8-KLeadership ChangesMaterial AgreementsFinancial Events+2

ENTERPRISE PRODUCTS PARTNERS L.P. 8-K Report, Material Agreement (Nov 18, 2008)

Filed November 18, 2008For Securities:EPDEPDU

Summary

Enterprise Products Partners L.P. (EPD) filed an 8-K on November 17, 2008, detailing significant financing activities and an employee incentive program. The company, through its operating subsidiary Enterprise Products Operating LLC, secured approximately $218 million in a Japanese Yen Term Loan maturing March 30, 2009, with an effective fixed U.S. Dollar interest rate of approximately 4.93% after currency swaps. Additionally, EPD entered into a $375 million 364-Day Revolving Credit Agreement maturing November 16, 2009, providing access to U.S. Dollar denominated loans, with options for LIBOR or Base Rate borrowings. Both credit facilities are guaranteed by the parent Partnership and are unsecured. Beyond debt financing, EPD also established an employee incentive program through EPCO Unit L.P. This program utilizes a 'profits interest' in EPD Units to reward certain employees, including named executive officers, by granting them Class B limited partner interests. These interests entitle holders to participate in the appreciation of EPD Units, with distributions and liquidation proceeds structured to prioritize the return of capital and preferred returns to the Class A limited partner (DFI Delaware Holdings L.P.) before benefiting Class B partners. These awards are subject to forfeiture based on employment termination prior to November 13, 2013, with exceptions for specific circumstances, and may eventually lead to EPD reimbursing EPCO for distributions made to Class B partners.

Key Highlights

  • 1Enterprise Products Operating LLC secured a ¥20.7 billion (approx. $218 million USD) Japanese Yen Term Loan maturing March 30, 2009, with an effective fixed USD interest rate of ~4.93% after currency swaps.
  • 2The Partnership entered into a $375 million 364-Day Revolving Credit Agreement maturing November 16, 2009, providing flexible U.S. Dollar borrowing options (LIBOR or Base Rate).
  • 3Both the Term Loan and Revolving Credit Agreement are unsecured but are guaranteed by Enterprise Products Partners L.P.
  • 4The company established EPCO Unit L.P. as an employee incentive program using 'profits interest' in EPD Units for key employees and executive officers.
  • 5Class B limited partner interests in EPCO Unit LP are designed as long-term incentives and entitle holders to participate in EPD Unit appreciation.
  • 6Awards in EPCO Unit LP are subject to forfeiture if employment terminates before November 13, 2013, with exceptions for death, disability, and certain retirements.
  • 7EPD may be required to amend its administrative services agreement to reimburse EPCO for distributions made to Class B partners of EPCO Unit LP.

Frequently Asked Questions

The new Japanese Yen Term Loan and the U.S. Dollar Revolving Credit Agreement are designed to provide Enterprise Products Operating LLC with additional financing options and liquidity. The Yen loan effectively hedges currency risk into a fixed U.S. Dollar rate, while the revolving credit facility offers flexible borrowing to meet potential short-term needs.

No, neither the Japanese Yen Term Loan nor the 364-Day Revolving Credit Agreement are secured by any collateral. However, both obligations are guaranteed by the parent company, Enterprise Products Partners L.P.

EPCO Unit L.P. is a newly formed entity designed as an incentive compensation arrangement. It allows certain employees, including named executive officers, to receive 'profits interest' in EPD Units through Class B limited partner interests. This structure allows them to benefit from the future appreciation in the value of EPD Units without requiring an upfront capital contribution, serving as a long-term retention and performance incentive.

Initially, EPD expects to recognize a portion of the fair value of these equity-based awards as a non-cash expense. However, there's a possibility that EPD may need to amend its administrative services agreement to reimburse EPCO for any cash distributions made by EPCO Unit L.P. to the Class B partners, which could represent a future cash outflow for the Partnership.