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Martin Midstream Partners L.P. Announces Acquisition Of Controlling Membership Interests In Cardinal Gas Storage Partners LLC

Stocks in this article: MMLP

KILGORE, Texas, Aug. 11, 2014 (GLOBE NEWSWIRE) -- 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 total consideration of $120.0 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.

Highlights of the Transaction

  • Accretive to annual distributions by $0.15+/LP unit by end of 2015
  • Management expects to recommend a distribution increase of at least $0.02/LP unit ($0.08 annually) payable in the 4Q 2014 as a result of this transaction
  • Improves Partnership's distribution coverage ratio to above 1.05x
  • Increases percentage of fee-based cash flows from approximately 50-55% to 60-65%
  • Over 90% of working gas storage capacity contracted with a weighted average remaining life greater than 5 years

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 2 nd and 3 rd 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. 

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