USA Compression Partners, LP - Form 8-K Summary
Business Context and Reporting Period
Date of Report: January 15, 2018
Company: USA Compression Partners, LP (Delaware Limited Partnership)
Event: Entry into material definitive agreements to acquire assets from Energy Transfer Partners, L.P. (ETP), restructure equity, and raise capital via a private placement.
Key Financial Metrics and Transaction Values
This filing details a series of transactions rather than periodic financial results (revenue, profit, or cash flow). Key financial figures include:
- Total Acquisition Consideration: Approximately $1.7 billion for CDM Resource Management LLC and CDM Environmental & Technical Services LLC.
- Acquisition Payment Structure:
- Cash: $1.225 billion (subject to adjustments).
- Common Units: 19,191,351 units (valued at approx. $335 million).
- Class B Units: 6,397,965 units (new class, non-distributing for one year).
- Private Placement Proceeds: $500 million aggregate issuance of Series A Preferred Units and Warrants. Net proceeds approx. $495 million after fees.
- Bridge Financing: Commitment for up to $725 million in senior unsecured bridge loans.
- GP Purchase Consideration: $250 million cash for the General Partner interests and 12,466,912 Common Units.
Material Changes and Agreements
The filing announces three primary material changes to the company's capital structure and operations:
- Asset Acquisition: Agreement to acquire CDM assets from ETP, expected to close in the first half of 2018.
- Equity Restructuring: Cancellation of incentive distribution rights (IDRs) and conversion of the General Partner Interest into a non-economic interest. In exchange, the General Partner receives 8,000,000 Common Units.
- Capital Raise: Issuance of $500 million in Series A Perpetual Preferred Units with a 9.75% annual distribution rate and warrants to purchase 15,000,000 Common Units.
Outlook, Risks, and Contingencies
Conditions Precedent: The closing of the acquisition and restructuring is contingent upon the concurrent closing of the GP Purchase and the ability to consummate the Equity Restructuring immediately following the closing. Antitrust waiting periods under the Hart-Scott Rodino Act must also expire.
Preferred Unit Terms:
- Distributions: Cumulative quarterly at 9.75%. For the first five quarters, distributions may be paid in cash or additional Preferred Units (PIK), with a cap on the PIK portion. From the fifth quarter onward, distributions must be paid in cash.
- Conversion/Redemption: Convertible to Common Units starting in year 3 (33%), year 4 (66%), and year 5 (100%). The Partnership may redeem units at 105% of purchase price plus accrued distributions after year 5.
Risks: The filing includes standard disclaimers that representations and warranties are qualified by confidential disclosures and may not reflect the actual state of facts. The bridge loan commitment expires on September 30, 2018, or upon consummation of the acquisition.
Investor Verification Checklist
- Verify the closing date of the $1.7 billion acquisition and the final cash consideration amount after adjustments.
- Confirm the impact of the 9.75% Preferred Unit distributions on the Partnership's distributable cash flow and ability to pay Common Unit distributions.
- Monitor the status of the $725 million bridge loan commitment and the execution of permanent debt financing.
- Review the final terms of the Equity Restructuring to confirm the full cancellation of IDRs and the new General Partner interest structure.
- Check for any regulatory approvals required for the Hart-Scott Rodino waiting period expiration.