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 October 6, 2015 - 6:55 AM EDT
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Exterran Holdings Secures Financing to Enable Spin-off of International Services and Global Fabrication Businesses

Exterran Holdings, Inc. (NYSE:EXH) announced today an update to the planned financing in connection with its previously announced separation.

In November 2014, Exterran Holdings announced that it intends to separate its international contract operations, international aftermarket services and global fabrication businesses into a standalone, publicly traded company named Exterran Corporation. Upon completion of the spin-off, Exterran Holdings, which will continue to own and operate its contract operations and aftermarket services businesses in the United States, will be renamed Archrock, Inc.

Spin-off Transaction Details and Next Steps

Exterran Holdings has reached financing arrangements for Exterran Corporation and Archrock, Inc. that enable Exterran Holdings to move forward with the separation transaction through an all secured financing structure. As a result, Exterran Holdings expects that the spin-off of Exterran Corporation will take place in the fourth quarter 2015. The completion of the spin-off will be subject to completion of a review by the U.S. Securities and Exchange Commission of Exterran Corporation’s Form 10, the receipt of an opinion of counsel as to the tax-free nature of the transaction, the execution of separation and intercompany agreements and final approval of the Exterran Holdings board of directors.

Update on Credit Facilities

As previously announced, Exterran Corporation entered into a $750 million revolving credit facility on July 10, 2015 that would become available upon the completion of the separation and the satisfaction of certain other conditions. On Oct. 5, 2015, Exterran Corporation amended and restated the credit agreement to provide for a new $925 million credit facility, consisting of a $680 million revolving credit facility and a $245 million term loan facility. The revolving credit facility will have an interest rate subject to a leverage grid with an expected initial interest rate of LIBOR plus 2.75%. The term loan will carry an interest rate of LIBOR plus 5.75%, with a 1.00% LIBOR floor. Availability under the new credit facility is conditioned upon the completion of the separation and the satisfaction of certain other customary conditions. The revolving credit facility will mature five years after the effective date of the separation transaction, and the term loan facility will mature two years after the effective date of the separation transaction.

The new credit facility includes, among other covenants, financial covenants requiring Exterran Corporation to maintain (after the separation) an Interest Coverage Ratio of not less than 2.25:1.00 and a Total Leverage Ratio of not greater than 3.75:1.00. Should Exterran Corporation refinance the term loan facility with the proceeds of certain qualified unsecured debt or equity issuances, the financial covenants in the revolving credit facility will be modified to require that Exterran Corporation maintain a Total Leverage Ratio of not greater than 4.50:1.00 and a Senior Secured Leverage Ratio of not greater than 2.75:1.00, while the Interest Coverage Ratio will not change. Such capitalized terms are defined in the amended and restated credit agreement.

In connection with the spin-off, Exterran Holdings anticipates that Exterran Corporation initially will borrow under its new credit facility and transfer an amount of proceeds to Exterran Holdings which, when taken together with the proceeds from borrowings under the Archrock credit facility as described below, will enable Exterran Holdings to repay all of its existing indebtedness.

As of June 30, 2015, on a pro forma basis after giving effect to the spin-off, Exterran Corporation would have borrowed and transferred to Exterran Holdings approximately $539 million. Subsequent to June 30, 2015 and prior to the completion of the spin-off, Exterran Holdings expects to incur additional borrowings under its existing credit facility of between $40 million and $50 million to finance expenses related to the completion of the spin-off, which will increase the amount that Exterran Corporation borrows under its new credit facility and transfers to Exterran Holdings.

Also as previously announced, Exterran Holdings entered into a $300 million credit facility on July 10, 2015 that would become available upon the completion of the separation and the satisfaction of certain other conditions. On Oct. 5, 2015, Exterran Holdings executed a first amendment to the credit agreement that, among other things, increases the aggregate commitments under the revolving credit facility from $300 million to $350 million. As previously announced, the revolving credit facility includes, among other covenants, financial covenants requiring Archrock, Inc. to maintain (after the separation) an Interest Coverage Ratio of not less than 2.25:1.00 and a Total Leverage Ratio of not greater than 4.25:1.00 (except that the maximum Total Leverage Ratio during a Specified Acquisition Period will be increased to 4.75:1.00), as those capitalized terms are defined in the credit agreement. The revolving credit facility will have an interest rate subject to a leverage grid with an expected initial interest rate of LIBOR plus 1.75%.

Archrock, Inc.’s indebtedness under its credit facility upon the closing of the spin-off, and following the redemption of Exterran Holding’s 7.25% Senior Notes of $350 million, is expected to be approximately $170 million less the aggregate amount of installment payments Exterran Holdings receives from the Venezuelan state-owned oil company before completion of the spin-off. Archrock, Inc. expects to incur additional borrowings under its credit facility of approximately $10 million to $15 million to finance expenses related to the completion of the spin-off. The amount of indebtedness of Exterran Partners will not be impacted by the separation.

Venezuela Receivable

At Sept. 30, 2015, subsidiaries of Exterran Corporation were due approximately $96 million of principal payments from the previously announced sales of nationalized Venezuelan assets. In connection with the spin-off, Exterran Corporation’s subsidiary will transfer to an Archrock subsidiary the right to receive an amount equal to the payments made on those remaining receivables as they are received from the Venezuelan state-owned oil company.

Other Arrangements

In connection with the spin-off, a subsidiary of Exterran Corporation will transfer to a subsidiary of Archrock the right to receive $25 million upon Exterran Corporation’s completion of certain qualified unsecured debt or equity issuances and repayment in full of the term loan portion of Exterran Corporation’s credit facility after the spin-off. Exterran Corporation will use its commercially reasonable efforts to complete such a capital raise on or before the maturity date of its term loan or as soon as practicable thereafter.

About Exterran Holdings

Exterran Holdings, Inc. is a global market leader in full-service natural gas compression and a premier provider of operations, maintenance, service and equipment for oil and gas production, processing and transportation applications. Exterran Holdings serves customers across the energy spectrum – from producers to transporters to processors to storage owners. Headquartered in Houston, Texas, Exterran has approximately 10,000 employees and operates in approximately 30 countries. Exterran Holdings owns an equity interest, including all of the general partner interest, in Exterran Partners, L.P. (NASDAQ: EXLP), a master limited partnership, the leading provider of natural gas contract compression services to customers throughout the United States. For more information, visit www.exterran.com.

Upon completion of the spin-off, Exterran Holdings will be renamed Archrock, Inc. Archrock will be the leading provider of natural gas contract compression services to customers throughout the United States. In addition, Archrock will be a leading supplier of aftermarket services to customers that own compression equipment in the United States. Archrock will be headquartered in Houston, Texas, operating in the major oil and gas producing regions in the United States. Archrock will continue to own an equity interest, including all of the general partner interest, in Archrock Partners, L.P. (which Exterran Partners, L.P. will be renamed upon completion of the spin-off).

About Exterran Corporation

Exterran Corporation will be a market leader in compression, production and processing products and services, serving customers throughout the world engaged in all aspects of the oil and natural gas industry. Its global product lines will include natural gas compression, process & treating and production equipment and water treatment solutions. Outside the United States, Exterran Corporation will be a leading provider of full-service natural gas contract compression and a supplier of new, used, OEM and aftermarket parts and services. Exterran Corporation will be headquartered in Houston, Texas, and will operate in approximately 30 countries with approximately 7,000 employees.

Cautionary Information

While Exterran Holdings is committed to the spin-off, there can be no assurance that any transaction will ultimately be consummated and there can be no assurance of the terms or timing of such transaction if it is consummated. Exterran Holdings may, at any time and for any reason until the proposed transaction is complete, abandon the separation or modify or change the terms of the spin-off.

All statements in this release (and oral statements made regarding the subjects of this release) other than historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and factors, many of which are outside Exterran Holdings’ control, which could cause actual results to differ materially from such statements. Forward-looking information includes, but is not limited to: Exterran Holdings’ plan to conduct a separation of certain of its businesses; the possibility that the proposed separation will be consummated; the timing of the consummation of the proposed separation transaction; statements regarding the expected capital structures of Exterran Corporation and Archrock, Inc.; statements regarding the credit facilities of Exterran Corporation and Archrock and the expected interest rates and amounts of borrowings under those facilities upon the closing of the separation; statements regarding Exterran Corporation’s use of proceeds from its expected indebtedness; statements regarding amounts owed by the Venezuelan state-owned oil company and the transfer of equivalent amounts to an Archrock subsidiary after the separation; and statements regarding Exterran Corporation’s transfer of $25 million to an Archrock subsidiary upon completion of certain debt or equity offerings after the closing of the separation.

While Exterran Holdings believes that the assumptions concerning future events are reasonable, it cautions that there are inherent difficulties in predicting certain important factors that could impact the future performance or results of its business. Among the factors that could cause results to differ materially from those indicated by such forward-looking statements are: local, regional, national and international economic conditions and the impact they may have on Exterran Holdings, Exterran Corporation, Archrock and their customers; changes in tax laws that impact master limited partnerships; conditions in the oil and gas industry, including a sustained decrease in the level of supply or demand for oil or natural gas or a sustained decrease in the price of oil or natural gas; delays, costs and difficulties that could impact the completion and expected results of the proposed separation transaction; Exterran Holdings’, Exterran Corporation’s and Archrock’s ability to timely and cost-effectively execute larger projects; changes in political or economic conditions in key operating markets, including international markets; any non-performance by third parties of their contractual obligations; changes in safety, health, environmental and other regulations; and the performance of Exterran Partners.

These forward-looking statements are also affected by the risk factors, forward-looking statements and challenges and uncertainties described in Exterran Holdings’ Annual Report on Form 10-K for the year ended December 31, 2014, Exterran Corporation’s Registration Statement on Form 10 and Exterran Holdings’ filings with the Securities and Exchange Commission, which are available at www.exterran.com. Except as required by law, Exterran Holdings and Exterran Corporation expressly disclaim any intention or obligation to revise or update any forward-looking statements whether as a result of new information, future events or otherwise.

Exterran Holdings, Inc.
Media
Susan Moore, 281-836-7398
or
Investors
David Oatman, 281-836-7035


Source: Business Wire (October 6, 2015 - 6:55 AM EDT)

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