Business Context and Reporting Period
Hess Midstream LP filed this Form 8-K on August 10, 2021, reporting events beginning August 5, 2021. Its consolidated subsidiary, Hess Midstream Operations LP, issued senior notes and subsequently used the proceeds to repurchase Class B units.
Key Financial and Capital Structure Information
- Debt issuance: $750 million aggregate principal amount of 4.250% senior notes due 2030.
- Estimated annual interest: Approximately $31.9 million based on the stated principal and coupon; the filing does not provide a complete pro forma interest expense or leverage calculation.
- Guarantees: The notes are fully and unconditionally guaranteed by the issuer’s direct and indirect wholly owned subsidiaries that guarantee its senior secured revolving credit facility.
- Use of proceeds: The note proceeds funded the repurchase of 31.25 million Class B units at $24.00 per unit, for total consideration of approximately $750 million.
- Ranking and security: The notes rank equally with existing and future senior unsecured indebtedness, are senior to future subordinated debt, and are effectively subordinated to secured debt to the extent of collateral value. They are structurally subordinated to debt of non-guarantor subsidiaries.
- Revenue, profit, cash flow, margins and liquidity: The filing does not provide operating results, cash flow, margin data, cash balances or a clear post-transaction liquidity figure.
Material Changes Versus the Prior Comparable Period
The filing does not present a prior-period comparison. The material reported changes are the addition of $750 million of senior notes and the repurchase and retirement or cancellation implications of 31.25 million Class B units, as specified in the transaction documents.
Guidance, Outlook, Risks and Unusual Items
- The notes include customary covenants concerning additional debt, restricted payments, affiliate transactions and asset sales.
- Before February 15, 2025, the issuer may redeem up to 40% of the notes at 104.250% of principal using qualifying equity-offering proceeds, subject to conditions. It may also redeem notes using a make-whole premium.
- On or after February 15, 2025, the notes are redeemable at prices specified in the indenture.
- Upon a Change of Control Triggering Event, the issuer must offer to repurchase the notes for 101% of principal plus accrued interest.
- The offering was conducted under Rule 144A and Regulation S. The notes are not registered under the Securities Act or applicable state securities laws.
- No escrow account or security interest in the offering proceeds benefits noteholders.
- After the repurchase, Hess Investments North Dakota LLC and GIP II Blue Holding Partnership, L.P. each held interests representing approximately 90.5% of the Company’s voting interest and 3.6% of its economic interest, and approximately 90.5% of the issuer’s economic interest.
- The filing does not provide management guidance or an operating outlook.
Important Facts for Investors to Verify
- Review the full indenture for covenant definitions, default provisions, redemption terms and guarantor obligations.
- Confirm the accounting treatment and effect of the Class B unit repurchase on units outstanding, earnings per unit and distributions.
- Assess the company’s post-issuance leverage, debt maturities, interest burden and compliance with revolving credit facility requirements.
- Review the extent of collateral securing the issuer’s other debt and the resulting effective subordination of the notes.
- Verify the final closing date and transaction mechanics, because the filing identifies August 5, 2021 for the notes issuance and August 10, 2021 for completion of the repurchase transaction.