ET

Business Context and Reporting Period

Company: Energy Transfer Equity, L.P.
Filing Type: Form 8-K (Current Report)
Date of Report: October 17, 2011
Context: The filing reports the entry into a material definitive agreement to secure financing for the proposed merger with Southern Union Company ("SUG"). On July 19, 2011, the Partnership entered into a Second Amended and Restated Agreement and Plan of Merger with SUG. This 8-K details the execution of a senior bridge term loan credit agreement on October 17, 2011, to fund the transaction.

Key Financial Metrics and Debt Structure

Debt Facility: Senior Bridge Term Loan Credit Agreement.
Principal Amount: Up to $3.7 billion (unsecured).
Term: 364 days, with an option to extend to 15 months subject to conditions and fees.
Interest Rates:

• Days 1-60: Alternate Base Rate + 3.00% OR Adjusted LIBO (1 or 2-month) + 4.00% (LIBO floor 1.0%).
• Day 61 onwards: Rating-based rate (10.5% to 13.0%) plus the lesser of 1.0% or a basis point adjustment based on the Credit Suisse High Yield Index.

Financial Covenants:

• Maximum Debt to EBITDA: 5.5 to 1.0.
• Maximum Net Debt to EBITDA: 6.5 to 1.0.
• Minimum EBITDA to Consolidated Fixed Charges: 1.5 to 1.0.

Use of Proceeds: Financing the Merger, repaying existing indebtedness, and paying transaction costs.

Material Changes and Unusual Items

Material Definitive Agreement: The Partnership entered into a new credit agreement with Credit Suisse AG as administrative agent. This represents a significant increase in potential leverage to facilitate the acquisition of SUG.
Prepayment Terms: The Partnership may voluntarily prepay loans without premium or penalty (subject to breakage costs for LIBO loans). Mandatory prepayments are required from net cash proceeds of asset sales and new indebtedness issuances.
Default Consequences: Upon an event of default, interest accrues at the applicable rate plus 2.00%, and lenders may accelerate payments.

Guidance, Outlook, and Risks

Outlook: The filing contains forward-looking statements regarding the anticipated benefits of the Merger and a related "Citrus Merger" involving Citrus Corp.
Risks and Contingencies:

• Conditions to closing the Merger or Citrus Merger may not be met.
• Anticipated benefits may not be fully realized.
• Interest rates post-day 60 are variable and tied to credit ratings, potentially ranging from 10.5% to 13.0% plus additional spreads.
• Strict negative covenants restrict future mergers, indebtedness, liens, acquisitions, and dividends.

Management Commentary: The filing directs investors to the definitive proxy statement/prospectus for detailed information on the transaction and participant interests.

Investor Verification Checklist

• Verify the satisfaction of conditions precedent required to draw down the $3.7 billion facility.
• Review the definitive proxy statement/prospectus for details on the Merger terms and SUG stockholder approval status.
• Monitor the Partnership's credit ratings (S&P and Moody's) as they directly impact the interest rate after the first 60 days.
• Confirm compliance with the new financial covenants (Debt/EBITDA and Fixed Charge Coverage) post-transaction.
• Assess the impact of the 10.5% to 13.0% interest rate range on future cash flows if the bridge loan is not refinanced quickly.