Enterprise Products Partners L.P.

SEC Filings

10-Q
GULFTERRA ENERGY PARTNERS L P filed this Form 10-Q on 08/09/2004
Entire Document
 
<PAGE>
 
  Senior Secured Term Loans
 
     In May 2004, we obtained an additional $200 million senior secured term
loan in addition to our already existing $300 million senior secured term loan.
We initially used this additional $200 million to temporarily reduce
indebtedness under our $700 million revolving credit facility and subsequently
to fund the redemption of our $175 million aggregate principal amount of 10 3/8%
senior subordinated notes due 2009. Our new senior secured term loan, which we
may prepay in full at any time, is payable in semi-annual installments of $1.0
million in November and May of each year for the first six installments, and the
remaining balance is due at maturity in October 2007. Our already-existing
senior secured term loan is payable in semi-annual installments of $1.5 million
in June and December of each year for the first nine installments, and the
remaining balance is due at maturity in December 2008. On both senior secured
term loans, we may elect that all or a portion of the senior secured term loans
bear interest at either 1.25% over the variable base rate described above or
LIBOR increased by 2.25%. As of June 30, 2004, we had $498.5 million outstanding
on our senior secured term loans with an average interest rate of 3.65%.
 
LONG-TERM DEBT
 
     In April 2004, we redeemed, at a premium, approximately $39.1 million in
principal amount of our 8 1/2% senior subordinated notes due June 2010. In
connection with the redemption of the notes, we recognized additional expense
during the quarter ended June 30, 2004, totaling $4.1 million resulting from the
payment of the redemption premium and the write-off of unamortized debt issuance
costs.
 
     In June 2004, we redeemed all of our outstanding $175 million aggregate
principal amount of 10 3/8% senior subordinated notes due 2009. The notes were
redeemed at a redemption price of 105.2% of the principal amount, plus accrued
and unpaid interest up to June 1, 2004. In connection with the redemption of the
notes, we recognized additional expense during the quarter ended June 30, 2004,
totaling $12.2 million resulting from the payment of the redemption premium and
the write-off of unamortized debt issuance costs.
 
     We accounted for the costs on both redemptions in accordance with the
provisions of SFAS No. 145, Rescission of Financial Accounting Standards Board
(FASB) Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections.
 
     Our senior and senior subordinated notes include provisions that, among
other things, restrict our ability and the ability of our subsidiaries
(excluding our unrestricted subsidiaries) to incur additional indebtedness or
liens, sell assets, make loans or investments, acquire or be acquired by other
companies, and enter into sale and lease-back transactions, as well as requiring
maintenance of certain financial ratios. Failure to comply with the provisions
of these covenants could result in acceleration of our debt and other financial
obligations and that of our subsidiaries in addition to restricting 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. Many restrictive covenants associated with our senior
notes will effectively be removed following a period of 90 consecutive days
during which they are rated Baa3 or higher by Moody's or BBB- or higher by S&P,
and some of the more restrictive covenants associated with some (but not all) of
our senior subordinated notes will be suspended should they be similarly rated.
 
     In July 2003, to achieve a more balanced mix of fixed rate debt and
variable rate debt, we entered into an eight-year interest rate swap agreement
to provide for a floating interest rate on $250 million of our 8 1/2% senior
subordinated notes due 2011. With this swap agreement, we paid the counterparty
a LIBOR based interest rate plus a spread of 4.20% and received a fixed rate of
8 1/2%. The net amount to be paid or received under the interest rate swap
contract was added to or deducted from the interest and debt expense on our
senior subordinated notes for which the swap contract was executed, payable
semi-annually in June and December. In December 2003, we received $2.8 million
related to the interest rate swap contract. We accounted for this derivative as
a fair value hedge under SFAS No. 133. In March 2004, we terminated our fixed to
floating interest rate swap with our counterparty. The value of the transaction
at termination was zero, and as such neither we, nor our counterparty, were
required to make any additional payments. Also, neither we, nor our
counterparty, have any future obligations under this transaction.
 
                                        10