PAA’s General Partner Also Agrees to Modify
IDRs
Plains All American Pipeline, L.P. (NYSE:PAA) today announced
that it has received binding commitments for the purchase of
approximately $1.5 billion of equity capital. The purchasers will
acquire approximately 56 million units of a newly authorized series
of 8% Perpetual Series A Convertible Preferred Units (the
“Preferred Units”) at a price of $26.25 per unit. The Preferred
Units will bear an annual distribution of $2.10 per unit. After two
years, the Preferred Units are convertible at the purchasers’
option into PAA common units on a one for one basis (subject to
customary anti-dilution adjustments), and are convertible at PAA’s
option in certain circumstances after three years. Closing of the
transaction is scheduled to occur prior to the end of January
2016.
The net proceeds, after deducting offering expenses and
including the general partner’s proportionate 2% equity
contribution, are approximately $1.5 billion. PAA expects to use
the proceeds for capital expenditures, repayment of debt, and
general partnership purposes. The primary purchasers include
affiliates of EnCap Investments L.P., EnCap Flatrock Midstream, The
Energy Minerals Group, Kayne Anderson Capital Advisors, L.P., and
First Reserve Advisors, L.L.C.
In connection with this transaction, PAA’s general partner
agreed to modify its incentive distribution rights (“IDRs”). As a
result of this modification, when the Preferred Units convert into
PAA common units, the IDRs associated with the resulting common
units will only participate in distribution growth above PAA’s
current distribution level of $2.80 per converted common unit.
Assuming all Preferred Units convert into PAA common units, the
modification represents a permanent IDR reduction of approximately
$90 million per year.
“We believe this transaction is extremely positive for PAA and
all of its stakeholders,” said Greg Armstrong, Chairman and Chief
Executive Officer. “This ‘one and done’ transaction enables PAA to
accomplish a number of objectives, including:
- Immediately strengthen PAA’s balance
sheet and liquidity;
- Reinforce PAA’s commitment to
maintaining mid-to-high BBB and Baa credit ratings and fund its
capital program in a very debt friendly manner;
- Satisfy PAA’s equity financing needs
for all of 2016 and, in all material respects, all of 2017;
- Address concerns about PAA's ability to
sustain its distribution;
- Resolve investor concerns about PAA’s
need to routinely access equity capital markets; and
- Substantially insulate PAA from further
capital market disruptions.”
In a separate release, PAA also announced a quarterly cash
distribution of $0.70 per limited partner unit ($2.80 per unit on
an annualized basis), and Plains GP Holdings (NYSE:PAGP) announced
a quarterly cash distribution of $0.231 per Class A share ($0.924
per Class A share on an annualized basis). Both distributions are
unchanged from the quarterly distributions paid in November
2015.
PAA will conduct a conference call on Tuesday, January 12, 2016
to discuss the Preferred Unit transaction and PAA’s outlook for
2016 and beyond. The conference call will be held at 10:00 a.m. ET
(9:00 a.m. CT).
Conference Call Access Instructions
Access to the live conference call is available by dialing toll
free (800) 230-1085. International callers should dial (612)
288-0329. No password is required. To access the slide presentation
accompanying the conference call, please go to
www.plainsallamerican.com, navigate to "Investor Relations," select
"PAA," then "News & Events," and then "Conference Calls." The
slide presentation will be available a few minutes prior to the
call at the above referenced website.
Telephonic Replay Instructions
To listen to a telephonic replay of the conference call, please
dial (800) 475-6701, or (320) 365-3844 for international callers,
and enter replay access code 383873. The replay will be available
beginning Tuesday, January 12, 2016, at approximately
12:30 p.m. ET and will continue until 12:59 a.m. ET on
February 12, 2016.
The securities offered in the private placement have not been
registered under the Securities Act of 1933, as amended (the
“Securities Act”), or any state securities laws and may not be
offered or sold in the United States absent registration or an
applicable exemption from registration requirements of the
Securities Act and applicable state laws.
This press release is neither an offer to sell nor a
solicitation of an offer to purchase the securities described
herein.
Plains All American Pipeline, L.P. is a publicly traded master
limited partnership that owns and operates midstream energy
infrastructure and provides logistics services for crude oil,
natural gas liquids ("NGL"), natural gas and refined products. PAA
owns an extensive network of pipeline transportation, terminalling,
storage and gathering assets in key crude oil and NGL producing
basins and transportation corridors and at major market hubs in the
United States and Canada. On average, PAA handles over 4.4 million
barrels per day of crude oil and NGL in its Transportation segment.
PAA is headquartered in Houston, Texas.
Plains GP Holdings, L.P. is a publicly traded entity that owns
an interest in the general partner and incentive distribution
rights of Plains All American Pipeline, L.P., one of the largest
energy infrastructure and logistics companies in North America.
PAGP is headquartered in Houston, Texas.
Forward Looking Statements
Except for the historical information contained herein, the
matters discussed in this release consist of forward-looking
statements that involve certain risks and uncertainties that could
cause actual results or outcomes to differ materially from results
or outcomes anticipated in the forward-looking statements. These
risks and uncertainties include, among other things, failure to
implement or capitalize, or delays in implementing or capitalizing,
on planned growth projects; declines in the volume of crude oil,
refined product and NGL shipped, processed, purchased, stored,
fractionated and/or gathered at or through the use of our assets,
whether due to declines in production from existing oil and gas
reserves, failure to develop or slowdown in the development of
additional oil and gas reserves, whether from reduced cash flow to
fund drilling or the inability to access capital, or other factors;
the effects of competition; unanticipated changes in crude oil
market structure, grade differentials and volatility (or lack
thereof); environmental liabilities or events that are not covered
by an indemnity, insurance or existing reserves; fluctuations in
refinery capacity in areas supplied by our mainlines and other
factors affecting demand for various grades of crude oil, refined
products and natural gas and resulting changes in pricing
conditions or transportation throughput requirements; the
occurrence of a natural disaster, catastrophe, terrorist attack or
other event, including attacks on our electronic and computer
systems; tightened capital markets or other factors that increase
our cost of capital or limit our ability to obtain debt or equity
financing on satisfactory terms to fund additional acquisitions,
expansion projects, working capital requirements and the repayment
or refinancing of indebtedness; the currency exchange rate of the
Canadian dollar; continued creditworthiness of, and performance by,
our counterparties, including financial institutions and trading
companies with which we do business; maintenance of our credit
rating and ability to receive open credit from our suppliers and
trade counterparties; weather interference with business operations
or project construction, including the impact of extreme weather
events or conditions; the availability of, and our ability to
consummate, acquisition or combination opportunities; the
successful integration and future performance of acquired assets or
businesses and the risks associated with operating in lines of
business that are distinct and separate from our historical
operations; increased costs, or lack of availability, of insurance;
non-utilization of our assets and facilities; the effectiveness of
our risk management activities; shortages or cost increases of
supplies, materials or labor; the impact of current and future
laws, rulings, governmental regulations, accounting standards and
statements and related interpretations; fluctuations in the debt
and equity markets, including the price of our units at the time of
vesting under our long-term incentive plans; risks related to the
development and operation of our assets, including our ability to
satisfy our contractual obligations to our customers; inability to
recognize current revenue attributable to deficiency payments
received from customers who fail to ship or move more than minimum
contracted volumes until the related credits expire or are used;
factors affecting demand for natural gas and natural gas storage
services and rates; general economic, market or business conditions
and the amplification of other risks caused by volatile financial
markets, capital constraints and pervasive liquidity concerns; and
other factors and uncertainties inherent in the transportation,
storage, terminalling and marketing of crude oil and refined
products, as well as in the storage of natural gas and the
processing, transportation, fractionation, storage and marketing of
natural gas liquids as discussed in the Partnerships' filings with
the Securities and Exchange Commission.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160112005833/en/
Plains All American Pipeline, L.P.Ryan Smith,
866-809-1291Director, Investor Relations
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