8-KAcquisitions & DispositionsMaterial AgreementsFinancial Events+4

Energy Transfer LP 8-K Report, Material Agreement (Mar 28, 2012)

Filed March 28, 2012For Securities:ETET-PI

Summary

This 8-K filing by Energy Transfer Equity, L.P. (ETE) on March 28, 2012, primarily reports on the completion of two significant merger transactions: the "Citrus Merger" involving Energy Transfer Partners, L.P. (ETP) and CrossCountry Energy, LLC (CCE), and the "Sigma Merger" involving ETE and Southern Union Company. The filing details the amendments to merger agreements, the entry into material definitive agreements including guarantees and support agreements related to the Citrus Merger, and the closing of both transactions on March 26, 2012. Additionally, ETE entered into a new $2 billion Senior Secured Term Loan Agreement and amended its existing revolving credit facility, which became effective on March 26, 2012. The document also notes the termination of an undrawn senior bridge term loan credit agreement and provides details on changes to limited partnership and limited liability company agreements to enhance corporate separateness. For investors, the key takeaways are the successful closing of these major acquisitions, which will expand Energy Transfer's asset base and operations. The new debt financing from the Term Loan Agreement provides substantial liquidity, partially funding the Sigma Merger and other related expenses. The amendments to the credit facilities and partnership agreements reflect ongoing corporate restructuring and debt management. Investors should pay close attention to the terms of the new credit facilities, including covenants and secured assets, as well as the consideration paid in the Sigma Merger (cash vs. ETE units), which impacts ETE's capitalization and future distribution potential.

Key Highlights

  • 1Completion of the "Sigma Merger": ETE successfully merged with Southern Union Company, with Southern Union becoming a wholly owned subsidiary of ETE. Southern Union stockholders received either $44.25 cash or ETE common units per share, with a mix of cash (approx. 54%) and units (approx. 46%) issued.
  • 2Completion of the "Citrus Merger": ETP successfully merged with CrossCountry Energy, LLC (CCE), with CCE becoming a wholly owned subsidiary of ETP. ETP contributed $1.895 billion in cash and issued approximately $105 million in ETP common units to acquire CCE.
  • 3New $2 Billion Senior Secured Term Loan: ETE entered into a new $2 billion term loan facility with Credit Suisse, effective March 26, 2012, maturing in March 2017, to partially fund the Sigma Merger and repay existing debt.
  • 4Amended Revolving Credit Facility: ETE amended and restated its senior secured revolving credit facility, maintaining a $200 million commitment with an option to increase up to $300 million, with a maturity of September 2015.
  • 5Termination of Bridge Loan: ETE terminated its undrawn senior bridge term loan credit agreement dated October 17, 2011.
  • 6Partnership Agreement Amendments: Amendments were made to ETP's and ETE's partnership and LLC agreements, including ETP's general partner relinquishing $13.75 million in quarterly distributions for 16 quarters to enhance corporate separateness.
  • 7Guarantee and Support Agreements: ETP Finance Sub entered into a Citrus Guarantee for ETP's senior notes, and PEPL Holdings entered into a support agreement for ETP Finance Sub's obligations.

Frequently Asked Questions

On March 26, 2012, ETE completed the "Sigma Merger" with Southern Union Company, making Southern Union a subsidiary. Simultaneously, ETP completed the "Citrus Merger" with CrossCountry Energy, LLC (CCE), making CCE a subsidiary of ETP. These closings were accompanied by the entry into material agreements, including new credit facilities and amendments to existing ones.

The Sigma Merger was partially funded by a new $2 billion Senior Secured Term Loan Agreement entered into by ETE. Southern Union shareholders had the option to receive either $44.25 in cash or one ETE common unit for each share of Southern Union common stock. Approximately 54% elected cash, and 46% will receive ETE common units.

The new $2 billion Senior Secured Term Loan and the amended and restated $200 million revolving credit facility provide ETE with significant liquidity. The term loan was used to help fund the acquisition of Southern Union and refinance existing debt. Both facilities have specific covenants, including leverage ratios, that investors should monitor as they impact the company's financial flexibility.

Yes, as part of the Citrus Merger closing, ETP's general partner (a subsidiary of ETE) agreed to relinquish its right to receive $13.75 million in distributions per quarter for 16 consecutive quarters, starting March 31, 2012. This was done to enhance corporate separateness.