Buckeye Partners LP (NYSE: BPL) announced Feb. 26 that it has entered into an agreement for the private placement of 6,220,658 Class C Units representing limited partnership interests in Buckeye for total proceeds of $265 million. Buckeye has also granted the purchasers the option to purchase up to an additional $50 million of Class C Units on the same terms on or before March 30, 2018.

The Class C Units will be substantially similar in all respects to Buckeye’s existing limited partnership units representing limited partner interests, except that Buckeye may elect to pay distributions in respect of the Class C Units through the issuance of additional Class C Units rather than cash. The Class C Units will convert into LP Units on a one-for-one basis no later than the second anniversary of the closing date.

“This transaction demonstrates the strong support of key unitholders in Buckeye,” said Clark C. Smith, chairman, president and CEO. “This offering positions Buckeye to continue to advance our strategic growth initiatives, while strengthening our balance sheet through reduced leverage and improving distribution coverage. Importantly, we expect this offering to eliminate the need for any additional equity offerings in 2018 and 2019 to fund our growth capital expenditures for those years. This transaction reinforces our commitment to maintain our annual distribution at our current level of $5.05 per unit.”

Buckeye expects the offering to close on March 2, 2018, subject to the satisfaction of customary closing conditions. Buckeye intends to use the net proceeds from this offering to repay borrowings outstanding on its revolving credit facility, to pre-fund the equity portion of its remaining 2018 and 2019 growth capital expenditure program and for general partnership purposes.

Investors include accounts managed by Kayne Anderson Capital Advisors LP and Tortoise Capital Advisors LLC. Barclays Capital Inc. is acting as sole placement agent for the Buckeye private placement.

The securities to be sold in the private placement have not been registered under the Securities Act of 1933, as amended, or state securities laws and may not be offered or sold in the United States absent registration with the Securities and Exchange Commission or an applicable exemption from such registration requirements.