Martin Midstream to Acquire Cardinal Gas Storage
August 11, 2014
Martin Midstream Partners L.P. (Nasdaq:MMLP) (“MMLP” or the “Partnership”) announced today that, through its indirect wholly-owned subsidiary Redbird Gas Storage LLC (“Redbird”), it has entered into definitive documentation with Energy Capital Partners and its affiliated funds (“ECP”) to acquire all of ECP’s Category A membership interests (approximately 57.8%) in Cardinal Gas Storage Partners LLC (“Cardinal”) for $120 million, subject to certain post-closing adjustments (the “Transaction”). Redbird currently owns the remaining Category A membership interest (approximately 42.2%) in Cardinal. At closing, Redbird will own 100% of the Category A interests in Cardinal and will retire approximately $265 million of net project level financings currently in place at various Cardinal subsidiaries.
The Partnership will fund the Transaction using available capacity under its revolving credit facility. Additionally, Martin Resource Management Corporation, the controlling indirect owner of the Partnership’s general partner, has committed to purchasing at least $40 million and up to $45 million of common equity units. Closing of the Transaction is expected to occur during the third quarter 2014 and is not subject to Hart-Scott-Rodino review.
“We are excited to announce the acquisition of ECP’s interests in Cardinal Gas Storage,” said Ruben Martin, President and Chief Executive Officer of Martin Midstream GP LLC, MMLP’s general partner. “As a result of this accretive transaction, management expects to recommend an increase to our quarterly distribution of approximately 4 to 5% over the next four quarters. The immediate repayment of all project finance debt at Cardinal unlocks significant value we’ve carried on our balance sheet that previously provided minimal distributable cash flow to the Partnership. The highly contracted, fee-based take-or-pay nature of the cash flow from Cardinal also improves our distribution coverage ratio and will help to reduce the 2nd and 3rd quarter seasonality of MMLP’s business going forward. Further, this acquisition will allow us to more effectively drive the strategic direction of Cardinal.”
Post-closing, MMLP will receive 100% of the Cardinal cash flows as there will be no indebtedness at the Cardinal level. The Partnership expects to realize approximately $40 to $45 million of EBITDA from the acquisition for the full year 2015.
About Cardinal Gas Storage
Cardinal has been involved in the development, construction, operation and management of four natural gas storage facilities in North Louisiana and Mississippi since 2007. These projects total approximately 50 billion cubic feet (“bcf”) of working gas storage capacity and include Arcadia Gas Storage, Cadeville Gas Storage, Perryville Gas Storage and Monroe Gas Storage, which collectively represent approximately 26 bcf of salt cavern storage capacity and 24 bcf of depleted reservoir storage capacity.
Cardinal’s fee-based cash flow is derived primarily from long-term contracts with credit-worthy counterparties (approximately 41 bcf) or well-capitalized customers backed by letters of credit and/or parent guarantees (approximately 5 bcf). Over 90% of total working gas storage capacity is contracted with a weighted average remaining life of approximately 5 years.
Martin Midstream Partners L.P. is a publicly traded limited partnership with a diverse set of operations focused primarily in the United States Gulf Coast region. The Partnership’s primary business lines include: (1) terminalling, storage and packaging services for petroleum products and by-products; (2) natural gas liquids distribution services and natural gas storage; (3) sulfur and sulfur-based products processing, manufacturing, marketing and distribution; and (4) marine transportation services for petroleum products and by-products.
Investment funds managed by Alinda Capital Partners own a 50% economic interest in Martin Midstream GP LLC, the general partner of Martin Midstream Partners LP.
The acquisition closed on September 2, 2014.