SAN ANTONIO–(BUSINESS WIRE)–NuStar Energy L.P. (NYSE: NS) (the “Partnership”) announced today that it has entered into an agreement to sell approximately $590 million of newly issued Series D Cumulative Convertible Preferred Units representing limited partner interests in the Partnership (the “Preferred Units”) in a private placement to investment funds managed or sub-advised by EIG Management Company, LLC and FS/EIG Advisor, LLC, the advisor to FS Energy & Power Fund (“EIG”). In addition, the Partnership has entered into an agreement to sell approximately $10 million of Common Units to William E. Greehey, Chairman of the Board of Directors (the “Board”) of NuStar GP, LLC, the general partner of the Partnership’s general partner. Neither the sale of the Common Units nor the sale of the Preferred Units is conditioned upon the other. The Partnership expects to use the aggregate net proceeds from the sale of the Preferred Units and the Common Units for general partnership purposes, including the repayment of debt and the funding of growth capital expenditures.
Preferred Unit Offering to EIG
The purchasers will acquire 23,246,650 Preferred Units at a price of $25.38 per Preferred Unit. At the initial closing, scheduled to occur on June 29, 2018, the purchasers will purchase $400 million of Preferred Units. The purchasers have agreed to purchase the balance of the Preferred Units at a second closing, scheduled to occur on July 13, 2018. Each closing of the sale of the Preferred Units is subject to the satisfaction of customary closing conditions.
The terms of the Preferred Units include:
- Distributions of 9.75% per annum for the first two years, 10.75% per annum for years three through five, and the greater of 13.75% per annum or the common unit distribution rate thereafter.
- The Preferred Units are convertible into common units representing limited partner interests in the Partnership (the “Common Units”) on a one-for-one basis at the purchasers’ option after two years.
- The Preferred Units are redeemable by the Partnership after five years, and the purchasers can cause the Partnership to redeem the Preferred Units after 10 years.
- The Preferred Units will rank pari passu with the Partnership’s outstanding Series A, Series B and Series C Preferred Units and senior to the Partnership’s Common Units, with respect to distribution rights and upon liquidation.
Common Unit Offering to Mr. Greehey
Mr. Greehey will acquire 413,736 Common Units at a price of $24.17 per Common Unit. The Nominating/Governance & Conflicts Committee of the Board approved the issuance and sale of the Common Units to Mr. Greehey, and the closing of the sale of the Common Units is scheduled to occur on June 29, 2018, subject to the satisfaction of customary closing conditions.
“Earlier this year, we launched a step-by-step, comprehensive plan to position NuStar for long-term financial strength and sustainable future growth, and this financing is a key component of that plan,” said Brad Barron, President and Chief Executive Officer of the Partnership. “We are especially gratified by the fact that our Chairman, Bill Greehey, has decided to participate in our financing with his purchase of NuStar common units, further demonstrating his confidence in, and continued support of, our plan.
“The capital we will raise with this financing, together with the proceeds from our planned sale of approximately $200-400 million of non-core assets, will allow us to accomplish several important objectives, including:
- Reducing NuStar’s debt and lowering our leverage;
- Strengthening NuStar’s balance sheet and liquidity; and
- Funding NuStar’s 2018 and 2019 capital programs.
“This financing represents a significant milestone in the successful execution of our plan for 2018, which we believe will allow NuStar to successfully de-lever and deliver strong, sustainable distribution coverage. In addition, the financing, combined with asset sales, should satisfy our expected equity needs through 2020, which means we would not anticipate accessing the public equity capital markets until 2021,” Barron said.
The securities offered in the private placements 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 the 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.
About NuStar Energy L.P. and NuStar GP Holdings, LLC (NYSE: NSH)
The Partnership is a publicly traded master limited partnership based in San Antonio.
NSH is a publicly traded limited liability company that owns the general partner interest, an approximate 11 percent common limited partner interest and the incentive distribution rights in the Partnership.