Southcross Energy LLC, the former owner of the general partner of Southcross Energy Partners LP, announced the completion of the agreement to combine with privately held gas gathering and processing partnership TexStar Midstream Services LP, located in the Eagle Ford Shale. Southcross Holdings LP, the company formed through the agreement, now owns 100% of the general partner of Southcross, limited partner interests in Southcross and certain former TexStar assets. EIG Global Energy Partners, Charlesbank Capital Partners and Tailwater Capital each indirectly own about one-third of Holdings.
As part of the transaction, Southcross acquired rich gas system assets formerly owned by TexStar for $80 million in cash, the assumption of $100 million of debt—which was immediately repaid by Southcross’ new term loan facility—and 14,633,000 newly issued payment-in-kind Class B Southcross convertible units. The rich gas system assets include a 300 million cubic feet per day gas processing facility and more than 230 miles of rich gas and residue gas pipelines. Southcross’ acquisition of the assets creates a substantial Eagle Ford-focused midstream operation with four gas processing plants, two fractionation facilities and about 3,000 miles of pipelines.
Holdings owns former TexStar assets including the Lancaster Gathering System and the NGL System, as well as a 57% limited partner interest in Southcross and 100% of Southcross’ general partner, which owns a 2% general partner interest in Southcross and Southcross’ incentive distribution rights. Public unitholders own the remaining 43% limited partner interest in Southcross. Assets retained at Holdings are expected to be available as future dropdowns into Southcross. Holdings has no obligation to sell its assets to Southcross and Southcross has no obligation to buy the assets.
In conjunction with the transaction, Southcross entered into a new seven-year $450 million Term Loan B facility and five-year $200 million revolving credit facility. Proceeds from the term loan were used to purchase the rich gas system assets, repay outstanding amounts under Southcross’ existing revolving credit facility and pay transaction related fees and expenses.
Southcross also announced changes to the board of directors of its general partner Southcross Energy Partners GP in association with the completed combination. Jason Downie of Tailwater Capital and Wallace Henderson of EIG Global Energy Partners have been elected to the board with the closing of the transaction.
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