Item 2.01 Completion of Acquisition or Disposition of Assets.
Purchase and Sale Agreement
On April 10, 2019, EQM Midstream Partners, LP, a Delaware limited partnership (EQM) and a subsidiary of Equitrans Midstream Corporation, a Pennsylvania corporation (ETRN), consummated its previously announced acquisition (the Acquisition) from North Haven Infrastructure Partners II Buffalo Holdings, LLC, a Delaware limited liability company (NHIP) and an affiliate of Morgan Stanley Infrastructure Partners, of (i) a 60% Class A interest in Eureka Midstream Holdings, LLC, a Delaware limited liability company, and (ii) a 100% interest in Hornet Midstream Holdings, LLC, a Delaware limited liability company, pursuant to that certain Purchase and Sale Agreement, dated as of March 13, 2019, by and between EQM and NHIP (the Purchase and Sale Agreement). The cash purchase price was approximately $1.03 billion (the Acquisition Purchase Price), subject to certain adjustments set forth in the Purchase and Sale Agreement. EQM funded the Acquisition Purchase Price with the net proceeds from the Private Placement (as defined below), which closed simultaneously with the Acquisition.
Convertible Preferred Unit Purchase Agreement
As previously disclosed, EQM entered into a Convertible Preferred Unit Purchase Agreement (the Purchase Agreement) on March 13, 2019, with certain affiliates of BlackRock, Inc., GSO Capital Partners LP, Magnetar Financial LLC, The Carlyle Group and Foundation Infrastructure Partners (collectively, the Original Purchasers), to issue and sell in a private placement (the Private Placement) an aggregate of 22,554,851 Series A Perpetual Convertible Preferred Units representing limited partner interests in EQM (the Initial Series A Preferred Units) for a cash purchase price of $48.77 per unit (the Series A Preferred Unit Purchase Price), resulting in total gross proceeds of approximately $1.1 billion. In accordance with the Purchase Agreement, on March 18, 2019, EQM entered into Joinder Agreements to the Purchase Agreement (collectively, the Joinder Agreements) with certain additional institutional investors identified therein and affiliates of Magnetar Financial LLC (together with the Original Purchasers, the Purchasers) to issue and sell in the Private Placement an aggregate of 2,050,440 additional Series A Perpetual Convertible Preferred Units (together with the Initial Series A Preferred Units, the Series A Preferred Units) at the Series A Preferred Unit Purchase Price, resulting in additional gross proceeds of approximately $100 million. Pursuant to the Purchase Agreement and the Joinder Agreements, EQM issued and sold the Series A Preferred Units to the Purchasers on April 10, 2019. EQM used a portion of the proceeds from the Private Placement to fund the Acquisition Purchase Price and to pay certain fees and expenses related to the Acquisition, and intends to use the remainder of the proceeds for general partnership purposes.
Registration Rights Agreement
On April 10, 2019, in connection with the closing of the Private Placement, EQM entered into a Registration Rights Agreement (the Registration Rights Agreement) with the Purchasers relating to the registered resale of the Series A Preferred Units issued and sold in the Private Placement (the Series A Preferred Unit Registrable Securities) and the common units representing limited partner interests in EQM issuable upon conversion of the Series A Preferred Units (the Common Units and, together with the Series A Preferred Unit Registrable Securities, the Registrable Securities). Pursuant to the Registration Rights Agreement, EQM is required to use its commercially reasonable efforts to file an initial registration statement for the resale of the Registrable Securities and to cause such registration statement to become effective no later than April 10, 2021. If EQM fails to cause such registration statement to become effective by that date, EQM will be required to pay certain amounts to the holders of the Registrable Securities as liquidated damages.
Additionally, pursuant to the Registration Rights Agreement and upon request of certain holders of Registrable Securities, EQM is required to use its commercially reasonable efforts to obtain and maintain a rating from a nationally recognized rating agency with respect to the Series A Preferred Units with certain costs associated therewith to be borne by such requesting holders.
In certain circumstances, and subject to certain qualifications and limitations, holders of Registrable Securities will have piggyback registration rights on offerings of Common Units initiated by certain other holders, and certain of the Purchasers will have the right to request that EQM initiate up to an aggregate of six Underwritten Offerings (as defined in the Registration Rights Agreement) when they reasonably expect certain gross proceeds from any such Underwritten Offering. The rights under the Registration Rights Agreement will generally cease on the second anniversary of the date on which all Series A Preferred Units have been converted into Common Units unless such rights cease earlier pursuant to the terms of the Registration Rights Agreement.
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