Long-Term Debt | 12 Months Ended |
Dec. 31, 2013 |
Long-term Debt, by Current and Noncurrent [Abstract] | ' |
Long Term Debt | ' |
(5) Long-Term Debt |
As of December 31, 2013 and 2012, long-term debt consisted of the following (in thousands): |
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| | 2013 | | 2012 |
Partnership's bank credit facility (due 2016), interest based on Prime and/or LIBOR plus an applicable margin, interest rate at December 31, 2013 and December 31, 2012 was 3.2% and 4.3%, respectively | | $ | 155,000 | | | $ | 71,000 | |
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Subsidiary Borrower's credit facility (due 2016), interest based on LIBOR plus 5.0%, interest rate at December 31, 2013 was 5.3% | | 65,041 | | | — | |
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Senior unsecured notes (due 2018), net of discount of $7.8 million and $9.7 million, respectively, which bear interest at the rate of 8.875% | | 717,202 | | | 715,305 | |
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Senior unsecured notes (due 2022), which bear interest at the rate of 7.125% | | 250,000 | | | 250,000 | |
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Other debt | | 13,229 | | | — | |
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Debt classified as long-term | | $ | 1,200,472 | | | $ | 1,036,305 | |
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Maturities. Maturities for the long-term debt as of December 31, 2013 are as follows (in thousands): |
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2014 | $ | — | | | | | | |
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2015 | — | | | | | | |
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2016 | 232,734 | | | | | | |
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2017 | 536 | | | | | | |
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2018 | 725,000 | | | | | | |
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Thereafter | 250,000 | | | | | | |
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Subtotal | 1,208,270 | | | | | | |
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Less discount | (7,798 | ) | | | | | |
Total outstanding debt | $ | 1,200,472 | | | | | | |
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The Partnership’s Existing Credit Facility. In January, 2013, the Partnership amended the existing credit facility to, among other things, eliminate the existing and any future step-up in the maximum permitted consolidated leverage ratio for acquisitions. All references herein to the Partnership's existing credit facility include, as applicable, such amendments. |
In August 2013, the Partnership amended the existing credit facility to, among other things, (i) allow the Partnership to make additional investments in joint ventures and subsidiaries that are not guarantors of the Partnership's obligations under the existing credit facility, (ii) decrease the minimum consolidated interest coverage ratio (as defined in the existing credit facility, being generally computed as the ratio of consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges to consolidated interest charges) and (iii) increase the maximum permitted consolidated leverage ratio (as defined in the existing credit facility, being generally computed as the ratio of total funded debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges). See the chart below for the ratios, as amended. |
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In January 22, 2014, the Partnership amended the existing credit facility to redefine the credit agreement's definition of "change of control" such that the consummation of the previously announced business combination with Devon Energy Corporation will not constitute a change of control under the existing credit agreement. |
As of December 31, 2013, there was $155.0 million of borrowing and $59.7 million in outstanding letters of credit under the existing credit facility leaving approximately $420.3 million available for future borrowing based on a borrowing capacity of $635.0 million. However, the financial covenants in the existing credit facility limit the amount of funds that the Partnership can borrow. As of December 31, 2013, based on the financial covenants in the existing credit facility, the Partnership could borrow approximately $207.1 million of additional funds. |
The Partnership’s existing credit facility is guaranteed by substantially all of the Partnership’s subsidiaries and is secured by first priority liens on substantially all of its assets and those of the guarantors, including all material pipeline, gas gathering and processing assets, all material working capital assets and a pledge of all of the Partnership’s equity interests in substantially all of its subsidiaries. The Partnership may prepay all loans under the Partnership’s existing credit facility at any time without premium or penalty (other than customary LIBOR breakage costs), subject to certain notice requirements. The Partnership’s existing credit facility requires mandatory prepayments of amounts outstanding thereunder with the net proceeds of certain asset sales, extraordinary receipts, equity issuances and debt incurrences, but these mandatory prepayments do not require any reduction of the lenders’ commitments under the Partnership’s existing credit facility. |
Under the existing credit facility, borrowings bear interest at the Partnership's option at the Eurodollar Rate (the British Bankers Association LIBOR Rate) plus an applicable margin or the Base Rate (the highest of the Federal Funds Rate plus 0.50%, the 30-day Eurodollar Rate plus 1.0%, or the administrative agent's prime rate) plus an applicable margin. The Partnership pays a per annum fee (as described below) on all letters of credit issued under the existing credit facility and a commitment fee of between 0.375% and 0.50% per annum on the unused availability under the existing credit facility. The commitment fee, letter of credit fee and the applicable margins for the interest rate vary quarterly based on the Partnership's leverage ratio (as defined in the existing credit facility, being generally computed as the ratio of total funded debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges) and are as follows: |
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Leverage Ratio | | Base Rate | | Eurodollar | | Letter of | | |
Loans | Rate | Commitment | | |
| Loans and | Fees | | |
| Letter of Credit | | | |
| Fees | | | |
Greater than or equal to 4.50 to 1.00 | | 2.00% | | 3.00% | | 0.50% | | |
Greater than or equal to 4.00 to 1.00 and less than 4.50 to 1.00 | | 1.75% | | 2.75% | | 0.50% | | |
Greater than or equal to 3.50 to 1.00 and less than 4.00 to 1.00 | | 1.50% | | 2.50% | | 0.50% | | |
Greater than or equal to 3.00 to 1.00 and less than 3.50 to 1.00 | | 1.25% | | 2.25% | | 0.50% | | |
Less than 3.00 to 1.00 | | 1.00% | | 2.00% | | 0.38% | | |
The existing credit facility includes financial covenants that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter. The minimum consolidated interest coverage ratio (as defined in the existing credit facility, but generally computed as the ratio of total funded debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges to consolidated interest charges) is 2.25 to 1.0 for the fiscal quarters ending March 31, 2014, June 30, 2014, September 30, 2014 and December 31, 2014, with a minimum ratio of 2.50 to 1.0 for each fiscal quarter thereafter. The maximum permitted senior leverage ratio (as defined in the existing credit facility, but generally computed as the ratio of total secured funded debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non cash charges) is 2.75 to 1.0. The maximum permitted leverage ratio (as defined in the existing credit facility, but generally computed as the ratio total funded debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges) is 5.50 to 1.0 for the fiscal quarters ending March 31, 2014, June 30, 2014 and September 30, 2014, with a maximum ratio of 5.25 to 1.0 for each fiscal quarter ending thereafter. |
In addition, the existing credit facility contains various covenants that, among other restrictions, limit the Partnership's ability to: |
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• | grant or assume liens; | | | | | | | |
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• | make investments; | | | | | | | |
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• | incur or assume indebtedness; | | | | | | | |
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• | engage in mergers or acquisitions; | | | | | | | |
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• | sell, transfer, assign or convey assets; | | | | | | | |
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• | repurchase the Partnership's equity, make distributions and certain other restricted payments; | | | | | | | |
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• | change the nature of the Partnership's business; | | | | | | | |
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• | engage in transactions with affiliates; | | | | | | | |
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• | enter into certain burdensome agreements; | | | | | | | |
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• | make certain amendments to the omnibus agreement or the Partnership's subsidiaries' organizational documents; | | | | | | | |
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• | prepay the senior unsecured notes and certain other indebtedness; and | | | | | | | |
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• | enter into certain hedging contracts. | | | | | | | |
The existing credit facility permits the Partnership to make quarterly distributions to unitholders so long as no default exists under the existing credit facility. |
Each of the following is an event of default under the existing credit facility: |
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• | failure to pay any principal, interest, fees, expenses or other amounts when due; | | | | | | | |
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• | failure to meet the quarterly financial covenants; | | | | | | | |
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• | failure to observe any other agreement, obligation, or covenant in the existing credit facility or any related loan document, subject to cure periods for certain failures; | | | | | | | |
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• | the failure of any representation or warranty to be materially true and correct when made; | | | | | | | |
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• | The Partnership's or any of its subsidiaries default under other indebtedness that exceeds a threshold amount; | | | | | | | |
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• | judgments against the Partnership or any of its material subsidiaries, in excess of a threshold amount; | | | | | | | |
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• | certain ERISA events involving the Partnership or any of its material subsidiaries, in excess of a threshold amount; | | | | | | | |
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• | bankruptcy or other insolvency events involving the Partnership or any of its material subsidiaries; and | | | | | | | |
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• | a change in control (as defined in the existing credit facility). | | | | | | | |
If an event of default relating to bankruptcy or other insolvency events occurs, all indebtedness under the existing credit facility will immediately become due and payable. If any other event of default exists under the existing credit facility, the lenders may accelerate the maturity of the obligations outstanding under the existing credit facility and exercise other rights and remedies. In addition, if any event of default exists under the existing credit facility, the lenders may commence foreclosure or other actions against the collateral. |
If any default occurs under the existing credit facility, or if the Partnership is unable to make any of the representations and warranties in the existing credit facility, the Partnership will be unable to borrow funds or have letters of credit issued under the existing credit facility. |
The Partnership expects to be in compliance with the covenants in the existing credit facility for at least the next twelve months. |
Subsidiary Borrower’s Credit Facility. On March 5, 2013, XTXI Capital, LLC, a wholly-owned subsidiary of the Company (“Subsidiary Borrower”), entered into a Credit Agreement (the “Subsidiary Credit Agreement”) with Citibank, N.A., as Administrative Agent, Collateral Agent and a Lender, and the other lenders party thereto. The Subsidiary Credit Agreement initially permitted Subsidiary Borrower to borrow up to $75.0 million on a revolving credit basis. The maturity date of the Subsidiary Credit Agreement is March 5, 2016. |
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In May 2013, Subsidiary Borrower exercised the accordion feature of the Subsidiary Credit Agreement, thereby increasing the amount Subsidiary Borrower is permitted to borrow on a revolving credit basis from $75.0 million to up to $90.0 million. Subsidiary Borrower intends to distribute these additional funds for the Company's investment commitment in E2. As of December 31, 2013, there was $65.0 million borrowed under the Subsidiary Credit Agreement, leaving approximately $25.0 million available for future borrowing based on the borrowing capacity of $90.0 million. |
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Subsidiary Borrower’s obligations under the Subsidiary Credit Agreement are guaranteed by the Company (the “Guaranty”) and are secured by a first priority lien on 10,700,000 common units in the Partnership, which common units were contributed by the Company to Subsidiary Borrower (together with any additional common units subsequently pledged as collateral under the Subsidiary Credit Agreement, the “Pledged Units”). |
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Borrowings under the Subsidiary Credit Agreement bear interest at a per annum rate equal to the reserve-adjusted British Banks Association LIBOR Rate plus 5.00%. Subsidiary Borrower pays a commitment fee of 0.75% per annum on the unused availability under the Subsidiary Credit Agreement. Subject to the $90.0 million cap on outstanding borrowings and the percentage obtained by dividing (A) the total net outstanding borrowings under the Subsidiary Credit Agreement by (B) the product of (x) the number of Common Units included in the Pledged Units on such date and (y) the closing sale price per Common Unit on such date (the “Loan to Equity Value Percentage”) not equaling or exceeding 47%, Subsidiary Borrower may elect to pay interest, fees and expenses in connection with the Subsidiary Credit Agreement in kind by adding such amounts to the principal amount of the borrowings under the Subsidiary Credit Agreement. |
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The Subsidiary Credit Agreement requires mandatory prepayments of all amounts outstanding thereunder if the Company ceases to own all of the equity interests of Subsidiary Borrower. In addition, if the Loan to Equity Value Percentage exceeds 47%, Subsidiary Borrower must prepay the loan, pledge additional Common Units as collateral and/or direct the collateral agent to sell Pledged Units to achieve a Loan to Equity Value Percentage that is less than 42.5%. |
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The Subsidiary Credit Agreement prohibits Subsidiary Borrower from making any distributions or other payments to the Company (including any distributions resulting from Subsidiary Borrower’s receipt of distributions from the Partnership) if the Loan to Equity Value Percentage exceeds 47% or any event of default exists under the Subsidiary Credit Agreement. The Subsidiary Credit Agreement also limits the Company’s ability and the ability of its subsidiaries (other than the Partnership) to sell Common Units in certain circumstances. |
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The Subsidiary Credit Agreement contains various other covenants that, among other restrictions, limit Subsidiary Borrower’s ability to incur indebtedness, enter into acquisition or disposition transactions and engage in any business activities. The Subsidiary Credit Agreement does not include any financial covenants. |
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In January 2014, the Subsidiary Borrower received a limited consent that the transactions contemplated by the Merger Agreement and the Contribution Agreement shall not constitute an issuer change of control or issuer merger event within the meaning given to such terms in the Subsidiary Credit Agreement. |
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Events of default under the Subsidiary Credit Agreement include, among others, (i) Subsidiary Borrower’s failure to pay principal or interest when due, (ii) Subsidiary Borrower’s or the Company’s failure to comply with agreements, obligations or covenants in the Subsidiary Credit Agreement, the Guaranty or any other loan document, (iii) material inaccuracy of any representation or warranty, (iv) certain change of control events (other than with respect to the proposed business combination with Devon, for which the Subsidiary Borrower has obtained a waiver), bankruptcy and other insolvency events and (v) the occurrence of certain events relating to the Common Units. |
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If an event of default relating to bankruptcy or other insolvency events occur, all indebtedness under the Subsidiary Credit Agreement will immediately become due and payable. If any other event of default exists under the Subsidiary Credit Agreement, the lenders may accelerate the maturity of the obligations outstanding under the Subsidiary Credit Agreement, Subsidiary Borrower will be unable to borrow funds and the lenders may exercise other rights and remedies. In addition, if any event of default exists under the Subsidiary Credit Agreement, the lenders may commence foreclosure or other actions against the Pledged Units. If the Company defaults on its obligations under the Guaranty, then the lenders could declare all amounts outstanding under the Subsidiary Credit Agreement immediately due and payable (with accrued interest). If Subsidiary Borrower and the Company are unable to pay such amounts, the lenders may foreclose on the Pledged Units. Citibank, N.A., as the agent under the Subsidiary Credit Agreement, has the right to demand additional collateral or amend the Subsidiary Credit Agreement if certain events occur that adversely impact the composition and quality of the Pledged Units or Citibank, N.A’s position as a secured creditor. |
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Other Borrowings. On September 4, 2013, E2 Energy Services LLC ("E2 Services"), one of the Ohio services companies in which the Company invests, entered into a credit agreement with JPMorgan Chase Bank ("JPMorgan"). The maturity date of the credit agreement is September 4, 2016. As of December 31, 2013, there was $12.7 million borrowed under the agreement, leaving approximately $7.3 million available for future borrowing based on borrowing capacity of $20.0 million. The interest rate under the credit agreement is based on Prime plus an applicable margin. The effective interest rate as of December 31, 2013 was approximately 4.2%. Additionally, as of December 31, 2013, E2 Services had certain promissory notes outstanding related to its vehicle fleet in the amount of $0.5 million due in increments through July 2017. The notes bear interest at fixed rates ranging 3.9% to 7.0%. CEI does not guarantee E2 Services debt obligations. |
Senior Unsecured Notes. On February 10, 2010, the Partnership and Crosstex Energy Finance Corporation issued $725.0 million in aggregate principal amount of 8.875% senior unsecured notes (the "2018 Notes") due on February 15, 2018 at an issue price of 97.907% to yield 9.25% to maturity including the original issue discount (OID). Interest payments on the 2018 Notes are due semi-annually in arrears in February and August. On May 24, 2012, the Partnership and Crosstex Energy Finance Corporation issued $250.0 million in aggregate principal amount of 7.125% senior unsecured notes (the "2022 Notes" and together with the 2018 Notes, the "Senior Notes") due on June 1, 2022 at an issue price of 100% of the principal amount to yield 7.125% to maturity. The interest payments on the 2022 Notes are due semi-annually in arrears in June and December. |
The indentures governing the Senior Notes contain covenants that, among other things, limit the Partnership's ability and the ability of certain of its subsidiaries to: |
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• | sell assets including equity interests in its subsidiaries; | | | | | | | |
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• | pay distributions on, redeem or repurchase units or redeem or repurchase its subordinated debt (as discussed in more detail below); | | | | | | | |
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• | make investments; | | | | | | | |
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• | incur or guarantee additional indebtedness or issue preferred units; | | | | | | | |
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• | create or incur certain liens; | | | | | | | |
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• | enter into agreements that restrict distributions or other payments from its restricted subsidiaries to the Partnership; | | | | | | | |
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• | consolidate, merge or transfer all or substantially all of its assets; | | | | | | | |
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• | engage in transactions with affiliates; | | | | | | | |
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• | create unrestricted subsidiaries; | | | | | | | |
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• | enter into sale and leaseback transactions; or | | | | | | | |
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• | engage in certain business activities. | | | | | | | |
The indentures provide that if the Partnership's fixed charge coverage ratio (the ratio of consolidated cash flow to fixed charges, which generally represents the ratio of adjusted EBITDA to interest charges with further adjustments as defined per the indenture) for the most recently ended four full fiscal quarters is not less than 2.0 to 1.0, the Partnership will be permitted to pay distributions to its unitholders in an amount equal to available cash from operating surplus (each as defined in our partnership agreement) with respect to its preceding fiscal quarter plus a number of items, including the net cash proceeds received by the Partnership as a capital contribution or from the issuance of equity interests since the date of the indenture, to the extent not previously expended. If the Partnership's fixed charge coverage ratio is less than 2.0 to 1.0, the Partnership will be able to pay distributions to its unitholders in an amount equal to a specified basket (less amounts previously expended pursuant to such basket), plus the same number of items discussed in the preceding sentence to the extent not previously expended. The Partnership was in compliance with this covenant as of December 31, 2013. |
If the Senior Notes achieve an investment grade rating from each of Moody's Investors Service, Inc. and Standard & Poor's Ratings Services, many of the covenants discussed above will terminate. Our current ratings on our bonds from Moody's Investors Service, Inc. and Standard & Poor's Rating Services are B1 and B+, respectively. |
On or after February 15, 2014, the Partnership may redeem all or a part of the notes at redemption prices (expressed as percentages of principal amount) equal to 104.438% for the twelve-month period beginning on February 15, 2014, 102.219% for the twelve-month period beginning February 15, 2015 and 100.00% for the twelve-month period beginning on February 15, 2016 and at any time thereafter, plus accrued and unpaid interest, if any, to the applicable redemption date on the notes. |
The Partnership may redeem up to 35% of the 2022 Notes at any time prior to June 1, 2015 in an amount not greater than the cash proceeds from equity offerings at a redemption price of 107.125% of the principal amount of the 2022 Notes (plus accrued and unpaid interest to the redemption date) provided that: |
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• | at least 65% of the aggregate principal amount of the 2022 Notes remains outstanding immediately after the occurrence of such redemption; and | | | | | | | |
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• | the redemption occurs within 180 days of the date of the closing of the equity offering. | | | | | | | |
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Prior to June 1, 2017, the Partnership may redeem all or a part of the remaining 2022 Notes at the redemption price equal to the sum of the principal amount thereof, plus a make-whole premium at the redemption date, plus accrued and unpaid interest to the redemption date. |
On or after June 1, 2017, the Partnership may redeem all or a part of the remaining 2022 Notes at redemption prices (expressed as percentages of principal amount) equal to 103.563% for the twelve-month period beginning on June 1, 2017, 102.375% for the twelve-month period beginning on June 1, 2018, 101.188% for the twelve-month period beginning on June 1, 2019 and 100.000% for the twelve-month period beginning on June 1, 2020 and at any time thereafter, plus accrued and unpaid interest, if any, to the applicable redemption date on the 2022 Notes. |
Each of the following is an event of default under the indenture: |
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• | failure to pay any principal or interest when due; | | | | | | | |
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• | failure to observe any other agreement, obligation, or other covenant in the indenture, subject to the cure periods for certain failures; | | | | | | | |
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• | the Partnership's or any of its subsidiaries' default under other indebtedness that exceeds a certain threshold amount; | | | | | | | |
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• | failures by the Partnership or any of its subsidiaries to pay final judgments that exceed a certain threshold amount; and | | | | | | | |
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• | bankruptcy or other insolvency events involving the Partnership or any of its material subsidiaries. | | | | | | | |
If an event of default relating to bankruptcy or other insolvency events occurs, the Senior Notes will immediately become due and payable. If any other event of default exists under the indenture, the trustee under the indenture or the holders of the Senior Notes may accelerate the maturity of the Senior Notes and exercise other rights and remedies. |
Successful completion of the Contribution and the Mergers would trigger a mandatory repurchase offer under the terms of the indenture governing the Partnership's 2018 Notes at a purchase price equal to 101% of the aggregate principal amount of the 2018 Notes repurchased, plus accrued and unpaid interest, if any. In certain circumstances, completion of the Contribution and the Mergers also could trigger a mandatory repurchase offer under the terms of the indenture governing the Partnership's 2022 Notes if, within 90 days of consummation of the transactions, the Partnership experiences a rating downgrade of the 2022 Notes by either Moody’s or S&P. The Partnership intends to fulfill its obligations with respect to the mandatory repurchase offer of the 2018 Notes and, if necessary, the 2022 Notes, following the closing of the Contribution and the Mergers in accordance with the terms of the applicable indenture. |