Suburban pushes back exchange offers to coincide with Inergy purchase

By Susanna Moon

Chicago, July 27 - Suburban Propane Partners, LP and Suburban Energy Finance Corp. extended exchange offers for the $1.2 billion principal amount of 7% senior notes due 2018 and 6 7/8% senior notes due 2021 issued by Inergy, LP and Inergy Finance Corp.

The offers were extended to coincide with the partnership's acquisition of Inergy's retail propane operations, according to a press release by Suburban Propane.

The exchange offers will now end at 12:01 a.m. ET on Aug. 1, extended from 11:59 p.m. ET on July 26 and, before that, 11:59 p.m. ET on July 6. The offers began on May 3 and were originally set to expire at 11:59 p.m. ET on May 31.

Suburban is offering to exchange any and all of the outstanding 7% notes and 6 7/8% notes issued by Inergy and Inergy Finance for a combination of $1.0 billion principal amount of new 7½% senior notes due 2018 and 7 3/8% senior notes due 2021, respectively, issued by Suburban, and $200.0 million in cash.

Investors had tendered 98.09% of the 7% notes and 99.73% of the 6 7/8% notes as of 5 p.m. ET on July 26.

Sweetened offer

Suburban said on July 6 that it was sweetening the offer after more discussions with noteholders.

The amended interest rates of the new notes reflected another jump from the amended rates announced on June 15. The interest rates are 50 basis points more than those initially offered, a previous press release noted.

Suburban also revised the redemption provisions of the notes and some covenants.

In addition, Suburban previously said it would pay a total of $65.0 million in cash to holders of Inergy notes, on a pro rata basis, who delivered consents under the offer.

Assuming that consents were delivered for all $1.2 billion principal amount of the Inergy notes, the cash consent payment would have been about $54.17 per $1,000 principal amount of Inergy notes. If consents were delivered for $1.0 billion of Inergy notes, the cash consent payment would have been $65.00 per $1,000 of notes.

In exchange for tendered Inergy notes, the companies previously offered $1.0 billion principal amount of new 7¼% notes and 7 1/8% notes issued by Suburban Energy plus $200.0 million in cash. The coupon for the 2018 notes was increased from 7%, and the coupon on the 2021 notes was increased from 6 7/8%.

As noted before, each new series of notes will have substantially the same terms - except for the coupon, which was recently raised - as the corresponding series of outstanding Inergy notes for which they are being offered in exchange, including interest payment dates, optional redemption terms and maturity.

Suburban Propane initially announced the offers on April 26. It said that it received a commitment to increase its revolving credit facility to $400.0 million from $250.0 million and that it planned on issuing $1.0 billion of 7% senior notes due 2018 and 6 7/8% senior notes due 2021.

Needed consents

As of July 13 the companies received enough holder consents to amend the notes to delete substantially all the restrictive covenants, modify the covenants regarding mergers and consolidations and eliminate events of default.

The consents were sought in connection with the exchange offer for the notes.

Investors had tendered $580.5 million principal amount, or about 96.75%, of the 7% notes and $532.5 million principal amount, or 88.75%, of the 6 7/8% notes by the early tender deadline at 5 p.m. ET on July 12. The consent deadline was extended several times, as detailed below.

As a result, the minimum tender condition was satisfied and the needed consents secured for both series of Inergy notes, according to a previous release.

Given the amount tendered, the consent fee was $58.40 per $1,000 principal amount of Inergy notes.

Deadline extensions

The consent deadline was most recently extended to 5 p.m. ET on July 12 from 5 p.m. ET on July 6, which was also the previous offer expiration. The consent deadline was originally set for May 16 and was extended to May 18, May 23, May 31, June 7, June 14, June 21, June 26 and June 28.

As previously noted, the exchange offers and consent solicitation are conditioned on the acquisition of Inergy, LP's retail propane operations.

As of 5 p.m. ET on July 5, investors had tendered about 44% of the Inergy notes. As of June 14, about 34% of the outstanding principle amount of Inergy notes had been tendered.

Previous consent changes

Along with the extension on June 15 the companies increased the consent payment and coupons of the new Suburban Energy notes and made other changes to the terms of the offers.

Before the most recent changes, the Suburban companies had been prepared to pay a total of $50.0 million in cash to holders who deliver consents by the deadline. Before that, the total consent payment was set at $30.0 million.

Assuming that consents are delivered for all $1.2 billion of the Inergy notes, the cash consent payment would have been $41.67, up from $25.00, per $1,000 principal amount. Assuming that consents are delivered for $1.0 billion of the notes, the premium would have been $50, up from $30, per $1,000 of notes.

Suburban originally offered to pay a cash consent fee of $3.75 per $1,000 principal amount of notes.

The amendments required the consent of a majority of holders of the outstanding principal amount of each series of Inergy notes.

Global Bondholder Services Corp. (866 387-1500 or collect 212 430-3774) is the information agent for the exchange offers.

Inergy is a Kansas City, Mo., master limited partnership with operations that include the retail marketing, sale and distribution of propane. It also operates a natural gas storage business, a liquid petroleum gas storage business, a solution-mining and salt production company and a propane supply logistics, transportation and wholesale marketing business.

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