Enterprise Products Partners L.P.

SEC Filings

GULFTERRA ENERGY PARTNERS L P filed this Form 10-Q on 08/09/2004
Entire Document
     The close of the merger with Enterprise, announced in December 2003, will
constitute a change of control, and thus a default, under our credit facility.
To avoid a default, our credit facility must be refinanced or amended at or
before the closing of the merger. Enterprise has stated that it currently
intends that our credit facility be refinanced before the closing of the merger
and that, if that does not occur, there are reasonable grounds to believe that
our existing credit facility will be amended prior to the closing of the merger.
If the facility is not amended or refinanced prior to closing, the resulting
default would have a material adverse effect on the combined company. In
addition, the closing of the merger will constitute a change of control under
our indentures, and we will be required to offer to repurchase our outstanding
senior subordinated notes (and possibly our senior notes) at 101 percent of
their principal amount after the closing. In coordination with Enterprise, we
are evaluating alternative financing plans in preparation for the closing of the
merger. On August 4, 2004, Enterprise announced that one of its subsidiaries
commenced cash tender offers to purchase any and all of our outstanding senior
subordinated and senior notes. In connection with the tender offers, Enterprise
is soliciting consents to proposed amendments that would eliminate certain
restrictive covenants and default provisions contained in the indentures
governing the notes. Enterprise is commencing the tender offers and consent
solicitations in anticipation of completing the merger, and the merger is a non-
waivable condition to the completion of the tender offers and consent
solicitations. We and Enterprise can agree on the date of the merger closing
after the receipt of all necessary approvals. We do not intend to close until
appropriate financing or other arrangements are in place.
     As of June 30, 2004, our credit facility consisted of three parts: the
revolving credit facility maturing in 2006, a senior secured term loan maturing
in 2007 and a senior secured term loan maturing in 2008. Our credit facility is
guaranteed by us and each of our subsidiaries, excluding our unrestricted
subsidiaries, as detailed in Note 12, and is collateralized with substantially
all of our assets (excluding the assets of our unrestricted subsidiaries). The
interest rates we are charged on our credit facility are determined at our
option using one of two indices that include (i) a variable base rate (equal to
the greater of the prime rate as determined by JPMorgan Chase Bank or the
federal funds rate plus 0.5%); or (ii) LIBOR. The interest rate we are charged
is contingent upon our leverage ratio, as defined in our credit facility, and
credit ratings we are assigned by Standard & Poor's (S&P) or Moody's. Depending
on the credit ratings on our senior secured credit facility and our leverage
ratio, the interest we are charged varies from 1.00% to 2.75% over LIBOR or
0.00% to 1.75% over the variable base rate discussed above. Additionally, we pay
commitment fees on the unused portion of our revolving credit facility at rates
that vary from 0.30% to 0.50%.
     Our credit facility contains covenants that include restrictions on our and
our subsidiaries' ability to incur additional indebtedness or liens, sell
assets, make loans or investments, acquire or be acquired by other companies and
amend some of our contracts, as well as requiring maintenance of certain
financial ratios. Failure to comply with the provisions of any of these
covenants could result in acceleration of our debt and other financial
obligations and that of our subsidiaries and could restrict our ability to make
distributions to our unitholders. In addition, our failure to comply with the
provisions of any of the covenants could also be a breach of our merger
agreement with Enterprise.
  Revolving Credit Facility
     At June 30, 2004, we had $462 million outstanding under our revolving
credit facility at an average interest rate of 3.16%. We may elect that all or a
portion of the revolving credit facility bear interest at either the variable
base rate described above increased by 1.0% or LIBOR increased by 2.0%. The
amount available to us at June 30, 2004, under this facility was $218 million.