BlackRock, GSO and Magnetar’s $1.1 Billion Preferred Equity Investment in EQM Midstream Partners

Citi and Guggenheim Securities, LLC are acting as financial advisors and Latham & Watkins is acting as legal advisor to ETRN and EQM. Citi and Guggenheim Securities, LLC are also acting as joint placement agents for the Convertible Preferred Units issuance. Kirkland & Ellis advised BlackRock, GSO Capital Partners and Magnetar Capital

EQM has entered into a definitive agreement with a fund managed by Morgan Stanley Infrastructure Partners to acquire a 60% interest in Eureka Midstream Holdings, LLC (Eureka Midstream) and a 100% interest in Hornet Midstream Holdings, LLC (Hornet Midstream) for total consideration of $1,030 million, comprised of approximately $860 million in cash and approximately $170 million of assumed pro-rata debt. The proposed acquisition is expected to close on or about April 15, 2019, subject to customary regulatory and other closing conditions.

Eureka Midstream is a 190-mile gathering header pipeline system in Ohio and West Virginia that services both dry Utica and wet Marcellus production. Hornet Midstream is a 15-mile, high-pressure gathering system in West Virginia that connects to the Eureka system.

EQM will fund the acquisition with cash proceeds from the issuance of $1,100 million of newly issued Series A Convertible Preferred Units (Convertible Preferred Units). The financing is consistent with EQM’s leverage targets, and the Convertible Preferred Units issuance is expected to close simultaneously with the proposed acquisition close. EQM has entered into an agreement to sell the Convertible Preferred Units to lead investors consisting of funds managed by BlackRock, GSO Capital Partners, and Magnetar Capital; and to supporting investors The Carlyle Group and Foundation Infrastructure Partners in connection with Neuberger Berman Private Credit. The Convertible Preferred Units will receive quarterly cash distributions based on an 8.5% annual coupon. Two years after issuance, the Convertible Preferred Units will be convertible by the holders on a one-for-one basis into EQM Common Units and convertible by EQM, under certain circumstances. The Convertible Preferred Units will be priced at $48.77 per unit, a 20.0% premium to the 20-day volume weighted average price of the EQM Common Units, prior to agreement signing.

Kirkland & Ellis advised BlackRock, GSO Capital Partners and Magnetar Capital, acting as lead purchasers, with a team including John Pitts (Picture), Kevin Crews and Sam Peca and associates Allan Kirk, Paul Rogers Knowlton, Hannah Marshall, Efren Lemus, Zain Rifat and David Wilson; tax partners David Wheat, Mark Dundon and Lane Morgan and associate William Dong; and capital markets partner Julian Seiguer and associate Mark Kam.

Involved fees earner: Kevin Crews – Kirkland & Ellis; William Dong – Kirkland & Ellis; Mark Dundon – Kirkland & Ellis; Mark Kam – Kirkland & Ellis; Allan Kirk – Kirkland & Ellis; Efren Lemus – Kirkland & Ellis; Hannah Marshall – Kirkland & Ellis; Lane Morgan – Kirkland & Ellis; Samuel Peca – Kirkland & Ellis; John Pitts – Kirkland & Ellis; Zain Rifat – Kirkland & Ellis; Julian Seiguer – Kirkland & Ellis; David Wheat – Kirkland & Ellis; David James Wilson – Kirkland & Ellis;

Law Firms: Kirkland & Ellis;

Clients: BlackRock; GSO Capital Partners LP; Magnetar Capital;

Author: Ambrogio Visconti