Regency Energy eyes exchange offer for $550 million Eagle Rock notes

By Susanna Moon

Chicago, Dec. 23 - Regency Energy Partners LP plans an exchange offer for Eagle Rock Energy Partners, LP's $550 million of outstanding senior notes.

In the exchange, the company will issue an equal amount of Regency senior notes, according to a press release by Eagle Rock.

The exchange offer is in connection with Eagle Rock's plans to contribute its midstream business to Regency Energy for total price of up to $1,325,000,000.

Eagle Rock will receive up to $1,325,000,000, consisting of $200 million of newly issued Regency common units and a combination of cash and assumed debt, the company said.

The cash portion of the purchase price will be reduced by the amount of notes exchanged subject to a 10% adjustment factor, so that if all $550 million of bonds are exchanged, the total price will be $1.27 billion, or $1,325,000,000 less $55 million consisting of $200 million Regency units, $550 million of assumed debt and $520 million of cash proceeds.

The deal is expected to close in the first half of 2014.

The company plans to use the cash proceeds from the contribution of its midstream business to pay down borrowings under its revolving credit facility.

"This transaction is consistent with our stated goals of simplifying our structure and reducing our debt balances," Joseph A. Mills, Eagle Rock's chairman and chief executive officer, said in a press release.

Dallas-based Regency Energy is involved in the gathering, processing and transportation of natural gas and the transportation and storage of natural gas liquids.

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