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.
View source version on businesswire.com: http://www.businesswire.com/news/home/20151006005662/en/
Copyright Business Wire 2015