Business Context and Reporting Period
This Form 8-K, filed on May 23, 2011, by Exterran Holdings, Inc. (Exterran), reports the entry into a Material Definitive Agreement. The filing details a Contribution, Conveyance and Assumption Agreement executed on May 23, 2011, between Exterran and its subsidiaries, including Exterran Partners, L.P. (the Partnership). The transaction is expected to close in June 2011, subject to regulatory approval and other standard conditions.
Key Financial Metrics and Transaction Details
- Debt Assumption: EXLP Operating will assume and repay $159.4 million of Exterran's debt.
- Equity Issuance: The Partnership will issue approximately 2.5 million common units (or cash equivalent) to MLP LP LLC or its affiliates.
- General Partner Units: The Partnership will issue approximately 51,000 general partner units to Exterran General Partner, L.P. (GP) to maintain its approximate 2.0% general partner interest.
- Asset Transfer: The transaction involves the conveyance of compression services contracts, compression equipment, and a natural gas processing plant with a capacity of 8 million cubic feet per day.
- Ownership Structure: Exterran holds an indirect 39% limited partner interest and an approximate 2% general partner interest in the Partnership.
Material Changes and Agreements
The filing outlines significant changes to the operational and financial relationship between Exterran and the Partnership through an amendment and restatement of the Omnibus Agreement:
- SG&A Cost Cap Increase: The cap on selling, general, and administrative costs allocated to the Partnership is increased from $7.6 million per quarter to $9.0 million per quarter.
- Term Extension: The term of the caps on cost reimbursements is extended by one year, terminating on December 31, 2012.
- Exclusion: Operations of the natural gas processing plant will not be subject to the operating cost cap.
Outlook, Risks, and Contingencies
The transaction is contingent upon the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the execution of the amended Omnibus Agreement. Management includes forward-looking statements regarding the expected closing in June 2011, noting that actual results may differ due to regulatory reviews and failure to satisfy closing conditions. The filing disclaims any obligation to update these forward-looking statements.
Investor Verification Checklist
- Verify the final closing date of the transaction, currently expected in June 2011.
- Confirm the successful expiration of the Hart-Scott-Rodino waiting period.
- Review the full text of the Contribution Agreement (Exhibit 2.1) for specific asset valuations and covenants.
- Monitor the execution of the amended Omnibus Agreement to confirm the new SG&A cost caps and termination dates.
- Assess the impact of the $159.4 million debt assumption on Exterran's balance sheet and liquidity.