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:
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Immediately strengthen PAA's balance sheet and liquidity;
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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;
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Satisfy PAA's equity financing needs for all of 2016 and, in all
material respects, all of 2017;
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Address concerns about PAA's ability to sustain its distribution;
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Resolve investor concerns about PAA's need to routinely access equity
capital markets; and
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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, 866-809-1291
Director,
Investor Relations