Anchors Comprehensive Plan to Materially Enhance Liquidity,
Visibility, and Strategic Capability
- Investment consists of $350 million of
perpetual convertible preferred equity and $650 million of senior
secured notes
- Amending credit facility to reset
borrowing base at $1.8 billion through April 2016
- Resetting common unit distribution at
$0.50 per unit on an annualized basis
- Adding Kurt Talbot, Vice Chairman of
EIG, to Breitburn’s Board of Directors
Breitburn Energy Partners LP (NASDAQ:BBEP) and EIG Global Energy
Partners (“EIG”) today announced definitive agreements whereby
Breitburn will sell $350 million of perpetual convertible preferred
units and $650 million of senior secured notes in simultaneous
private offerings to investment funds managed by EIG, and other
purchasers. These offerings are expected to close on April 8, 2015,
subject to the approval of an amendment to Breitburn’s senior
credit facility and satisfaction of other customary closing
conditions.
“We are pleased that EIG, a preeminent, global, energy-focused
investment firm, has decided to make a sizable strategic investment
in Breitburn. We view the investment as an endorsement of the
quality of our diversified asset portfolio and future growth
prospects,” said Hal Washburn, Chief Executive Officer of
Breitburn. “The series of actions announced today bolster our
financial flexibility and align us with an experienced energy
investor partner to help execute our vision and avail ourselves of
strategic opportunities as they arise. This transaction provides
valuable pro forma excess liquidity for Breitburn and gives us the
ability to opportunistically pursue strategic acquisitions in the
current depressed commodity price environment. Through our 27-year
history, we have emerged from each prior downturn a much stronger
company, and we expect to continue this track record.”
“We are excited to partner with a management team for whom we
have great respect,” said R. Blair Thomas, Chief Executive Officer
of EIG. “We will work with Breitburn with the goal of creating
significant value and distribution growth for unitholders given the
substantial liquidity our investment will provide and the growth
opportunities available in the current market environment.”
The Series B Perpetual Convertible Preferred Units (“Series B
Preferred Units”) will be issued at a price of $7.50, representing
a premium of approximately 27% to Breitburn’s common unit closing
price on March 27, 2015. The Series B Preferred Units will pay
monthly distributions at a rate equal to 8% per annum, payable in
cash or additional Series B Preferred Units at Breitburn’s option
for the first three years, and in cash thereafter. After three
years, the Series B Preferred Units will be convertible at the
option of the holder, and earlier in certain limited circumstances.
After three years, the Series B Preferred Units will be convertible
by Breitburn under certain circumstances. The Series B Preferred
Units will vote on an as-converted basis with Breitburn’s common
units and will have certain other class voting rights. At close,
the Series B Preferred Units will have a combined voting interest
of approximately 18%.
The Senior Secured Notes due May 2020 (the “Senior Notes”) will
pay interest at the rate of 9.25% per annum. The Senior Notes will
be secured on a second-priority basis and be effectively
subordinated to the extent of the value of the collateral to
Breitburn’s credit facility. The Senior Notes will be effectively
senior to Breitburn's existing 2020 senior notes and 2022 senior
notes and any existing and future unsecured indebtedness to the
extent of the value of the collateral securing the Senior Notes.
The Senior Notes are not callable prior to the third anniversary of
the closing date, other than at a customary make-whole premium, and
are callable at par beginning on the fourth anniversary of the
closing date. The Senior Notes do not include any financial
maintenance covenants.
Breitburn expects to use the net proceeds from the private
offerings of approximately $938 million to repay borrowings under
its credit facility, resulting in net borrowings, at closing, of
approximately $1.24 billion.
In conjunction with the private offerings, Breitburn is amending
its credit facility to allow for the issuance of the Senior Notes
and to establish a revised borrowing base of $1.8 billion through
April 2016, subject to limited exceptions.
Simultaneously, Breitburn announced that it intends to reduce
its common distribution to $0.50 per unit on an annualized basis in
conjunction with these private offerings. This lower distribution
rate is part of an overall plan to increase Breitburn’s liquidity
and strategic flexibility for a potentially prolonged market
downturn.
“This distribution reduction is a very difficult, but prudent
undertaking and an important component of our comprehensive
liquidity, cash flow, and value management strategy,” indicated Mr.
Washburn. “We have spent the better part of the past four months
carefully examining our playbook and rewriting it to deliver the
highest unitholder value over the medium to long-term. The steps
that we have outlined today, along with additional actions underway
including meaningful reductions to our operating expenses and
G&A, will substantially increase our distribution coverage and
better position us for long-term value creation, as we believe we
can reinvest this additional liquidity at higher rates of return in
the current environment.”
Breitburn has agreed to appoint Kurt Talbot to its Board of
Directors upon completion of the financing transactions with
EIG.
Jefferies LLC is serving as lead placement agent and sole
financial advisor to Breitburn and Credit Suisse is serving as
financial advisor to EIG.
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 shall not constitute an offer to sell or a
solicitation of an offer to buy the securities described
herein.
Kurt Talbot
Mr. Talbot is the Vice Chairman and Co-Head of the Investment
Committee of EIG. From 2007 through 2014, Mr. Talbot was the Chief
Investment Officer for EIG, having primary responsibility for the
group’s global investment activity. Mr. Talbot first joined EIG in
1990 and played an integral role in the success of EIG’s oil and
gas practice. In 2003, Mr. Talbot left EIG and joined Goldman Sachs
Group, Inc., where he founded and served as head of its E&P
Capital Group. In 2005, Mr. Talbot returned to EIG as Managing
Director and Head of Oil and Gas. Mr. Talbot began his professional
career with Trafalgar House Oil & Gas, a British independent,
holding both engineering and commercial positions in Houston and
London, respectively. Mr. Talbot received a B.S. in Petroleum
Engineering from Louisiana State University and an M.B.A. from
Texas A&M University. Mr. Talbot is a registered professional
engineer in the State of Texas.
About Breitburn Energy Partners
LP
Breitburn Energy Partners LP is a publicly traded independent
oil and gas master limited partnership focused on the acquisition,
development, and production of oil and gas properties throughout
the United States. Breitburn’s producing and non-producing crude
oil and natural gas reserves are located in the following seven
producing areas: the Permian Basin, Michigan/Indiana/Kentucky,
Ark-La-Tex, the Mid-Continent, the Rockies, Florida, and
California. See www.breitburn.com for more information.
About EIG
EIG is a leading institutional investor to the global energy
sector with $14.2 billion under management as of December 31, 2014.
EIG specializes in private investments in energy and energy-related
infrastructure on a global basis. During its 33-year history, EIG
has invested over $18.5 billion in the sector through more
than 300 projects or companies in 35 countries on six
continents. EIG’s clients include many of the leading pension
plans, insurance companies, endowments, foundations and sovereign
wealth funds in the U.S., Asia and Europe. EIG is headquartered in
Washington, D.C. with offices in Houston, London, Sydney, Rio de
Janeiro, Hong Kong and Seoul.
Cautionary Statement Regarding
Forward-Looking Information
This press release contains forward-looking statements. All
statements, other than statements of historical facts, included in
this press release that address activities, events or developments
that Breitburn expects, believes or anticipates will or may occur
in the future are forward-looking statements, including our
expectation that the credit facility will be amended and that the
closing of the sale of the preferred equity and the senior secured
notes will occur. The closing of the sale of the preferred equity
and the senior secured notes are conditioned on both transactions
closing simultaneously and on the satisfaction of conditions,
including conditions that may be out of Breitburn’s control.
Accordingly, there is risk that the closings may not occur. Our
forward-looking statements are based on certain assumptions made by
Breitburn based on management’s experience and perception of
historical trends, current conditions, anticipated future
developments and other factors believed to be appropriate. Such
statements are not guarantees of future performance and are subject
to certain risks, uncertainties and other factors, some of which
are beyond our control and are difficult to predict, including
those which are set forth under the heading “Risk Factors” in our
Annual Report on Form 10-K filed with the Securities and Exchange
Commission, and if applicable, our Quarterly Reports on Form 10-Q
and our Current Reports on Form 8-K.
BBEP-IR
Photos/Multimedia Gallery Available:
http://www.businesswire.com/multimedia/home/20150329005029/en/
Breitburn Energy Partners LPAntonio D’AmicoVice President,
Investor Relations & Government AffairsorJessica TangInvestor
Relations Manager(213) 225-0390