midstream Partners, LLC plans to use proceeds of a $35 million first-lien senior secured loan from Energy Capital Partners II, LLC to enhance its liquidity position and for general corporate purposes, according to a news release.

Summit Midstream Partners, LP (SMLP) announced on Monday that it has entered into a definitive agreement to acquire Summit Midstream Partners, LLC, the privately held company that indirectly owns SMLP's general partner, Summit Midstream GP, LLC, from Energy Capital Partners II.

SMLP will also acquire 5.9 million SMLP common units owned separately by Energy Capital Partners II. The total purchase price will be $35 million in cash plus warrants covering 10 million SMLP common units

At closing, Energy Capital Partners II will loan the full $35 million of cash proceeds to SMLP under a first-lien senior secured credit agreement, which will bear annual interest of 8%. The loan will mature on March 31, 2021.

Summit Midstream Partners Holdings, LLC will continue as the borrower under a $158.2 million term loan, which matures in May 2022, the release notes.

SMLP also plans to immediately suspend its distributions payable on its common units and its 9.5% series A fixed-to-floating rate cumulative redeemable perpetual preferred units, which will enable SMLP to retain an additional $76 million of cash a year, according to the release.

SMLP plans to use this extra cash to de-lever its balance sheet, enhance liquidity and increase financial flexibility. The unpaid distributions on the preferred units will continue to accrue.

“SMLP's announcement to acquire our general partner interests, place SMLP's control in the hands of a majority independent board and concurrently suspend our common distributions as well as payment on our preferred distributions sets up SMLP for long-term success,” Heath Deneke, SMLP president and chief executive officer, said in the release.

“The suspension of approximately $76 million of common distributions and cash payment of our preferred distributions combined with the $35 million loan from [Energy Capital Partners II] enhances SMLP's near term liquidity position and creates significant financial flexibility to help the business navigate through a turbulent and volatile time for the entire oil and gas industry.”

Summit, based in the Woodlands, Texas, is an owner and operator of midstream energy infrastructure assets.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.