Cypress Environmental Partners Reports New Lender – Argonaut Private Equity
April 22 2022 - 4:17PM
Business Wire
Today, Cypress Environmental Partners, L.P., (NYSE: CELP)
(“Cypress”) reported that an affiliate of Argonaut Private Equity,
which is headquartered in Tulsa, Oklahoma, has acquired 100% of
Cypress’s senior secured debt from the seven existing lenders.
As previously reported, Cypress, with the support of its
lenders, engaged Piper Sandler & Co. to solicit potential debt
and equity investors to submit proposals to recapitalize Cypress in
advance of the May 31, 2022 maturity date of Cypress’s credit
facility. Cypress and its lenders worked together to ensure
business continuity and normal operations for Cypress’s customers
and employees. Piper Sandler reported the results of this extensive
marketing process to the board of directors of Cypress’s general
partner and made a recommendation regarding which proposal was
superior. Cypress’s board of directors and the lenders
independently agreed with this recommendation. Cypress plans to
pursue a court-supervised restructuring with the support of
Argonaut, the new senior secured lender.
The New York Stock Exchange (the “NYSE”) continues to monitor
trading in Cypress’s common units for compliance with the NYSE’s
requirement of a $15 million market capitalization over 30 trading
days; the failure to satisfy this requirement would result in
immediate suspension and commencement of delisting procedures. It
is highly likely that Cypress’s common units would be delisted from
the NYSE in the event of a restructuring proceeding. Such a
proceeding would also likely lead to Cypress’s common and preferred
equity (including accrued and unpaid distributions) having no
value, given the amount of Cypress’s senior secured debt, which is
currently $58.1 million. Further, Cypress would likely initiate the
deregistration process with the Securities and Exchange Commission
and, following completion of that process, its common units would
no longer be publicly traded, and Cypress’s public disclosure
obligations would cease.
CEO PERSPECTIVES
“The Piper Sandler team did a thorough job, approaching
approximately one hundred parties. I want to thank our board of
directors, who have been heavily engaged in helping us evaluate
alternatives to recapitalize Cypress. Argonaut is a highly
respected Tulsa, Oklahoma based private equity firm that we have
known since inception. In 2020 Cypress had discussions with
Argonaut about potentially investing in Cypress. Steve Mitchell,
Argonaut’s CEO and Managing Director, is a highly regarded
successful investor and has been a friend for over a decade.
Argonaut had been interested in the inspection industry for several
years and cares deeply about our employees, customers, and
community. Our board of directors is pleased that Argonaut is
interested in recapitalizing Cypress and growing its business, and
that Argonaut is committed to the Tulsa community. Regrettably, our
equity holders will lose their investment, including insiders
(management, board, and individuals that control the general
partner) who own ~ 76% of our equity (common and preferred units)
and remain fully aligned with the minority unitholders. The
pandemic drove a steep decline in our business that left us with
too much debt. Additionally, the Fair Labor Standards Act (“FLSA”)
litigation that swept through the inspection industry over the last
several years has been expensive and time consuming for our
customers, our competitors, and Cypress. Considering this is a
people-intensive business, Argonaut has requested that some of
Cypress’s current insiders co-invest with them as minority
investors,” said Peter C. Boylan III, Chairman, President, and
CEO.
“Pete and the leadership team have built a great business that
offers excellent paying jobs in Tulsa and in over 40 states,
serving blue chip customers. Cypress enjoyed its best year ever in
2019 prior to COVID and the collapse in energy prices. The FLSA
litigation impacting the entire inspection industry and its
customers is unfortunate but was not unique to Cypress. A
combination of these events left them with too much debt and the
need for recapitalization. Argonaut has been interested in this
industry for several years and we looked at several other
acquisition opportunities over the years. As the new senior secured
lender, we look forward to expeditiously working with Cypress’s
management, board of directors, and advisors on a court-supervised
restructuring. We plan to have Cypress emerge with a strong balance
sheet that will position them for growth. We remain committed to
the Tulsa community and working with the talented management and
employees,” said Steve Mitchell.
ABOUT CYPRESS ENVIRONMENTAL PARTNERS, L.P.
Cypress Environmental Partners, L.P. is a master limited
partnership that provides essential environmental services to the
utility and energy industries, including pipeline &
infrastructure inspection, NDE testing, and in-line integrity
support services throughout the United States. Cypress also
provides environmental services to upstream and midstream energy
companies and their vendors in North Dakota, including water
treatment, hydrocarbon recovery, and disposal into EPA Class II
injection wells to protect our groundwater. Cypress works closely
with its customers to help them protect people, property, and the
environment, and to assist their compliance with increasingly
complex and strict rules and regulations. Cypress is headquartered
in Tulsa, Oklahoma.
CAUTIONARY STATEMENTS
This press release may contain or incorporate by reference
forward-looking statements as defined under the federal securities
laws regarding Cypress Environmental Partners, L.P., including
projections, estimates, forecasts, plans and objectives. Although
management believes that expectations reflected in such
forward-looking statements are reasonable, no assurance can be
given that such expectations will prove to be correct. In addition,
these statements are subject to certain risks, uncertainties and
other assumptions that are difficult to predict and may be beyond
Cypress's control. If any of these risks or uncertainties
materialize, or if underlying assumptions prove incorrect,
Cypress's actual results may vary materially from what management
forecasted, anticipated, estimated, projected or expected.
The key risk factors that may have a direct bearing on Cypress's
results of operations and financial condition are described in
detail in the "Risk Factors" section of Cypress's most recently
filed annual report and subsequently filed quarterly reports with
the Securities and Exchange Commission. Investors are encouraged to
closely consider the disclosures and risk factors contained in
Cypress's annual and quarterly reports filed from time to time with
the Securities and Exchange Commission. The forward-looking
statements contained herein speak as of the date of this
announcement. Cypress undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise, except as required by
applicable securities laws. Information contained in this press
release is unaudited and subject to change.
About Argonaut Private Equity
Founded in 2002, Argonaut Private Equity is a Tulsa-based
private equity firm with more than $2 billion of capital deployed
in direct investments across the manufacturing and industrials
sectors. Argonaut partners with companies to develop a strategy for
accelerating growth and enhancing operations. In January, Argonaut
held the first close for Argonaut Private Equity Fund V, continuing
its history of generating attractive investment returns through a
disciplined approach and aligning interests with those of its
investors and business partners.
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version on businesswire.com: https://www.businesswire.com/news/home/20220422005531/en/
Investors: Cypress Environmental Partners, L.P. - Jeff Herbers –
Vice President & Chief Financial Officer
jeff.herbers@cypressenvironmental.biz or 918-947-5730
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