| Item 1.01. | Entry into a Material Definitive Agreement. |
Purchase Agreement
On May 25, 2022, Crestwood Midstream Partners LP, a Delaware limited partnership (the “LP Buyer” or “CMLP”) and wholly owned subsidiary of Crestwood Equity Partners LP, a Delaware limited partnership (the “Partnership”), and Crestwood Sendero GP LLC, a Delaware limited liability company and wholly owned subsidiary of the Partnership (the “GP Buyer” and together with the LP Buyer, the “Buyers”) entered into a Purchase Agreement (the “Purchase Agreement”), by and among (i) the Buyers, (ii) the Partnership, as the guarantor and indirect owner of the Buyers, (iii) Sendero Midstream Partners, LP, a Delaware limited partnership (“Sendero Midstream”), (iv) Energy Capital Partners III, LP, a Delaware limited partnership (“ECP III”), (v) Energy Capital Partners III-A, LP, a Delaware limited partnership (“ECP III-A”), (vi) Energy Capital Partners III-B (Sendero IP), LP, a Delaware limited partnership (“ECP III-B”), (vii) Energy Capital Partners III-C (Sendero IP), LP, a Delaware limited partnership (“ECP III-C”), (viii) Carlsbad Co-Invest, LP, a Delaware limited partnership (“Carlsbad CIV”), (ix) ECP III (Sendero Co-Invest) Corp, a Delaware corporation (“ECP III CIV”), (x) Sendero Midstream Management, LLC, a Delaware limited liability company (“Sendero Management” and, together with ECP III, ECP III-A, ECP III-B, ECP III-C, Carlsbad CIV, ECP III CIV, the “LP Interest Sellers”) and (xi) Sendero Midstream GP, LLC, a Delaware limited liability company and the general partner of Sendero Midstream (“SMGP”).
Pursuant to the Purchase Agreement, the LP Buyer will acquire all of the outstanding limited partner interests in Sendero Midstream from the LP Interest Sellers and the GP Buyer will acquire all of the outstanding general partner interests in Sendero Midstream from SMGP (such transactions, the “Sendero Transaction”) in exchange for an aggregate base purchase price of $600.0 million, subject to certain adjustments contemplated by the Purchase Agreement. The purchase price will be funded using a combination of (i) cash from borrowings under the LP Buyer’s revolving credit facility and (ii) cash from the Barnett Divestiture (as defined in Section 2.06 of this Current Report on Form 8-K).
The Purchase Agreement includes certain representations, warranties, and covenant provisions customary for transactions of this nature. The consummation of the closing of the Sendero Transaction (the “Sendero Closing”) is subject to, among other specified closing conditions, the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The Sendero Closing is also subject to other customary closing conditions, including, subject to certain materiality exceptions, the accuracy of each party’s representations and warranties and each party’s compliance with its obligations and covenants under the Purchase Agreement.
The Purchase Agreement may be terminated under certain customary circumstances, including, mutual agreement of the parties and certain uncured breaches, as well as if the Sendero Closing does not occur on or before September 22, 2022, subject to possible extension.
The Partnership is a party to the Purchase Agreement to guarantee certain obligations of the Buyers under the Purchase Agreement. The Partnership’s obligations under its guaranty are customary for this type of agreement.
The summary of the Purchase Agreement in this Current Report on Form 8-K does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement, which is filed herewith as Exhibit 2.1 and is incorporated into this Item 1.01 by reference.
| Item 2.06. | Material Impairments. |
On May 19, 2022, CMLP entered into a definitive agreement to divest its legacy, non-core Barnett Shale assets to EnLink Midstream Operating, LP, for $275 million of cash, subject to certain adjustments (the “Barnett Divestiture”). The Barnett Divestiture contemplates CMLP’s sale of the Alliance System, the Lake Arlington System and the Cowtown System. CMLP will utilize the cash proceeds from the Barnett Divestiture to fund the cash consideration for the Sendero Transaction. CMLP anticipates that the proceeds from the sale will be less than its historical book value in the assets, and on May 25, 2022, CMLP concluded that the sale will result in a loss on long-lived assets of approximately $50 million to $60 million. We do not expect this loss to result in any cash expenditures.
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