Martin Midstream gives results of exchange offer, cash tender offer

By Sarah Lizee

Olympia, Wash., Aug. 10 – Martin Midstream Partners LP and its subsidiary Martin Operating Partnership LP announced the results of its concurrent but separate tender and exchange offers for its $364.5 million of 7¼% notes due 2021 (Cusips: 573334AD1, 573334AC3, U57363AB6 and U57363AC4) according to a Monday news release.

By the expiration time, $335,666,000, or about 92.1% of the notes, had been tendered under the offer.

Specifically, the company said it had received the following tenders:

• $1,427,000, or 0.4%, tendered under the cash election under exchange offer option 1;

• $34,589,000, or 9.5%, under the exchange notes election;

• $298,425,000, or 81.9%, under the new notes and exchange notes election; and

• $1,225,000, or 0.3%, under the cash tender offer.

The company said it expects to accept all tendered notes for purchase.

As announced on July 9, in connection with the exchange offer, the company also solicited votes to accept a pre-packaged plan of reorganization.

The offers were subject to participation by holders of at least 92% of the notes. The minimum purchase amount was previously 95% of the notes, which was later lowered to 92%.

Martin Operating entered into an amendment to its credit agreement with Royal Bank of Canada to permit consummation of the offers.

Exchange offer

Under the exchange offer, the company offered to exchange any and all of the outstanding existing notes for a combination of cash, up to $322 million of 11½% senior secured second-lien notes due 2025 or rights to acquire up to $50 million of 10% senior secured 1.5-lien notes due 2024 at a subscription price of $137.1908.

The partnership announced Monday that because the amount of cash consideration required to be paid under the cash portion of the exchange offer and the cash tender offer is less than $50 million, it will first purchase existing notes from each eligible holder electing option three, on a pro rata basis, with excess proceeds at a purchase price equal to $1,000 per existing note, and the balance of existing notes each such eligible holder tendered that were not accepted for purchase for cash will be exchanged into exchange notes as if such eligible holder had made an election under option two with respect to the balance of existing notes. “Excess proceeds” will be an amount equal to the difference between $50 million and the total cash consideration multiplied by 0.85.

The partnership expects that it will pay about $41,966,510 in cash, issue about $291,969,885 of exchange notes and, under the rights offering, issue about $53.75 million of new notes, which amount includes the $3.75 million backstop fee, in consideration for the existing notes expected to be accepted in the exchange offer.

Qualified institutional buyers, institutional accredited investors and non-U.S. persons were eligible to participate in the exchange offer.

Holders who tendered their notes for exchange by the early deadline were offered per $1,000 principal amount of existing notes $650 under the cash option; $1,000 of the 11½% second-lien notes due 2025 under the new notes option; or $1,000 principal amount of cash from excess proceeds and/or exchange notes, plus automatic exercise of the right to purchase their pro rata portion of up to $50 million of 10% 1.5-lien notes due 2024.

In order to facilitate the transactions, Martin Midstream, Martin Operating, certain subsidiaries and certain of the supporting noteholders entered into a backstop agreement under which each of the backstop parties agreed to purchase any unsubscribed new notes that have not been purchased in the rights offering as part of the exchange offer. Backstop parties will receive a backstop fee of $3.75 million, which will be paid in the form of additional new notes.

Holders who participated in the exchange offer after the early date but prior to the expiration were eligible to receive, per $1,000 principal amount, $600 under the cash option or $950 principal amount of the 11½% second-lien notes due 2025 under the new notes option. The rights offering was not available after the early date.

In the event that holders tendered $77 million or more in principal amount of existing notes under the cash tender offer, holders electing the cash option under the exchange offer would receive no cash and would instead receive exchange notes as if they had chosen the new-notes option.

In connection with the exchange offer, the company is soliciting related consents to amend the indenture governing the existing notes, including to eliminate substantially all of the restrictive covenants and some events of default and to shorten to three business days from 30 days, the notice period required to be given to holders before a redemption.

Epiq Corporate Restructuring, LLC (Tabulation@epiqglobal.com) is the information agent, solicitation agent, exchange agent, subscription agent, and voting agent for the exchange offer, consent solicitation, rights offering and plan solicitation.

Plan and plan solicitation

The plan solicitation is being made to eligible holders of existing notes.

The company had said that if the conditions to the exchange offer and the related consent solicitation are not satisfied or waived, but the partnership receives votes to accept the plan from holders of at least 66 2/3% in principal amount of the existing notes that cast ballots with respect to the plan and more than 50% in number of holders of existing notes that cast ballots, the partnership and its subsidiaries planned to commence Chapter 11 cases to consummate the plan.

In addition, if at any time the partnership for any reason determines that it would be advantageous, the partnership and its subsidiaries may commence Chapter 11 cases to consummate the plan.

Cash tender offer

The issuers offered to purchase for cash up to $77 million of the existing 7¼% notes.

The partnership announced Monday that it expects that it will pay about $791,250 in cash as consideration for the existing notes expected to be accepted in the cash tender offer.

Holders of existing notes who are not qualified institutional buyers, not institutional accredited investors and not non-U.S. persons were eligible to participate in the cash tender offer.

For each $1,000 of notes tendered by the early deadline, the issuers offered $650, which includes a $50 early tender premium that will not be paid to holders who participated after the early deadline.

In conjunction with the tender offer, the issuers are soliciting consents from holders eligible to participate in this offer to the proposed amendments to the existing notes indenture.

On July 17, the funding date in the rights offering was extended to 5 p.m. ET on July 29 from 5 p.m. ET on July 28. The expiration time of the exchange offer and cash tender offer, was extended to 5 p.m. ET on Aug. 7 from 5 p.m. ET on Aug. 6.

The expected settlement date for the exchange offer and cash tender offer was extended to Aug. 12 from Aug. 11.

Epiq Corporate Restructuring, LLC (Tabulation@epiqglobal.com) acted as the depositary and information agent for the cash tender offer and related consent solicitation.

Martin Midstream is a Kilgore, Tex.-based company that collects, transports, stores and markets petroleum products and byproducts.

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