Cypress Energy Partners, L.P. Closes Convertible Preferred Unit Placement and Credit Facility Renewal
May 29 2018 - 4:05PM
Business Wire
Cypress Energy Partners, L.P. (NYSE: CELP) (“Cypress”) announced
today that it closed a $43.5 million placement of convertible
preferred units to an affiliate, using the proceeds to pay down
debt and allowing it to extend the maturity of its credit facility
three years from the closing date of the renewal. Cypress
simplified and renewed the facility with its existing bank group.
The amended $90 million revolving credit facility has a $20 million
accordion feature (for a total of $110 million), exclusive of
additional banks that may join the credit facility in the
future.
To ensure the successful refinancing of the credit agreement, an
affiliate of our sponsor made the investment in a private placement
of public equity (the “PIPE”). The conflicts committee of our board
of directors, with the aid of its financial and legal advisors,
negotiated and approved the final terms of the PIPE, which include
standard and customary provisions for similar type arrangements,
and obtained a fairness opinion. Cypress also benefits from no
origination fees and no warrant coverage as is customary on PIPE
investments. After the third anniversary of the closing date, the
holder of the preferred units will have the option to convert the
preferred units into common units on a one-for-one basis. If
certain conditions are met after the third anniversary of the
closing date, Cypress will also have the option to cause the
preferred units to convert to common units. Additionally, within
the first six months after the closing date, Cypress will have the
option to redeem the preferred units with a nominal below market
fee.
Cypress’ Chairman, President and Chief Executive Officer, Peter
C. Boylan III, stated, “I am pleased to announce we have completed
the previously disclosed renewal of our credit facility and PIPE
investment to deleverage Cypress. Our debt has been reduced
approximately 43% from the balance at March 31, 2018 to 3.75x
trailing twelve-month EBITDA (as defined in the credit agreement)
and approximately 3.3x net of cash. Cypress shopped the market
with a financial advisor and no third party offered equal or better
terms. The PIPE investment was $43.5 million, rather than our
original estimate of up to $50 million, as the result of cash
received from the successful divestiture of a saltwater disposal
facility. We continue to believe our organic growth combined
with the interest expense savings associated with having less debt
will allow us to resume an increase to our distribution rate
sometime in 2019. The attractive terms of the PIPE provide us
with significant flexibility with regard to payment-in-kind (“PIK”)
distributions up to 7% of the PIPE distribution, and very flexible
prepayment rights. We continue to evaluate a few strategic
alternative transactions that resulted from hiring a financial
advisor. Over the next couple of months, we will determine if
any of those proposals provide us with additional attractive growth
options.”
This press release includes “forward-looking statements.”
All statements, other than statements of historical facts included
or incorporated herein, may constitute forward-looking statements.
Actual results could vary significantly from those expressed or
implied in such statements, and are subject to a number of risks
and uncertainties. While Cypress believes its expectations, as
reflected in the forward-looking statements, are reasonable,
Cypress can give no assurance that such expectations will prove to
be correct. The forward-looking statements involve risks and
uncertainties that affect operations, financial performance, and
other factors as discussed in filings with the Securities and
Exchange Commission. Other factors that could impact any
forward-looking statements are those risks described in Cypress’s
Annual Report filed on Form 10-K and other public filings. You are
urged to carefully review and consider the cautionary statements
and other disclosures made in those filings, specifically those
under the heading “Risk Factors.” Cypress undertakes no obligation
to publicly update or revise any forward-looking statements except
as required by law.
About Cypress Energy Partners, L.P.
Cypress Energy Partners, L.P. is a master limited partnership
that provides essential midstream services including pipeline
inspection, integrity, and hydrostatic testing services to various
energy companies and their vendors throughout the U.S. and Canada.
Cypress also provides saltwater disposal and environmental services
to upstream energy companies and their vendors in the Bakken region
of the Williston Basin in North Dakota. In all of these business
segments, Cypress works closely with its customers to help them
comply with increasingly complex and strict environmental and
safety rules and regulations, and reduce their operating costs.
Cypress is headquartered in Tulsa, Oklahoma.
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version on businesswire.com: https://www.businesswire.com/news/home/20180529006205/en/
Cypress Energy Partners, L.P.Jeff Herbers,
918-947-5730Chief Accounting
Officerjeff.herbers@cypressenergy.com
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