NGL plans to use the transaction proceeds to reduce outstanding indebtedness under its revolving credit facility
NGL Energy Partners announced that it has signed a definitive agreement to sell TransMontaigne Product Services, and associated assets for approximately $300m (£250m).
NGL said that the transaction amount include equity consideration, inventory, and net working capital based on values as of 30 June 2019 and is subject to the actual values at closing.
In addition, it is planning to use the transaction proceeds to reduce outstanding indebtedness under its revolving credit facility.
NGL would significantly reduce letter of credit commitments after the sale
The sale of southeast refined products assets is expected to enable the company to significantly reduce letter of credit commitments.
Under the transaction, the company has divested TPSL Terminaling Services Agreement with TransMontaigne Partners that includes exclusive rights to use 18 terminals. TPSL is a part of NGL’s refined products reporting segment.
In addition, the divested assets also include line space along Colonial and Plantation Pipelines, two wholly-owned refined products terminals in Georgia and multiple third-party throughput agreements, and all associated customer contracts, inventory and other working capital associated with the assets.
NGL CEO Mike Krimbill said: “NGL continues to focus on its core areas where we have competitive strength. These focus areas generate stable and predictable cash flows as we grow our mix of long-term contracted revenues. The sale of TPSL is part of this strategy and a result of the strategic review of the Refined Products business announced earlier this year.
“Along with the significant reduction in inventory and working capital associated with this business, this transaction reduces borrowings on our working capital revolver and enhances the Partnership’s liquidity and overall leverage profile.
“Managing our leverage and cost of capital are fundamental to our business strategy as we continue our strategic growth plan while maintaining focus on a strong balance sheet.”
The transaction is subject to certain regulatory and other customary closing conditions and is expected to close during the second fiscal quarter.
For the transaction, TD Securities and Credit Suisse Securities have served as financial advisors, and Winston & Strawn served as legal counsel to NGL.