8-KMaterial AgreementsSecurities & Listing

Targa Resources Corp. 8-K Report, Material Agreement (Feb 24, 2016)

Filed February 24, 2016For Securities:TRGP

Summary

Targa Resources Corp. (TRGP) announced a significant private placement of Series A Preferred Stock with Stonepeak Target Holdings LP, an affiliate of Stonepeak Infrastructure Partners. The company will issue 500,000 shares of Series A Preferred Stock for $1,030.00 per share, with proceeds intended for debt repayment and general corporate purposes. This transaction also includes the issuance of substantial warrants to Stonepeak, exercisable into TRGP's common stock. The Series A Preferred Stock carries a preferential dividend rate of 9.5% annually and ranks senior to common stock in terms of distributions and liquidation. The agreement details provisions for dividend accrual, conversion rights into common stock after a specified period (twelfth anniversary), and redemption rights by the company or Stonepeak, particularly in the event of a change of control or dividend trigger. Stonepeak will also receive board observer rights, with potential for a board seat under certain conditions, and pre-emptive rights on certain future equity issuances.

Key Highlights

  • 1Targa Resources entered into a Series A Preferred Stock Purchase Agreement with Stonepeak Target Holdings LP for a private placement of 500,000 shares.
  • 2The transaction involves the issuance of Series A Preferred Stock for $1,030.00 per share, with net proceeds used for debt repayment and general corporate purposes.
  • 3Stonepeak will receive warrants to purchase 7,020,000 shares of common stock at $18.88 per share and an additional 3,385,000 shares at $25.11 per share.
  • 4The Series A Preferred Stock has a senior liquidation preference and accrues an annual dividend of 9.5%.
  • 5Key provisions include dividend payment flexibility (in-kind accrual with additional warrants), conversion rights into common stock after 12 years, and redemption options for the company and Stonepeak.
  • 6Stonepeak will receive board observer rights and potentially a board seat under specific dividend or default triggers.
  • 7The agreement includes customary representations, warranties, and covenants, and the issuance is being made under an exemption from registration requirements (Section 4(a)(2)).

Frequently Asked Questions

The primary purpose of this private placement is to raise capital for Targa Resources Corp. to repay existing indebtedness and for general corporate purposes. This infusion of capital is intended to strengthen the company's financial position.

The Series A Preferred Stock carries an annual dividend rate of 9.5% and ranks senior to common stock regarding distributions and liquidation. Dividends may be accrued and added to the liquidation preference, with additional warrants issued in such cases. The stock has conversion rights into common stock after 12 years and redemption options for both Targa Resources and Stonepeak, especially in change-of-control scenarios.

The issuance of preferred stock and warrants can dilute existing common shareholders' ownership percentage and potentially earnings per share. However, the capital raised is intended to improve the company's financial health, which could indirectly benefit common shareholders in the long term. The terms also include potential limitations on conversions and exercises to manage dilution, and the company intends to seek stockholder approval for issuances exceeding certain thresholds.

Stonepeak receives significant rights, including board observer status (with potential for a board seat), pre-emptive rights on certain future equity issuances, and specific redemption rights. These rights provide Stonepeak with a degree of influence and protection over their investment.