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FORM 8-K
CURRENT REPORT
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) MARCH 29, 1999
Commission Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No
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1-2921 PANHANDLE EASTERN PIPE LINE COMPANY 44-0382470
(A Delaware Corporation)
5444 Westheimer Court
Houston, Texas 77056
(713) 627-5400
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ITEM 1. ACQUISITION OF ASSETS
On March 29, 1999, CMS Energy Corporation ("CMS Energy") announced that it had
closed on its previously announced acquisition of all the stock of Panhandle
Eastern Pipe Line Company ("Panhandle") and its principal subsidiaries,
Trunkline Gas Company and Pan Gas Storage Company, from subsidiaries of Duke
Energy Corporation ("Duke"). It also acquired the stock of Panhandle Storage
Company and Trunkline LNG Company. (These companies together with their
subsidiaries Panhandle Eastern Resources, Inc., Trunkline Field Services
Company, Trunkline Gas Resources, Inc., and Trunkline Pipeline Holdings, Inc.
are hereinafter referred to as the "Panhandle Companies".)
The purchase price for the stock of the Panhandle Companies was $1.9 billion in
cash and existing Panhandle debt of approximately $300 million. Concurrent with
the closing, CMS Panhandle Holding Company ("CMS Holding"), a newly formed
interim holding company for the Panhandle Companies, issued $800 million of
senior unsecured notes which were guaranteed by Panhandle. The CMS Holding notes
were issued in a 144A offering in three tranches: $300 million of 6.125% senior
notes due 2004; $200 million of 6.500% senior notes due 2009; and $300 million
of 7.000% senior notes due 2029. CMS Energy intends to merge CMS Holding into
Panhandle during the second quarter of 1999, at which time Panhandle will
replace CMS Holding as the obligor on the CMS Holding notes. CMS Holding's and
Panhandle's combined $1.1 billion of long-term debt as well as approximately an
additional $1.1 billion of CMS Energy unsecured bridge and revolving credit
indebtedness became a part of CMS Energy's consolidated indebtedness as of March
29, 1999. The $600 million CMS Energy bridge loan has a weighted average
interest rate of 5.94% and a term of six months, and the approximately $500
million CMS Energy revolver draw has a weighted average interest rate of 6.22%.
The bridge loan was provided by Barclays Bank PLC, Nationsbank, N.A., and Union
Bank of California, N.A., co-agents, and the revolver loan is with a consortium
of banks for which The Chase Manhattan Bank serves as administrative agent. CMS
Energy expects to complete permanent financing of the acquisition with the sale
of approximately $600 million of CMS Energy Common Stock.
Panhandle and Trunkline Gas Company, together with the two gas storage companies
acquired, are primarily engaged in the interstate transportation and storage of
natural gas. The acquired assets include 10,400 miles of mainline natural gas
pipeline extending from the Texas Gulf Coast to Michigan and from the
Kansas/Oklahoma mid-continent region to Michigan with a combined capacity of 4.4
billion cubic feet per day, and 70 billion cubic feet of underground working gas
storage facilities. The Trunkline and Panhandle transmission systems connect
directly with the intrastate gas transmission system of Consumers Energy
Company, CMS Energy's Michigan electric and gas utility subsidiary. Consumers
Energy Company is one of the largest gas transmission customers of the two
acquired pipeline companies.
Trunkline LNG Company owns a liquified natural gas ("LNG") regasification plant
and related LNG tanker port, unloading facilities and LNG and gas storage
facilities located at Lake Charles, Louisiana. The LNG plant has the capacity to
deliver 700 million cubic feet per day but has been operated on a limited basis
for a number of years.
The Panhandle Companies compete with a number of interstate and intrastate
pipeline companies in the transportation and storage of natural gas. The
principal elements of competition among pipelines are rates, terms of service
and flexibility and reliability of service. The rates and conditions of service
of the principal Panhandle Companies are subject to regulation by the Federal
Energy Regulatory Commission.
Readers should review the historic Panhandle disclosure under the Securities
Exchange Act of 1934 and in particular its financial information in light of the
changes reflected in the CMS Holding Unaudited Pro Forma Financial Information
filed as an exhibit to this report. Readers should note in particular that prior
to the closing of the acquisition by CMS Energy, Panhandle's interest in
Northern Border Partners, LP and certain non-operating assets which were not
material in amount or revenue impact were transferred from the Panhandle
Companies to other subsidiaries of Duke. In addition, certain intercompany
accounts, including advances, between the Panhandle Companies and Duke were
eliminated. Also, contemporaneous with the acquisition, the stock of Panhandle
Storage Company and Trunkline LNG Company was contributed by CMS Holding to
Panhandle so that they became subsidiaries of Panhandle. Finally, readers should
be aware of the pending merger of CMS Holding into Panhandle and the impact of
that merger on Panhandle's financial information. In general, the CMS Holding
Pro Forma column of the Unaudited Pro Forma Financial Information will be the
combining companies' financial information subsequent to the merger.
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ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Effective upon the closing of the acquisition described above, Panhandle's Board
of Directors dismissed Deloitte & Touche LLP as Panhandle's certifying
accountant and retained Arthur Andersen LLP for 1999. Arthur Andersen LLP is
serving as certifying accountant for CMS Energy and its principal subsidiaries
in 1999. Deloitte & Touche LLP's report on the Panhandle financial statements
for 1997 and 1998 did not contain an adverse opinion or a disclaimer of opinion,
nor was it qualified or modified as to uncertainty, audit scope, or accounting
principles.
ITEM 7. EXHIBITS
(a) Financial Statements of Business Acquired - Not applicable.
(b) Pro Forma Financial Information - Attached as Exhibit 99(a) is the CMS
Holding Unaudited Pro Forma Financial Information.
(c) Exhibits -
(16) - Letter of Deloitte & Touche LLP, independent auditors.
(99)(a) - CMS Holding Unaudited Pro Forma Financial Information.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PANHANDLE EASTERN PIPE LINE COMPANY
Dated: April 5, 1999 By: /s/ Alan M. Wright
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Alan M. Wright
Senior Vice President and
Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number Description
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(16) - Letter of Deloitte & Touche LLP, independent auditors.
(99)(a) - CMS Holding Unaudited Pro Forma Financial Information.