PROSPECTUS SUPPLEMENT		(TO PROSPECTUS DATED NOVEMBER 3, 2003)

 

$300,000,000

TEPPCO Partners, L.P.

 

7.000% Fixed/Floating Rate Junior Subordinated Notes due 2067

 

 

Guaranteed to the extent described in this prospectus supplement by

 

TE Products Pipeline Company, Limited Partnership, TCTM, L.P.,

TEPPCO Midstream Companies, L.P. and Val Verde Gas Gathering Company, L.P.

 

 

 

 

The 7.000% Fixed/Floating Rate Junior Subordinated Notes due 2067, which we refer to as the “Notes,” issued by TEPPCO Partners, L.P. will bear interest from the date they are issued to June 1, 2017, at the annual rate of 7.000% of their principal amount, payable semi-annually in arrears on June 1 and December 1 of each year, commencing December 1, 2007, and thereafter will bear interest at an annual rate equal to the Three-Month LIBOR Rate for the related interest period plus a spread of 277.75 basis points, payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year, commencing September 1, 2017. The Notes will mature on June 1, 2067.

 

We may elect to defer interest payments on the Notes on one or more occasions for up to ten consecutive years as described in this prospectus supplement. Deferred interest will accumulate additional interest at a rate equal to the interest rate then applicable to the Notes, to the extent permitted by law. Each of TE Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P. and Val Verde Gas Gathering Company, L.P. will, jointly and severally, guarantee, on a junior subordinated basis, payment of the principal of, premium, if any, and interest on the Notes.

 

We may redeem the Notes in whole or in part at any time on or after June 1, 2017, at a redemption price equal to their principal amount plus accrued and unpaid interest. In addition, we may redeem the Notes prior to June 1, 2017 (a) in whole or in part, at any time, at a redemption price equal to the Make-Whole Redemption Price and (b) in whole but not in part, after the occurrence of either a Tax Event or a Rating Agency Event, at a redemption price equal to the Special Event Make-Whole Redemption Price, in each case as described in this prospectus supplement. Any redemption of the Notes is subject to the limitations set forth in the Replacement Capital Covenant described in this prospectus supplement.

 

 

 

 

Investing in the Notes involves certain risks. See “Risk Factors” beginning on page S-14 of this prospectus supplement and on page 1 of the accompanying prospectus.

 

 

 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

 

 

 

The underwriters expect to deliver the Notes in book entry form only, through the facilities of The Depository Trust Company, against payment on May 18, 2007.

 

Joint Book-Running Managers

 

 

 

 

 

 

 

The date of this prospectus supplement is May 15, 2007.

 

TABLE OF CONTENTS

 

 

This document is in two parts. The first part is this prospectus supplement, which describes the terms of this offering of Notes and certain terms of the Notes and the Guarantees. The second part is the accompanying prospectus, which describes certain terms of the indenture under which the Notes will be issued and which gives more general information, some of which may not apply to this offering of Notes. If the information varies between this prospectus supplement and the accompanying prospectus, you should rely on the information in this prospectus supplement.

 

You should rely only on the information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with additional or different information. We are not making an offer to sell these Notes or the Guarantees in any jurisdiction where the offer is not permitted. You should not assume that the information contained in this prospectus supplement or the accompanying prospectus is accurate as of any date other than the date on the front of this document or that any information we have incorporated by reference is accurate as of any date other than the date of the document incorporated by reference. Our business, financial condition, results of operations and prospects may have changed since these dates.

 

SUMMARY

	•	Downstream Segment: Transporting, Marketing and Storing Refined Petroleum Products, LPGs and Petrochemicals.  Our Downstream Segment owns, operates or has investments in properties located in 14 states. The operations of the Downstream Segment consist of interstate transportation, storage and terminaling of refined products and LPGs; intrastate transportation of petrochemicals; distribution and marketing operations including terminaling services and other ancillary services. We own and operate an approximately 4,700-mile pipeline system, which includes receiving, storage and terminaling facilities, extending from southeast Texas through the central and midwestern United States to the northeastern United States. In addition, we own a 50% interest in Centennial Pipeline LLC, which owns and operates an interstate refined petroleum products pipeline extending from the upper Texas Gulf Coast to Illinois.
	•	Upstream Segment: Gathering, Transporting, Marketing and Storing Crude Oil.  Our Upstream Segment gathers, transports, markets and stores crude oil, and distributes lubrication oils and specialty chemicals, principally in Oklahoma, Texas, New Mexico and the Rocky Mountain region. We own and operate approximately 3,450 miles of crude oil trunk line and gathering pipelines, primarily in Texas, New Mexico and Oklahoma. Our Upstream Segment uses its asset base to aggregate crude oil and provide transportation and related services to its customers. Our Upstream Segment purchases crude oil from various producers and operators at the wellhead and makes bulk purchases of crude oil at pipeline and terminal facilities and trading locations. The crude oil is then sold to refiners and other customers. We also own a 50% interest in Seaway Crude Pipeline Company (starting in 2007, we receive 40% of revenue and expense), which owns an approximately 500-mile, 30-inch diameter crude oil pipeline that transports primarily imported crude oil from

		Freeport, Texas to Cushing, Oklahoma, a central crude distribution point for the central United States and a delivery point for the New York Mercantile Exchange. In addition, we own crude oil storage tanks at Cushing, Oklahoma, and Midland, Texas, and an interest in the Basin pipeline, which transports crude oil from the Permian Basin in New Mexico and Texas to Cushing, Oklahoma.

	•	Midstream Segment: Gathering Natural Gas, Transporting NGLs and Fractionating NGLs.  Our Midstream Segment gathers natural gas and transports and fractionates NGLs. We have an equity ownership interest in Jonah Gas Gathering Company, which serves the Jonah and Pinedale fields in Wyoming. According to the Energy Information Administration’s 2005 estimates, these fields were in the top ten natural gas producing fields in the United States. The Jonah system gathers natural gas from approximately 1,130 producing wells and consists of approximately 640 miles of pipelines. Natural gas gathered on the Jonah system is delivered to several interstate pipeline systems that provide access to a number of West Coast, Rocky Mountain and Midwest markets. Through our Val Verde gathering system, we gather coal bed methane in southern Colorado and New Mexico. Our Val Verde coal bed methane gathering system consists of approximately 400 miles of pipelines, 14 compressor stations operating over 75,000 horsepower of compression and a large amine treating system for the removal of carbon dioxide. In addition, we own approximately 1,500 miles of NGL pipelines, which include the Chaparral and Quanah systems extending from southeastern New Mexico through Texas, and NGL pipelines along the Texas Gulf Coast and in East Texas. We also own two fractionators in Colorado, which separate a mixed stream of NGLs into individual components.

	•	To operate in a safe, efficient and environmentally responsible manner;
	•	To increase fee based revenues;
	•	To maintain a balanced mix of assets;
	•	To focus on internal growth prospects in order to increase pipeline system and terminal throughput, expand and upgrade existing assets and services and construct new pipelines, terminals and facilities; and

	•	To target accretive and complementary acquisitions and expansion opportunities that provide attractive growth potential.

(1)	EPCO, Inc. and its private company affiliates own the sole 0.01% GP interest and an aggregate 90.1% LP interest in Enterprise GP Holdings L.P. The remaining LP interests in Enterprise GP Holdings L.P. are publicly owned.
(2)	Does not include our general partner’s interest in distributions above the minimum quarterly distribution. For the quarter ended March 31, 2007, our general partner received 16.4% of the cash we distributed to our partners.

Issuer		TEPPCO Partners, L.P.
Securities Offered		$300,000,000 aggregate principal amount of our 7.000% Fixed/Floating Rate Junior Subordinated Notes due 2067, which we refer to as the “Notes.”
Guarantors		TE Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P. and Val Verde Gas Gathering Company, L.P., which we refer to as the “Subsidiary Guarantors.”
Maturity		June 1, 2067.
Interest Rate; Fixed Rate Period; Floating Rate Period		The Notes will bear interest from the date of issuance to June 1, 2017, which we refer to as the “Fixed Rate Period,” at an annual rate of 7.000%, payable semi-annually in arrears on June 1 and December 1 of each year, commencing December 1, 2007, and thereafter, which we refer to as the “Floating Rate Period,” at an annual rate equal to the sum of the Three-Month LIBOR Rate (as defined in “Description of the Notes — Determining the Floating Rate; Calculation Agent”) for the related interest period plus a spread of 277.75 basis points, payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year, commencing September 1, 2017, unless payment is deferred as described below.
		For a more complete description of interest payable on the Notes, see “Description of the Notes — Interest Rate and Interest Payment Dates” and “Description of the Notes — Determining the Floating Rate; Calculation Agent.”
Optional Deferral of Interest		We may defer interest payments on the Notes, from time to time, for one or more periods (each, an “Optional Deferral Period” ) of up to 10 consecutive years per Optional Deferral Period. In other words, we may declare at our discretion up to a 10-year interest payment moratorium on the Notes, and we may choose to do that on more than one occasion. We may not defer payments beyond the maturity date of, or redemption date for, the Notes.
		Deferred interest not paid on an interest payment date will bear interest from that interest payment date until paid at the then prevailing interest rate on the Notes compounded semi-annually during the Fixed Rate Period and quarterly during the Floating Rate Period, as described under “Description of the Notes — Interest Rate and Interest Payment Dates.” We refer to such deferred interest, the interest accrued thereon and any accrued and unpaid interest on any interest payment date during a deferral period collectively as “Deferred Interest.” Once we pay all Deferred Interest resulting from our optional deferral, such Optional Deferral Period will end and we may later defer interest again for a new Optional Deferral Period. We have, however, no current intention of deferring interest payments on the Notes.

Distribution Stopper		During any period in which we defer interest payments on the Notes, subject to certain exceptions:
		• we will not declare or make any distributions with respect to, or redeem, purchase or make a liquidation payment with respect to, any of our equity securities;
		• neither we nor the Subsidiary Guarantors will make, and we and the Subsidiary Guarantors will cause our respective majority-owned subsidiaries not to make, any payment of interest, principal or premium, if any, on or repay, purchase or redeem any of our or the Subsidiary Guarantors’ debt securities (including securities similar to the Notes) that contractually rank equally with or junior to the Notes or the Guarantees, as applicable; and
		• neither we nor the Subsidiary Guarantors will make, and we and the Subsidiary Guarantors will cause our respective majority-owned subsidiaries not to make, any payments under a guarantee of debt securities (including under a guarantee of debt securities that are similar to the Notes) that contractually ranks equally with or junior to the Notes or the Guarantees, as applicable.
		This covenant is subject to the exceptions described under “Description of the Notes — Distribution Stopper.”
Subordination and Ranking		Our payment obligations under the Notes will be unsecured and will, to the extent provided in the Indenture (as defined in this prospectus supplement), be subordinated to the prior payment in full of all of our present and future indebtedness for borrowed money, indebtedness evidenced by securities, bonds, notes and debentures, obligations under guarantees, direct credit substitutes, hedge and derivative products, capitalized lease obligations, letters of credit, cash management arrangements, certain operating leases and other Senior Indebtedness (as defined under “Description of the Notes — Subordination; Ranking of the Notes; Payment Blockage”). However, the Notes will rank equally with our trade accounts payable and certain other liabilities arising in the ordinary course of our business, any of our indebtedness which by its terms is expressly made equal in rank with the Notes and indebtedness owed by us to our majority-owned subsidiaries.
		The Notes will rank senior in right of payment to all of our present and future equity securities.
		The Indenture does not limit our ability to incur additional debt, including debt that ranks senior in priority of payment to or pari passu with the Notes.
		We conduct a significant amount of our operations through our subsidiaries and unconsolidated affiliates, and a significant amount of our assets include our ownership interests in such entities. Holders of the Notes will have a junior position to claims of creditors of our subsidiaries, other than the Subsidiary Guarantors, and unconsolidated affiliates, including trade creditors, debt holders, secured creditors, taxing authorities and guarantee

		holders. Holders of the Notes will have a junior position to claims of creditors holding “senior indebtedness” of our subsidiaries that are Subsidiary Guarantors to the extent described under “Description of the Notes — Guarantees.”
Guarantees		Each of the Subsidiary Guarantors will, jointly and severally, fully and unconditionally guarantee (each, a “Guarantee”) the full and prompt payment of principal of, premium, if any, and interest on the Notes, when and as the same become due and payable (subject to our right to defer interest as set forth under “Description of the Notes — Optional Deferral of Interest”), whether at stated maturity, upon redemption, by declaration of acceleration or otherwise, as described under “Description of the Notes — Guarantees.” The Guarantees will be unsecured and subordinated to the senior indebtedness of each of the Subsidiary Guarantors, as described under “Description of the Notes — Guarantees.”
Optional Redemption		We may redeem the Notes before their maturity, subject to the limitations set forth in the Replacement Capital Covenant discussed below, as follows:
		• in whole or in part at any time on or after June 1, 2017, at a redemption price equal to 100% of their principal amount plus accrued and unpaid interest;
		• in whole or in part at any time prior to June 1, 2017, at a redemption price equal to the Make-Whole Redemption Price (as defined in “Description of the Notes — Optional Redemption”); or
		• in whole but not in part prior to June 1, 2017, after the occurrence of a Tax Event or Rating Agency Event at a redemption price equal to the “Special Event Make-Whole Redemption Price” (as defined in “Description of the Notes — Optional Redemption”).
		For a more complete description of the redemption provisions of the Notes, see “Description of the Notes — Optional Redemption.”
Replacement Capital Covenant		At or around the time of the initial issuance of the Notes, we and the Subsidiary Guarantors will enter into a Replacement Capital Covenant in which we and they will covenant for the benefit of holders of a designated series of long-term indebtedness that ranks senior to the Notes that we and they will not redeem or purchase (or cause any of our majority-owned subsidiaries to purchase) or otherwise satisfy, discharge or defease (which we are together referring to as “defease” or “defeasance,” as applicable) any of the Notes on or before June 1, 2037, unless, subject to certain limitations, during the 180 days prior to the date of that redemption, repurchase, defeasance or purchase we have or one of our subsidiaries has received a specified amount of proceeds from the sale of qualifying securities that have characteristics that are the same as, or more equity-like than, the applicable characteristics of the Notes. The Replacement Capital Covenant is not intended for the benefit of holders of the Notes and cannot

		be enforced by them, and the Replacement Capital Covenant is not a term of the Indenture or the Notes.
		In the event that the Replacement Capital Covenant terminates prior to June 1, 2037, as a result of there being no eligible designated debt outstanding, we intend that if we redeem the Notes, or if we or one of our majority-owned subsidiaries purchases the Notes, the redemption or purchase price of the Notes will be paid with amounts that include net proceeds received by us or our subsidiaries from the sale or issuance, during the 180-day period prior to the date of such redemption or such purchase, by us or our subsidiaries to third-party purchasers of securities for which we will receive equity-like credit from the rating agencies which rate our securities, that is equal to or greater than the equity-like credit then attributed to the Notes being redeemed or purchased. The determination of the equity-like credit of the Notes may result in the issuance of an amount of new securities that may be less than the principal amount of the Notes, depending upon, among other things, the nature of the new securities issued and the equity-like credit attributed by a rating agency to the Notes and the new securities.
Events of Default		The following will be events of default under the Indenture governing the terms of the Notes, as described in more detail under “Description of the Notes — Events of Default”:
		• the failure to pay principal when due;
		• the failure to pay interest when due and payable that continues for 30 days, subject to the right to defer interest payments as described in “Description of the Notes — Optional Deferral of Interest;”
		• certain events of bankruptcy, insolvency or reorganization involving us; or
		• any of the Guarantees ceases to be in full force and effect or is declared null and void in a judicial proceeding.
Reopening of the Series		We may, without the consent of the holders of the Notes, increase the principal amount of the series and issue additional notes of such series having the same ranking, interest rate, maturity and other terms as the Notes, except for issue date, issue price and, if applicable, first interest payment date. Any such additional notes may, together with the Notes, constitute a single series of securities.
Use of Proceeds		We expect to receive aggregate net proceeds of approximately $295.3 million from the sale of the Notes to the underwriters after deducting the underwriters’ discount and other offering expenses payable by us. We expect to use the net proceeds of this offering to temporarily reduce borrowings outstanding under our multi-year revolving credit facility and for general partnership purposes.
Ratings		The Notes will be rated Ba1 (negative) and BB (stable) by Moody’s Investors Service and Standard & Poor’s Rating Services,

		respectively. Credit ratings are intended to provide banks and capital market participants with a framework for comparing the credit quality of securities and are not a recommendation to buy, sell or hold these securities. Each rating may be subject to revision or withdrawal at any time and should be evaluated independently of any other rating.
Federal Income Tax Considerations		In connection with the issuance of the Notes, Bracewell & Giuliani LLP will render an opinion to us that, for United States federal income tax purposes, the Notes will be classified as indebtedness (although there is no clear authority directly on point). This opinion is subject to certain customary conditions. See “Certain United States Federal Income Tax Considerations.”
		Each purchaser of the Notes agrees to treat the Notes as indebtedness for all United States federal, state and local tax purposes. We intend to treat the Notes in the same manner.
		If we elect to defer interest on the Notes, the holders of the Notes will be required to accrue income for United States federal income tax purposes in the amount of the accumulated interest payments on the Notes, in the form of original issue discount, even though cash interest payments are deferred and even though they may be cash basis taxpayers.
Risk Factors		Investing in the Notes involves certain risks. You should carefully consider the risk factors discussed under the heading “Risk Factors” beginning on page S-14 of this prospectus supplement and on page 1 of the accompanying prospectus and the other information contained or incorporated by reference in this prospectus supplement and the accompanying prospectus before deciding to invest in the Notes.
Book-Entry Form/Denominations		The Notes will be issued in denominations of $1,000 and integral multiples thereof in book-entry form and will be represented by a permanent global certificate deposited with, or on behalf of, The Depository Trust Company (“DTC”) and registered in the name of a nominee of DTC. Beneficial interests in any of the Notes will be shown on, and transfers will be effected only through, records maintained by DTC or its nominee and any such interest may not be exchanged for certificated securities, except in limited circumstances.
Trading		We will not list the Notes for trading on any securities exchange.
Trustee		The Bank of New York Trust Company, N.A.
Governing Law		The Notes and the Indenture will be governed by, and construed in accordance with, the laws of the State of New York.

														Three Months Ended
		Year Ended December 31,												March 31,
		2004				2005				2006				2006				2007
														(Unaudited)
		(In thousands, except per unit amounts)
Income statement data:
Operating revenues		$	5,948,090			$	8,605,034			$	9,607,485			$	2,536,369			$	1,978,429
Purchases of petroleum products			5,367,027				7,986,438				8,967,062				2,371,040				1,813,994
Depreciation and amortization			112,284				110,729				108,252				28,757				25,369
Operating, general and administrative expenses			285,388				288,502				309,796				75,312				74,281
Gains on sales of assets			(1,053	)			(668	)			(7,404	)			(1,378	)			(18,649	)
Total costs and expenses			5,763,646				8,385,001				9,377,706				2,473,731				1,894,995
Operating income			184,444				220,033				229,779				62,638				83,434
Interest expense — net			(72,053	)			(81,861	)			(86,171	)			(21,143	)			(22,211	)
Gain on sale of ownership interest in Mont Belvieu Storage Partners, L.P.			—				—				—				—				59,837
Equity earnings			22,148				20,094				36,761				989				16,563
Other income — net			1,320				1,135				2,965				899				586
Income before provision for income taxes			135,859				159,401				183,334				43,383				138,209
Provision for income taxes			—				—				652				—				18
Income from continuing operations			135,859				159,401				182,682				43,383				138,191
Income from discontinued operations			2,689				3,150				1,497				1,607				—
Gain on sale of discontinued operations			—				—				17,872				17,884				—
Discontinued operations			2,689				3,150				19,369				19,491				—
Net income		$	138,548			$	162,551			$	202,051			$	62,874			$	138,191
Basic and diluted net income per Limited Partner Unit:
Continuing operations		$	1.53			$	1.67			$	1.77			$	0.43			$	1.29
Discontinued operations			0.03				0.04				0.19				0.20				—
Basic and diluted net income per Limited Partner Unit		$	1.56			$	1.71			$	1.96			$	0.63			$	1.29
Weighted average Limited Partner Units outstanding			62,999				67,397				73,657				69,964				89,805
Balance sheet data (at period end):
Property, plant and equipment — net		$	1,703,702			$	1,960,068			$	1,642,095			$	1,936,755			$	1,650,547
Total assets			3,186,284				3,680,538				3,922,092				3,814,582				3,796,950
Long-term debt (net of current maturities)			1,480,226				1,525,021				1,603,287				1,547,054				1,512,302
Partners’ capital			1,011,103				1,201,370				1,320,330				1,199,259				1,386,675

														Three Months Ended
		Year Ended December 31,												March 31,
		2004				2005				2006				2006				2007
														(Unaudited)
		(In thousands, except per unit amounts)
Other financial data:
Adjusted EBITDA(1)		$	349,377			$	383,695			$	432,229			$	119,475			$	199,027
Net cash flow provided by (used in):
Operating activities from continuing operations			263,896				250,723				271,552				37,093				68,731
Total operating activities			267,167				254,505				273,073				38,724				68,731
Investing activities
Capital expenditures			(156,749	)			(220,553	)			(170,046	)			(38,272	)			(34,084	)
Acquisitions and equity investments			(26,279	)			(116,464	)			(148,775	)			(1,720	)			(37,023	)
Proceeds from the sale of assets			1,226				510				51,558				39,030				165,266
Other			(957	)			(14,408	)			(6,453	)			—				—
Discontinued operations			(7,398	)			—				—				—				—
Total investing activities		$	(190,157	)		$	(350,915	)		$	(273,716	)		$	(962	)		$	94,159
Total financing activities		$	(90,057	)		$	80,107			$	594			$	(37,792	)		$	(162,889	)
Operating data:
Downstream (barrels):
Refined products			152,437				160,667				165,269				35,808				35,754
Liquefied petroleum gases			43,982				45,061				44,997				12,840				16,598
Upstream:
Crude oil transportation (barrels)			101,462				94,743				91,487				22,328				24,133
Crude oil marketing (barrels)			177,273				203,325				222,069				52,941				55,946
Crude oil terminaling (barrels)			113,197				110,254				125,974				24,443				40,143
Lubricants and chemicals (gallons)			13,964				14,844				14,444				3,855				3,831
Midstream:
NGL transportation (barrels)			59,549				61,051				69,746				15,866				17,565
Gathering — natural gas (million cubic feet)			499,085				595,880				654,796				154,019				176,150
Fractionation — natural gas liquids (barrels)			4,149				4,431				4,406				1,153				978

(1)		“Adjusted EBITDA” is a “non-GAAP financial measure” under the rules of the Securities and Exchange Commission. We define Adjusted EBITDA as net income plus interest expense-net, provision for income taxes and depreciation and amortization plus a pro rata portion, based on our equity ownership, of the interest expense and depreciation and amortization of each of our joint ventures. We have historically included the pro rata portion of these joint venture items in our EBITDA-related disclosures. We have included Adjusted EBITDA as a supplemental disclosure because our management believes Adjusted EBITDA is used by our investors as a supplemental financial measurement in the evaluation of our business. Our management believes Adjusted EBITDA provides useful information regarding the performance of the assets of TEPPCO Partners and its subsidiaries without regard to financing methods, capital structures or historical cost basis. As a result, Adjusted EBITDA provides investors a helpful measure for comparing the operating performance of TEPPCO Partners and its subsidiaries with the performance of other companies that have different financing and capital structures. Adjusted EBITDA multiples are also used by our investors in assisting in the valuation of our limited partners’ equity.
		Adjusted EBITDA should not be considered as an alternative to net income or income from continuing operations, operating income, cash flows from operating activities or any other measure of financial performance calculated and presented in accordance with generally accepted accounting principles. Adjusted EBITDA of TEPPCO Partners and its subsidiaries may not be comparable to EBITDA of other companies because other companies may not calculate EBITDA in the same manner as we do.

		The following table reconciles Adjusted EBITDA to net income, its most directly comparable financial measure calculated and presented in accordance with GAAP:

		Year Ended												Three Months Ended
		December 31,												March 31,
		2004				2005				2006				2006				2007
		(In thousands)
Net income		$	138,548			$	162,551			$	202,051			$	62,874			$	138,191
Discontinued operations			2,689				3,150				19,369				19,491				—
Net income from continuing operations			135,859				159,401				182,682				43,383				138,191
Interest expense — net			72,053				81,861				86,171				21,143				22,211
Depreciation and amortization (D&A)			112,284				110,729				108,252				28,757				25,369
Provision for income taxes			—				—				652				—				18
Amortization of excess investment in joint ventures			3,833				4,763				4,314				907				809
TEPPCO’s pro-rata percentage of joint venture interest expense and D&A			22,049				23,179				30,738				5,743				12,429
Adjusted EBITDA, from continuing operations		$	346,078			$	379,933			$	412,809			$	99,933			$	199,027
Discontinued operations			2,689				3,150				19,369				19,491				—
D&A included in discontinued operations			610				612				51				51				—
Adjusted EBITDA		$	349,377			$	383,695			$	432,229			$	119,475			$	199,027

 

An investment in the Notes involves certain risks. You should carefully consider the supplemental risks described below in addition to the risks described under “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2006, which is incorporated by reference herein, as well as the other information contained in or incorporated by reference into this prospectus supplement and the accompanying prospectus. If any of these risks were to materialize, our business, results of operations, cash flows and financial condition could be materially adversely affected. In that case, the value of the Notes could decline, and you could lose part or all of your investment.

 

We may elect to defer interest payments on the Notes at our option for one or more periods of up to ten consecutive years.

 

We may elect to defer payment of all or part of the current and accrued interest otherwise due on the Notes for one or more periods of up to ten consecutive years, as described under “Description of the Notes — Optional Deferral of Interest.” If we exercise this option, you will not receive any current income on your investment in the Notes during such deferral period. In addition, although we are not permitted to defer payment of interest for more than ten consecutive years, we are permitted to defer interest for multiple periods of up to ten years without triggering an event of default.

 

We will not be able to pay current interest on the Notes until we have paid all Deferred Interest, which could have the effect of extending interest deferral periods.

 

We will be prohibited from paying current interest on the Notes until we have paid all Deferred Interest on the Notes, even if we have cash available from other sources. As a result, we will not be able to pay current interest on the Notes, even if we have funds available to pay such current interest, if we do not have available funds to pay all Deferred Interest.

 

The Notes are subordinated to substantially all of our direct indebtedness.

 

Our payment obligations under the Notes are unsecured and subordinated and rank junior in right of payment to all of our current and future “senior indebtedness,” including our indebtedness for borrowed money, indebtedness evidenced by bonds, debentures, notes or similar instruments, obligations arising from or with respect to guarantees and direct credit substitutes, obligations associated with hedges and derivative products, capitalized lease obligations and other senior indebtedness, excluding our trade account payables, certain other liabilities arising in the ordinary course of our business, any of our indebtedness which by its terms is expressly made equal in rank with or subordinated to the Notes and indebtedness owed by us to our majority-owned subsidiaries. We cannot make any payments on the Notes if we have defaulted on a payment of senior indebtedness and do not cure the default within the applicable grace period, or if the senior indebtedness becomes immediately due because of a default and has not yet been paid in full.

 

As a result of the subordination provisions discussed in “Description of the Notes — Subordination; Ranking of the Notes; Payment Blockage,” in the event of our insolvency, funds that we would otherwise use to pay the holders of the Notes will be used to pay the holders of our senior indebtedness to the extent necessary to pay such indebtedness in full. As a result of those payments, holders of the Notes may recover less, ratably, than the holders of our senior indebtedness. In addition, the holders of all of our senior indebtedness may, under certain circumstances, restrict or prohibit us from making payments on the Notes.

 

The Indenture does not limit our ability to incur additional indebtedness and other obligations, including indebtedness and other obligations that rank senior to or pari passu with the Notes. At March 31, 2007, the indebtedness of TEPPCO Partners and the Subsidiary Guarantors (including guarantees of indebtedness of unconsolidated affiliates) that is senior to the Notes and the Guarantees totaled approximately $1,562.6 million. As discussed below, the Notes will also be effectively subordinated to the existing and future indebtedness and other obligations of our subsidiaries, other than the Subsidiary Guarantors, and unconsolidated affiliates.

 

The Subsidiary Guarantors’ guarantee of the Notes is subordinate to all of their respective senior indebtedness.

 

Each Subsidiary Guarantor’s guarantee of the Notes is subordinated and ranks junior in right of payment to all of its current and future “senior indebtedness,” including such Subsidiary Guarantor’s indebtedness for borrowed money, indebtedness evidenced by bonds, debentures, notes or similar instruments, obligations arising from or with respect to guarantees and direct credit substitutes, obligations associated with hedges and derivative products, capitalized lease obligations and other senior indebtedness, excluding its trade account payables, certain other liabilities arising in the ordinary course of its business, any indebtedness which by its terms is expressly made equal in rank with or subordinated to its guarantee of the Notes and obligations owed by such Subsidiary Guarantor to its majority-owned subsidiaries. A Subsidiary Guarantor will not be permitted to make any payments under its guarantee of the Notes if it has defaulted on a payment of senior indebtedness.

 

A court may use fraudulent conveyance considerations to avoid or subordinate the subsidiary guarantees.

 

Various applicable fraudulent conveyance laws have been enacted for the protection of creditors. A court may use fraudulent conveyance laws to subordinate or avoid the Subsidiary Guarantors’ guarantees of the Notes. It is also possible that under certain circumstances a court could hold that the direct obligations of a Subsidiary Guarantor could be superior to the obligations under its guarantee of the Notes.

 

A court could avoid or subordinate the guarantee of the Notes by a Subsidiary Guarantor in favor of that Subsidiary Guarantor’s other debts or liabilities to the extent that the court determined either of the following were true at the time the Subsidiary Guarantor issued the guarantee:

 

 

 

The measure of insolvency for purposes of the foregoing will vary depending upon the law of the relevant jurisdiction. Generally, however, an entity would be considered insolvent for purposes of the foregoing if the sum of its debts, including contingent liabilities, were greater than the fair saleable value of all of its assets at a fair valuation, or if the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and matured.

 

Among other things, a legal challenge of a Subsidiary Guarantor’s guarantee of the Notes on fraudulent conveyance grounds may focus on the benefits, if any, realized by that Subsidiary Guarantor as a result of our issuance of the Notes. To the extent a Subsidiary Guarantor’s guarantee of the Notes is avoided as a result of fraudulent conveyance or held unenforceable for any other reason, the Note holders would cease to have any claim in respect of that Subsidiary Guarantor’s guarantee.

 

We may not be able to obtain cash from our subsidiaries to make payments on the Notes.

 

We conduct the majority of our operations through our subsidiaries and unconsolidated affiliates, some of which are not wholly-owned, and we rely on dividends, distributions, proceeds from inter-company transactions, interest payments and loans from those entities to meet our obligations for payment of

principal and interest on our outstanding debt obligations and corporate expenses, including interest payments on the Notes, which may be subject to contractual restrictions. Accordingly, the Notes are structurally subordinated to all existing and future liabilities of our subsidiaries, other than the Subsidiary Guarantors, and unconsolidated affiliates. Holders of the Notes will have a junior position to claims of creditors holding “senior indebtedness” of our subsidiaries that are Subsidiary Guarantors as described in the risk factor above. Holders of Notes should look only to our assets and the assets of the Subsidiary Guarantors, and not any of our other subsidiaries or unconsolidated affiliates, for payments on the Notes. If we are unable to obtain cash from such entities to fund required payments in respect of the Notes, we may be unable to make payments of principal of or interest on the Notes.

 

If interest on the Notes is deferred, holders of the Notes will be required to recognize income for United States federal income tax purposes at the time interest accrues regardless of their method of accounting before they actually receive interest payments in cash.

 

If we defer interest payments on the Notes, each holder of the Notes will be required to accrue income for United States federal income tax purposes in the amount of the Deferred Interest on the Notes, in the form of original issue discount. In that event, you, as a holder of Notes,

 

 

The interest rate of the Notes will fluctuate when the fixed rate period ends, and may from time to time decline below the fixed rate.

 

After the conclusion of the Fixed Rate Period for the Notes, on June 1, 2017, the Notes will begin to bear interest at a floating rate equal to the Three-Month LIBOR Rate for the related interest period plus         basis points. The floating rate may be volatile over time and could be substantially less than the fixed rate. In addition to experiencing a decline in current interest income, holders of the Notes could also encounter a reduction in the value of their Notes.

 

We may elect to cause the redemption of the Notes when prevailing interest rates are relatively low.

 

We may redeem the Notes:

 

 

We may choose to redeem the Notes for a variety of reasons, including when prevailing interest rates are lower than the then applicable interest rate on the Notes. In that case, you may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as the interest rate on the Notes.

 

As discussed in the next succeeding risk factor, our ability to redeem the Notes will be limited by the terms of a Replacement Capital Covenant that we are entering into for the benefit of the holders of a designated series of our long-term indebtedness that ranks senior to the Notes.

 

Our right to redeem, repurchase, defease or purchase the Notes is limited by a covenant that we are making in favor of certain other debtholders.

 

By their terms, the Notes may be redeemed by us before their maturity as described in “Description of the Notes — Optional Redemption.” However, around the time of the initial issuance of the Notes, we are entering into a “Replacement Capital Covenant,” which is described under “Certain Terms of the Replacement Capital Covenant,” that will limit our right to redeem or repurchase the Notes. In the Replacement Capital Covenant, we covenant for the benefit of holders of a designated series of our long-term indebtedness that ranks senior to the Notes that we will not redeem or repurchase Notes on or before June 1, 2037 unless, subject to certain limitations, during the 180 days prior to the date of that redemption, repurchase, defeasance or purchase we, or one of our subsidiaries has received a specified amount of proceeds from the sale of qualifying securities that have characteristics that are the same as, or more equity-like than, the applicable characteristics of the Notes.

 

Our ability to raise proceeds from the sale of securities that qualify under the Replacement Capital Covenant during the 180 days prior to a proposed redemption, repurchase, defeasance or purchase will depend on, among other things, the condition of our business and our financial condition, market conditions at such time as well as the acceptability to prospective investors of the terms of those securities. Accordingly, there could be circumstances where we would wish to redeem, repurchase, defease or purchase some or all of the Notes and sufficient cash is available for that purpose, but we are restricted from doing so because we have not been able to obtain proceeds from the sale of securities that qualify under the Replacement Capital Covenant.

 

The Trustee has only limited rights of acceleration.

 

The Trustee may accelerate payment of the principal and accrued and unpaid interest on the Notes only upon the occurrence and continuation of an Event of Default. An event of default is generally limited to payment defaults after giving effect to our deferral rights, and specific events of bankruptcy, insolvency and reorganization relating to us. There is no right to acceleration upon breaches by us of other covenants under the Indenture.

 

The tax accounting for the Notes is uncertain.

 

We intend to treat the Notes as our indebtedness and to treat stated interest on the Notes as ordinary interest income that is includible in your gross income at the time the interest is paid or accrued, in accordance with your regular method of tax accounting. By purchasing the Notes you agree to report income on this basis. However, the determination of whether an instrument is indebtedness is an inherently factual one. Because there are no regulations, rulings or other authorities that address the United States federal income tax treatment of debt instruments that are substantially similar to the Notes, other treatments of the Notes are possible, and we can offer you no assurance that the Internal Revenue Service or a court would agree with our conclusion. See “Certain United States Federal Income Tax Considerations.”

 

A market may not develop for the Notes.

 

The Notes constitute a new issue of securities with no established trading market and will not be listed on any exchange. An active market for the Notes may not develop or be sustained. As a result, we cannot assure you that you will be able to sell your Notes or at what price. Although the underwriters have indicated that they intend to make a market in the Notes, as permitted by applicable laws and regulations, they are not obligated to do so and may discontinue that market-making at any time without notice.

 

If a trading market develops for the Notes, trading may occur at prices that do not fully reflect the value of Deferred Interest and, as a result, a holder of Notes who disposes of his holdings between record dates for interest payments may incur an adverse tax effect.

 

A holder of Notes who disposes of Notes between record dates for payments of interest will not receive an interest payment for the period prior to the disposition but nevertheless will be required to

include accumulated but unpaid interest through the date of disposition as ordinary income in such holder’s gross income for United Stated federal income tax purposes. If a trading market develops, the Notes may trade at prices that do not fully reflect the value of Deferred Interest. As a result, a holder of Notes who sells Notes between record dates for interest payments may recognize a capital loss for tax purposes as a result of a portion of the sale proceeds being allocated to Deferred Interest. Any such capital loss may not be available to offset the ordinary income recognized as a result of the Deferred Interest because, subject to limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes.

 

The aftermarket price of the Notes may be discounted significantly if we defer interest payments.

 

If a deferral of an interest payment occurs or is perceived by the market as being likely to occur, you may be unable to sell your Notes at a price that reflects the value of Deferred Interest or the face amount of your Notes. To the extent a trading market develops for the Notes, that market may not continue during a deferral period, or during periods in which investors perceive that there is a likelihood of a deferral, and you may be unable to sell Notes at those times, either at a price that reflects the value of required payments under the Notes or at all.

 

There are restrictions on your ability to resell the Notes.

 

The Notes may not be purchased by or transferred to certain types of benefit plans. See “Certain ERISA Considerations.”

 

If we were to become subject to entity level taxation for federal or state tax purposes, then our cash available for payment on the Notes would be substantially reduced.

 

Current law may change so as to cause us to be treated as a corporation for federal income tax purposes or otherwise subject us to entity-level federal income taxation. If we were treated as a corporation for United States federal income tax purposes, we would pay United States federal income tax on our taxable income at the corporate tax rate, which is currently a maximum of 35%, and we likely would pay state taxes as well. Because a tax would be imposed upon us as a corporation, the cash available for payment on the Notes would be substantially reduced. Therefore, treatment of us as a corporation would result in a material reduction in our anticipated cash flows and could cause a reduction in the value of the Notes.

 

In addition, several states are evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise and other forms of taxation. For example, we became subject in 2007 to a new entity-level tax on the portion of our income generated in Texas. Specifically, the Texas margin tax will be imposed at a maximum effective rate of 0.7% of our gross income apportioned to Texas. Imposition of such tax on us by Texas, or any other state, will reduce the cash available for payment on the Notes.

 

A successful IRS contest of the United States federal income tax positions we take may adversely impact the market for the Notes, and the costs of any contests will reduce cash available for payment on the Notes.

 

The IRS may adopt positions that differ from the positions we take, even positions taken with advice of counsel. It may be necessary to resort to administrative or court proceedings to sustain some or all of the positions we take. A court may not agree with some or all of the positions we take. Any contest with the IRS may materially and adversely impact the market for the Notes. In addition, the costs of any contest with the IRS, principally legal, accounting and related fees, will result in a reduction in the amount of cash available to us to pay the principal of, and interest and premium, if any, on the Notes.

 

We expect to receive aggregate net proceeds of approximately $295.3 million from the sale of the Notes to the underwriters after deducting the underwriters’ discount and other offering expenses payable by us. We expect to use the net proceeds of this offering to temporarily reduce borrowings outstanding under our revolving credit facility and for general partnership purposes.

 

In general, our indebtedness under the revolving credit facility was incurred to finance capital expenditures and acquisitions and for working capital purposes. As of March 31, 2007, $399.5 million was outstanding under our revolving credit facility bearing interest at a weighted average interest rate of approximately 5.9%. The final maturity date of our revolving credit facility is December 13, 2011. Affiliates of the joint book-running managers and co-managers are lenders under our revolving credit facility and, accordingly, will receive a portion of the proceeds of this offering. Please read “Underwriting”.

 

The following table sets forth the capitalization of TEPPCO Partners and its subsidiaries as of March 31, 2007:

 

 

The historical data in the table below is derived from and should be read in conjunction with our consolidated historical financial statements, including the accompanying notes, incorporated by reference in this prospectus supplement.

 

 

 

 

The ratio of earnings to fixed charges of TEPPCO Partners and its subsidiaries for each of the periods indicated is as follows:

 

 

For purposes of calculating the ratio of earnings to fixed charges:

 

 

We have summarized below certain material terms and provisions of the Notes. This summary is not a complete description of all of the terms and provisions of the Notes. You should read carefully the section entitled “Description of Debt Securities” in the accompanying prospectus for a description of other material terms of the Notes, the Guarantees and the Base Indenture. For more information, we refer you to the Notes, the Base Indenture and the Supplemental Indenture, all of which are available from us. We urge you to read the Base Indenture and the Supplemental Indenture because they, and not this description, define your rights as an owner of the Notes.

 

The Notes are a new series of debt securities that will be issued under an Indenture dated as of May 14, 2007 (which we refer to as the “Base Indenture”), as supplemented by the First Supplemental Indenture to be dated the date of delivery of the Notes (which we refer to as the “Supplemental Indenture,” and, together with the Base Indenture, as the “Indenture”), among TEPPCO Partners, L.P., as issuer, TE Products Pipeline Company, Limited Partnership., TCTM, L.P., TEPPCO Midstream Companies, L.P., and Val Verde Gas Gathering Company, L.P., as guarantors, and The Bank of New York Trust Company, N.A., as trustee (which we refer to as the “Trustee”).

 

General

 

The Notes:

 

 

We may, without the consent of the holders of the Notes, increase the principal amount of the series and issue additional notes of such series having the same ranking, interest rate, maturity and other terms as the Notes, except for issue date, issue price and, if applicable, first interest payment date. Any such additional notes may, together with the Notes, constitute a single series of securities under the Indenture. The Notes and any additional notes of the same series having the same terms as the Notes offered hereby subsequently issued under the Indenture may be treated as a single class for all purposes under the Indenture, including, without limitation, voting waivers and amendments. In addition, the Indenture does not limit our incurrence or issuance of other senior, pari passu or subordinated debt, whether under the Indenture relating to the Notes or any existing or other indenture or agreement that we may enter into in the future or otherwise. As of March 31, 2007, the indebtedness of TEPPCO Partners and the Subsidiary

Guarantors (including guarantees of indebtedness of unconsolidated affiliates) that is senior to the Notes and the Guarantees totaled approximately $1,562.6 million.

 

Maturity

 

The Notes will mature on June 1, 2067.

 

The Notes are non-amortizing and do not have the benefit of a sinking fund. This means that we are not required to make any principal payments prior to maturity or otherwise set aside amounts in respect of the repayment of the Notes prior to their maturity.

 

Interest Rate and Interest Payment Dates

 

The Notes will bear interest from the date of issuance to but not including June 1, 2017, which we refer to as the “Fixed Rate Period,” at an annual rate of 7.000% of their principal amount, payable semi-annually in arrears on June 1 and December 1 of each year, commencing December 1, 2007, and thereafter, which we refer to as the “Floating Rate Period,” at an annual rate equal to the Three-Month LIBOR Rate for the related interest period plus a spread of 277.75 basis points, payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year, commencing September 1, 2017.

 

Interest payments not paid when due will accrue interest at the then applicable rate of interest on the amount of unpaid interest, to the extent permitted by law, compounded semi-annually during the Fixed Rate Period and quarterly during the Floating Rate Period. The amount of interest payable during the Fixed Rate Period will be computed based on a 360-day year consisting of twelve 30-day months, and the amount of interest payable during the Floating Rate Period will be computed based on a 360-day year and the number of days actually elapsed. The amount of interest payable for any period shorter than a full quarterly period will be computed on the basis of the actual number of days elapsed per 30-day month.

 

Determining the Floating Rate; Calculation Agent

 

Following June 1, 2017, the Calculation Agent will calculate the floating rate with respect to each interest period and the amount of interest payable on each interest payment date during the Floating Rate Period. The floating rate determined by the Calculation Agent, absent manifest error, will be binding and conclusive upon the beneficial owners and registered holders of the Notes and us. The Bank of New York Trust Company, N.A. will act initially as “Calculation Agent.”

 

The floating rate for any interest period during the Floating Rate Period will be equal to the sum of the Three-Month LIBOR Rate plus a spread of 277.75 basis points.

 

The “Three-Month LIBOR Rate,” with respect to an interest period, means the rate (expressed as a percentage per year) for deposits in U.S. dollars for a three-month period that appears on Reuters Page LIBOR01 as of 11:00 a.m. (London time) on the second London banking day immediately preceding the first day of such interest period (the “LIBOR determination date”). The term “Reuters Page LIBOR01” means the display so designated on the Reuters 3000 Xtra (or such other page as may replace that page on that service, or such other service as may be nominated as the information vendor, for the purpose of displaying rates or prices comparable to the London Interbank Offered Rate for U.S. dollar deposits).

 

If the Three-Month LIBOR Rate cannot be determined as described above, we will select four major banks in the London interbank market. We will request that the principal London offices of those four selected banks provide their offered quotations to prime banks in the London interbank market at approximately 11:00 a.m. (London time) on the LIBOR determination date for such interest period. These quotations will be for deposits in U.S. dollars for a three-month period. Offered quotations must be based on a principal amount equal to an amount that is representative of a single transaction in U.S. dollars in the market at the time.

 

If two or more quotations are provided, the Three-Month LIBOR Rate for such interest period will be the arithmetic mean of the quotations. If fewer than two quotations are provided, we will select three

offered rates quoted by three major banks in New York City on the LIBOR determination date for that interest period. The rates quoted will be for loans in U.S. dollars for a three-month period. Rates quoted must be based on a principal amount equal to an amount that is representative of a single transaction in U.S. dollars in the market at the time. If fewer than three New York City banks selected by us are quoting rates, the Three-Month LIBOR Rate for the applicable interest period will be the same as for the immediately preceding interest period or, if the immediately preceding interest period was the Fixed Rate Period, the same as for the most recent quarter for which the Three-Month LIBOR Rate can be determined.

 

“Business day” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which commercial banks are authorized or required by law, regulation or executive order to close in New York City or Houston, Texas.

 

“London banking day” means any Business day on which dealings in deposits in U.S. dollars are transacted in the London interbank market.

 

Payment; Record Dates and Transfer

 

Initially, the Notes will be issued only in permanent global form. Beneficial interests in Notes in global form will be shown on, and transfers of interests in Notes in global form will be made only through, records maintained by The Depository Trust Company, or DTC, and its participants. Under the limited circumstances when the Notes are no longer in global form, Notes in definitive form, if any, may be presented for registration of transfer or exchange at the office or agency maintained by us for such purpose (which initially will be the corporate trust office of the Trustee located at 601 Travis Street, 18th Floor, Houston, Texas 77002).

 

Payment of principal of, premium, if any, and interest on Notes in global form registered in the name of DTC’s nominee will be made in immediately available funds to DTC’s nominee, as the registered holder of such global notes. Under the limited circumstances when the Notes are no longer in global form, payment of interest on the Notes in definitive form may, at our option, be made at the corporate trust office of the Trustee indicated above or by check mailed directly to holders at their respective registered addresses or by wire transfer to an account designated by a holder.

 

The regular record date for interest payable on the Notes on any interest payment date during the Fixed Rate Period will be the immediately preceding May 15 or November 15, as the case may be, and during the Floating Rate Period will be the immediately preceding February 15, May 15, August 15 and November 15 as the case may be.

 

No service charge will be made for any registration of transfer or exchange of Notes, but we may require payment of a sum sufficient to cover any transfer tax or other governmental charge payable in connection therewith. We are not required to register the transfer of or exchange any Notes selected for redemption or for a period of 15 days before mailing a notice of redemption of Notes.

 

The registered holder of Notes will be treated as the owner of such Notes for all purposes, and all references in this Description of the Notes to “holders” mean holders of record, unless otherwise indicated. DTC will be the holder of the global Note.

 

Optional Deferral of Interest

 

We may elect to defer payment of all or part of the current and accrued interest otherwise due on the Notes from time to time, for one or more periods (each, an “Optional Deferral Period”) of up to 10 consecutive years per Optional Deferral Period. However, we may not optionally defer interest payments on or after the maturity date of, or redemption date for, the Notes.

 

Deferred interest not paid on an interest payment date will bear interest from that interest payment date until paid at the then prevailing interest rate on the Notes, compounded semi-annually during the Fixed Rate Period and quarterly during the Floating Rate Period. We refer to such deferred interest, the interest accrued thereon and any accrued and unpaid interest on any interest payment date during a

deferral period collectively as “Deferred Interest.” No interest will be due and payable on the Notes until the end of an Optional Deferral Period except upon a redemption of the Notes during such Optional Deferral Period. At the end of the Optional Deferral Period or on any redemption date, we will be obligated to pay all Deferred Interest.

 

Once we pay all Deferred Interest resulting from our optional deferral, such Optional Deferral Period will end and we may later defer interest again for a new Optional Deferral Period.

 

If we defer interest for a period of 10 consecutive years from the commencement of an Optional Deferral Period, we will be required to pay all Deferred Interest at the conclusion of the 10-year period, and, to the extent we do not do so, the Subsidiary Guarantors will be required to make guarantee payments in accordance with the Guarantees. If we fail to pay in full all accrued and unpaid interest at the conclusion of the 10-year period, such failure continues for 30 days and the Subsidiary Guarantors fail to make guarantee payments with respect thereto, an Event of Default that gives rise to acceleration of principal and interest on the Notes will occur under the Indenture. See “— Events of Default” herein.

 

We will provide the Trustee with written notice of any optional deferral of interest at least ten and not more than 60 business days prior to the applicable interest payment date, other than in the case of an optional deferral in connection with certain defaults on Senior Indebtedness as described under “— Subordination; Ranking of the Notes; Payment Blockage,” and any such notice will be forwarded promptly by the Trustee to each holder of record of the Notes.

 

We have no current intention to exercise our right to defer interest payments.

 

Distribution Stopper

 

During any period in which we defer interest payments on the Notes, subject to the exceptions described below:

 

 

Notwithstanding the foregoing, we and any of our subsidiaries may take any of the following actions at any time, including during an Optional Deferral Period:

 

 

 

Optional Redemption

 

We may redeem the Notes before their maturity, subject to the limitations set forth in the Replacement Capital Covenant discussed under “Certain Terms of the Replacement Capital Covenant,” as follows:

 

 

Notes called for redemption become due on the redemption date. Notices of optional redemption will be mailed at least 30 but not more than 60 days before the redemption date to each holder of Notes to be redeemed at its registered address. The notice of optional redemption for the Notes will state, among other things, the amount of Notes to be redeemed, the redemption date, the method of calculating the redemption price and each place that payment will be made upon presentation and surrender of Notes to be redeemed. If less than all of the Notes are redeemed at any time, the Trustee will select the Notes to be redeemed on a pro rata basis or by any other method the Trustee deems fair and appropriate. Unless we default in payment of the redemption price, interest will cease to accrue on the redemption date with respect to any Notes called for optional redemption.

 

We may not redeem the Notes in part if the principal amount has been accelerated and such acceleration has not been rescinded or unless all accrued and unpaid interest, including Deferred Interest, has been paid in full on all outstanding Notes for all interest periods terminating on or before the redemption date.

 

In the event of any redemption, neither we nor the Trustee will be required to:

 

 

 

The provisions relating to defeasance in the accompanying prospectus shall apply to the Notes.

 

The following definitions apply with respect to the redemption of the Notes:

 

 

 

there is more than an insubstantial risk that interest payable by us on the Notes is not, or within 90 days of the date of such opinion will not be deductible by us, in whole or in part, for United States federal income tax purposes.

 

 

 

Our right to redeem, repurchase, defease or purchase the Notes, and the right of our subsidiaries to purchase the Notes, are limited by a covenant that we are making in favor of certain debtholders. See “Certain Terms of the Replacement Capital Covenant” in this prospectus supplement.

 

In the event that the Replacement Capital Covenant terminates prior to June 1, 2037 as a result of there being no eligible designated debt outstanding, we intend that, if we redeem, repurchase, defease or purchase the Notes, or if we or one of our subsidiaries purchases the Notes, the redemption or purchase price of the Notes will be paid with amounts that include net proceeds received by us or our subsidiaries from the sale or issuance, during the 180-day period prior to the date of such redemption or such purchase, by us or our subsidiaries to third-party purchasers of securities for which we will receive equity-like credit from the rating agencies that rate our securities, that is equal to or greater than the equity-like credit then attributed to the Notes being redeemed, repurchased, defeased or purchased. The determination of the equity-like credit of the Notes may result in the issuance of an amount of new securities that may be less than the principal amount of the Notes, depending upon, among other things, the nature of the new securities issued and the equity-like credit attributed by a rating agency to the Notes and the new securities.

 

Certain Covenants

 

Base Indenture.  Each of TEPPCO Partners and the Subsidiary Guarantors will be subject to the covenant in the Base Indenture to preserve their existence.

 

Merger, Consolidation or Sale of Assets.  We will covenant in the Indenture not to merge or consolidate with or into any other entity or sell, convey, lease, transfer or otherwise dispose of all or substantially all of our property or assets to any person, whether in a single transaction or series of related transactions unless:

 

 

 

 

Thereafter, the surviving entity may exercise our rights and powers under the Indenture, in our name or in its own name. Any act or proceeding required or permitted to be done by our general partner’s board of directors or any of our general partner’s officers or employees may be done by the board of directors, officers or employees of the successor. If we sell or otherwise dispose of (except by lease) all or substantially all of our assets and the above stated requirements are satisfied, we will be released from all our liabilities and obligations under the Indenture. If we lease all or substantially all of our assets, we will not be so released from our obligations under the Indenture.

 

Non-Recourse Obligation

 

The Notes are obligations of TEPPCO Partners and, to the extent provided in the Subsidiary Guarantees, are guaranteed by the Subsidiary Guarantors. Pursuant to the Indenture, holders of the Notes will not have recourse against our general partner, the general partner of any Subsidiary Guarantor, any other partner of, or other person that owns an equity interest directly or indirectly in, us, a Subsidiary Guarantor or such general partners or against any of their respective past, present or future directors, managers, officers, employees, agents, members or partners. In addition, holders of the Notes by their purchase and holding thereof acknowledge the separateness of TEPPCO Partners and its general partner from each other and from any other persons, including Enterprise GP Holdings L.P. and its affiliates and EPCO, Inc. and its affiliates and that TEPPCO Partners and its general partner have assets and liabilities that are separate from those of other persons, including Enterprise GP Holdings L.P. and its affiliates and EPCO, Inc. and its affiliates.

 

Events of Default

 

Any one or more of the following events that have occurred and are continuing will constitute an Event of Default:

 

 

 

The Indenture provides that the Trustee must give holders notice of any default or Event of Default within 90 days after the occurrence of an Event of Default known to it, or, if later, within 30 days after the Trustee obtains actual knowledge of the Event of Default unless the default or Event of Default has been cured or waived. However, except in the cases of a default or an Event of Default in payment on the Notes, the Trustee will be protected in withholding the notice if its board of directors, executive or other committee of directors or responsible officers determine that withholding of the notice is in the interest of such holders.

 

If an Event of Default (other than an Event of Default described in the third bullet point above) occurs and is continuing, the Trustee by notice to us, or the holders of at least 25% in principal amount of the outstanding Notes by notice to us and the Trustee, may, and the Trustee at the request of such holders will, declare the principal of, premium, if any, and interest, including Deferred Interest, if any, on all the Notes to be due and payable. Upon such a declaration, such principal, premium and interest will be due and payable immediately.

 

If an Event of Default described in the third bullet point above occurs and is continuing, the principal of, premium, if any, and interest, including Deferred Interest, if any, on all the Notes will become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holders. However, the effect of such provision may be limited by applicable law.

 

The holders of a majority in principal amount of the outstanding Notes may rescind any such acceleration with respect to the Notes and its consequences if rescission would not conflict with any judgment or decree of a court of competent jurisdiction and all existing Events of Default with respect to the Notes, other than the nonpayment of the principal of, premium, if any, and interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived.

 

The holders of a majority in aggregate principal amount of the outstanding Notes may waive any past default or Event of Default and its consequences under the Indenture or the Notes, except:

 

 

The holders of a majority in principal amount of the Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, subject to the provisions of the Indenture.

 

We are required to file an officers’ certificate with the trustee each year that states, to the knowledge of the certifying officer, whether or not any defaults exist under the terms of the Indenture.

 

Subordination; Ranking of the Notes; Payment Blockage

 

Our payment obligations under the Notes will, to the extent provided in the Indenture, be subordinated in right of payment to the prior payment in full of all of our present and future Senior Indebtedness, as defined below. The Notes will rank senior in right of payment to all of our present and future equity securities.

 

The holders of our Senior Indebtedness will be entitled to receive payment in full of such Senior Indebtedness before holders of the Notes will receive any payment of principal, premium or interest with respect to the Notes:

 

 

In these circumstances, until our Senior Indebtedness is paid in full, any distribution to which holders of Notes would otherwise be entitled will be made to the holders of Senior Indebtedness, except that such holders may receive units representing limited partner interests and debt securities that are subordinated to Senior Indebtedness to at least the same extent as the Notes.

 

If we do not pay any principal, premium or interest with respect to Senior Indebtedness within any applicable grace period (including at maturity), or any other default on Senior Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms, we may not:

 

 

unless, in either case,

 

 

During the continuance of any Senior Indebtedness default, other than a default described in the immediately preceding paragraph, that may cause the maturity of any Designated Senior Indebtedness to be accelerated immediately without further notice, other than any notice required to effect such acceleration, or the expiration of any applicable grace periods, we may not make payments on the Notes for a period called the “Payment Blockage Period.” A Payment Blockage Period will commence on the receipt by us and the Trustee of written notice of the default, called a “Blockage Notice,” from the representative of any Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period, and will expire 179 days thereafter.

 

Generally, “Designated Senior Indebtedness” will include any issue of Senior Indebtedness of at least $100 million and any issue of Senior Indebtedness designated by TEPPCO Partners at the time of issuance as Designated Senior Indebtedness.

 

The Payment Blockage Period may be terminated before its expiration:

 

 

Unless the holders of Designated Senior Indebtedness shall have accelerated the maturity of the Senior Indebtedness, we may resume payments on the Notes after the expiration of the Payment Blockage Period.

 

If (1) we do not pay principal, premium or interest with respect to Senior Indebtedness within any applicable grace period, (2) any other default on Senior Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms or (3) we receive a Blockage Notice, then, notwithstanding any notice requirements necessary to invoke an Optional Deferral Period, we may elect to

defer payment of all or part of the current and accrued interest otherwise due on the Notes on an interest payment date by giving notice to the Trustee of such election not later than the time we must remit payment of interest on the Notes to the Trustee under the Supplemental Indenture on such interest payment date. Any such notice will be forwarded promptly by the Trustee to each holder of record of the Notes. However, we may only exercise this right if we are otherwise entitled to elect to optionally defer payment of interest on the Notes as described under “— Optional Deferral of Interest.”

 

Generally, not more than one Blockage Notice may be given in any period of 360 consecutive days. The total number of days during which any one or more Payment Blockage Periods are in effect, however, may not exceed an aggregate of 179 days during any period of 360 consecutive days.

 

After all Senior Indebtedness is paid in full and until the Notes are paid in full, holders of the Notes will be subrogated to the rights of holders of Senior Indebtedness to receive distributions applicable to Senior Indebtedness.

 

Because of the subordination, in the event of our insolvency, our creditors who are holders of Senior Indebtedness, as well as certain of our general creditors, may recover more, ratably, than the holders of the Notes.

 

The term “Senior Indebtedness” as used in this section includes our obligations in respect of the principal of, any interest and premium, if any, on and any other payments in respect of any of the following, whether currently outstanding or hereafter created or incurred:

 

 

but does not include our obligations in respect of:

 

 

Our obligations under the Notes will be structurally subordinated to all indebtedness and other liabilities of our subsidiaries, other than the Subsidiary Guarantors, and unconsolidated affiliates. In the event of an insolvency, liquidation, bankruptcy proceeding or other reorganization of any such entity, all of the existing and future liabilities of such entity, including any claims of lessors under capital and operating leases, trade creditors and holders of preferred stock or units of that entity have the right to be satisfied prior to receipt by us of any payment on account of our status as an equity owner of such entity. Holders of the Notes will also have a junior position to claims of creditors holding “senior indebtedness” of our subsidiaries that are Subsidiary Guarantors as described more fully below under “Guarantees.” At March 31, 2007, the indebtedness of TEPPCO Partners and the Subsidiary Guarantors (including guarantees of indebtedness of unconsolidated affiliates) that is senior to the Notes and the Guarantees totaled approximately $1,562.6 million. Moreover, the Indenture does not limit our ability or the ability of our subsidiaries or unconsolidated affiliates to incur additional indebtedness and other obligations, including indebtedness and other obligations that rank senior in priority of payment to or pari passu with the Notes.

 

Guarantees

 

Each of the Subsidiary Guarantors will, jointly and severally, fully and unconditionally guarantee on an unsecured and junior subordinated basis the full and prompt payment of principal of, premium, if any, and interest on the Notes, when and as the same become due and payable (other than during an Optional Deferral Period), whether at stated maturity, upon redemption, by declaration of acceleration or otherwise.

 

Each Subsidiary Guarantor’s obligations under its Guarantee will, to the extent provided in the Indenture, be subordinated to the prior payment in full of all present and future Senior Indebtedness of such Subsidiary Guarantor, as defined below. Each Subsidiary Guarantor’s obligations under its Guarantee will rank senior in right of payment to all of its present and future equity securities.

 

The holders of a Subsidiary Guarantor’s Senior Indebtedness will be entitled to receive payment in full in cash of such Senior Indebtedness before holders of the Notes receive any payment of principal, premium or interest with respect to the Notes from such Subsidiary Guarantor:

 

 

In these circumstances, until such Subsidiary Guarantor’s Senior Indebtedness is paid in full, any distribution to which holders of Notes would otherwise be entitled under the Guarantees will be made to the holders of such Subsidiary Guarantor’s Senior Indebtedness, except that such holders may receive equity securities and any debt securities that are subordinated to such Subsidiary Guarantor’s Senior Indebtedness to at least the same extent as its Guarantee.

 

If a Subsidiary Guarantor does not pay any principal, premium or interest with respect to its Senior Indebtedness within any applicable grace period (including at maturity), or any other default on its Senior Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms, such Subsidiary Guarantor may not:

 

 

unless, in either case,

 

 

 

During the continuance of any Senior Indebtedness default, other than a default described in the immediately preceding paragraph, that may cause the maturity of any Designated Senior Indebtedness of a Subsidiary Guarantor to be accelerated immediately without further notice, other than any notice required to effect such acceleration, or the expiration of any applicable grace periods, such Subsidiary Guarantor may not make payments under its Guarantee for a period called the “Payment Blockage Period.” A Payment Blockage Period will commence on the receipt by such Subsidiary Guarantor and the Trustee of written notice of the default, called a “Blockage Notice,” from the representative of any Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period, and will expire 179 days thereafter.

 

Generally, “Designated Senior Indebtedness” will include any issue of Senior Indebtedness of at least $100 million and any issue of Senior Indebtedness designated by TEPPCO Partners at the time of issuance as Designated Senior Indebtedness.

 

The Payment Blockage Period may be terminated before its expiration:

 

 

Unless the holders of the Designated Senior Indebtedness of a Subsidiary Guarantor shall have accelerated the maturity of the Senior Indebtedness, such Subsidiary Guarantor may resume making payments under its Guarantee after the expiration of the Payment Blockage Period.

 

Generally, not more than one Blockage Notice may be given in any period of 360 consecutive days. The total number of days during which any one or more Payment Blockage Periods are in effect, however, may not exceed an aggregate of 179 days during any period of 360 consecutive days.

 

After all Senior Indebtedness is paid in full and until the Notes are paid in full, holders of the Notes will be subrogated to the rights of holders of Senior Indebtedness to receive distributions applicable to Senior Indebtedness.

 

Because of the subordination, in the event of a Subsidiary Guarantor’s insolvency, its creditors who are holders of Senior Indebtedness, as well as certain of its general creditors, may recover more, ratably, than the holders of the Notes will recover under its Guarantee.

 

The term “Senior Indebtedness” as used in this section includes the Subsidiary Guarantors’ obligations in respect of the principal of, any interest and premium, if any, on and any other payments in respect of any of the following, whether currently outstanding or hereafter created or incurred:

 

 

 

but does not include the Subsidiary Guarantors’ obligations in respect of:

 

 

The obligations of the Subsidiary Guarantors under the Guarantees will be structurally subordinated to all indebtedness and other liabilities of their respective subsidiaries and unconsolidated affiliates. In the event of an insolvency, liquidation, bankruptcy proceeding or other reorganization of any such entity, all of the existing and future liabilities of such entity, including any claims of lessors under capital and operating leases, trade creditors and holders of preferred stock or units of that entity have the right to be satisfied prior to receipt by us of any payment on account of the applicable Subsidiary Guarantor’s status as an equity owner of such entity. Moreover, the Guarantees do not limit the Subsidiary Guarantors or any of their subsidiaries or unconsolidated affiliates from incurring or issuing other secured or unsecured debt, including Senior Indebtedness. Accordingly, claimants under the Guarantee should look only to the Subsidiary Guarantors and not to any of their subsidiaries or unconsolidated affiliates for payments under the Guarantee.

 

The Guarantee of a Subsidiary Guarantor may be released under certain circumstances set forth in the Indenture as more fully described in the accompanying prospects under “Description of Debt Securities — The Subsidiary Guarantees.”

 

Agreement by Purchasers of Certain Tax Treatment

 

Each registered holder and beneficial owner of the Notes will, by accepting the Notes or a beneficial interest therein, be deemed to have agreed that the holder intends that the Notes constitute debt and will treat the Notes as debt for United States federal, state and local tax purposes.

 

We have summarized below certain terms of the Replacement Capital Covenant. This summary is not a complete description of the Replacement Capital Covenant and is qualified in its entirety by the terms and provisions of the full document.

 

We and the Subsidiary Guarantors will covenant in the Replacement Capital Covenant for the benefit of persons that buy, hold or sell a specified series of our long-term indebtedness that ranks senior to the Notes, that neither we nor the Subsidiary Guarantors will redeem or repurchase (or cause any of our subsidiaries to purchase) or otherwise satisfy, discharge or defease (which we are together referring to as “defease” or “defeasance,” as applicable), any of the Notes on or before June 1, 2037 (subject to extension as described below), unless we or one of our subsidiaries have received a specified amount of proceeds from the sale during the 180 days prior to the date of that redemption, repurchase, defeasance or purchase of qualifying securities that have equity-like characteristics that are the same as, or more equity-like than, the applicable characteristics of the Notes at the time of such redemption, repurchase, defeasance or purchase. The determination of the equity-like credit of the Notes may result in the issuance of an amount of new securities that may be less than the principal amount of the Notes, depending upon, among other things, the nature of the new securities issued and the equity-like credit attributed by a rating agency to the Notes and the new securities.

 

Our ability to raise proceeds from qualifying securities during the 180 days prior to a proposed redemption, repurchase, defeasance or purchase of the Notes will depend on, among other things, market conditions at that time as well as the acceptability to prospective investors of the terms of those qualifying securities.

 

The initial series of indebtedness benefiting from the Replacement Capital Covenant is TEPPCO Partners’ 6.125% Senior Notes due 2013. The Replacement Capital Covenant includes provisions requiring us to redesignate a new series of indebtedness if the covered series of indebtedness approaches maturity or is to be redeemed or purchased such that the outstanding principal amount is less than $100,000,000, unless no eligible series of covered indebtedness exists.

 

The covenants in the Replacement Capital Covenant will run only to the benefit of holders of the designated series of our long-term indebtedness or the long-term indebtedness of the Subsidiary Guarantors, as applicable. The Replacement Capital Covenant is not intended for the benefit of holders of the Notes and cannot be enforced by them. The Replacement Capital Covenant is not a term of the Indenture, the Guarantees or the Notes.

 

We may amend or supplement the Replacement Capital Covenant from time to time with the consent of the holders of a majority in aggregate outstanding principal amount of the designated series of indebtedness benefiting from the Replacement Capital Covenant, except that no such consent will be required (i) for certain specified types of changes to the types of securities qualifying as replacement capital securities, (ii) if such amendment or supplement extends the June 1, 2037 termination date for the Replacement Capital Covenant, or (iii) if such amendment or supplement is not adverse to the covered debtholders.

 

The Replacement Capital Covenant may be terminated if the holders of a majority of the aggregate principal amount of the then existing designated covered debt agree to terminate the Replacement Capital Covenant, or if we no longer have outstanding any indebtedness that qualifies as covered debt, or if the Notes have been accelerated as a result of an Event of Default.

 

The following summary describes certain United States federal income tax considerations associated with the purchase, ownership and disposition of the Notes by United States Holders (as defined below) and non-United States Holders (as defined below), as of the date of this prospectus supplement. Except where noted, this summary deals only with the Notes held as capital assets by holders who acquired the Notes upon their original issuance at their public offering price set forth on the cover of this prospectus supplement. Some holders (including banks, insurance companies, tax-exempt organizations, financial institutions, regulated investment companies, mutual funds, persons whose functional currency is not the U.S. dollar, persons subject to alternative minimum tax, broker-dealers, persons that hold the Notes as part of a straddle, hedge, conversion transaction or other integrated investment, expatriates, controlled foreign corporations, passive foreign investment companies and corporations that accumulate earnings to avoid United States federal income tax) may be subject to special rules not discussed below. The discussion below does not address the effect of any state, local or foreign tax law.

 

Furthermore, the discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), the Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, all as of the date of this prospectus supplement. Because the foregoing are subject to change or differing interpretations, possibly on a retroactive basis, the United States federal income tax consequences of an investment in the Notes may be different from those discussed below.

 

A “United States Holder” of the Notes means a holder that is for United States federal income tax purposes:

 

 

A “non-United States holder” means a beneficial owner of the Notes that is for United States federal income tax purposes:

 

 

If a partnership or other entity treated as a partnership for United States federal income tax purposes holds the Notes, the United States federal income tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding Notes, you should consult your own tax advisor on this, as well as other issues.

 

There is no clear authority addressing the United States federal income tax treatment of the Notes. Accordingly, you should consult your tax advisor in determining the tax consequences to you of purchasing, holding and disposing of the Notes, including the application to your particular situation of the United States federal income tax considerations discussed below, as well as the application of state, local, or other tax laws.

 

Classification of the Notes

 

In connection with the issuance of the Notes, Bracewell & Giuliani LLP, special tax counsel to us, will render its opinion to us generally to the effect that, under then current law and assuming full compliance with the terms of the indenture and other relevant documents, and based on the facts, assumptions and analysis contained in that opinion, as well as representations we make, the Notes will be classified for United States federal income tax purposes upon issuance as indebtedness of TEPPCO Partners (although there is no clear authority directly on point). That opinion will not be binding on the IRS or any court. The determination of whether an instrument is indebtedness for United States federal income tax purposes is an inherently factual one, dependent on all the facts and circumstances, with no one factor being conclusive. The remainder of this discussion assumes that the classification of the Notes as indebtedness of TEPPCO Partners will be respected for United States federal income tax purposes.

 

United States Holders

 

Interest Income and Original Issue Discount

 

Under applicable Treasury regulations, a “remote” contingency that stated interest will not be timely paid will be ignored in determining whether a debt instrument is issued with original issue discount, or OID. We believe that the likelihood of our exercising our option to defer payments is remote within the meaning of the Treasury regulations. Based on the foregoing, we believe that the Notes will not be considered to be issued with OID at the time of their original issuance. Accordingly, each United States Holder of Notes should include in gross income that holder’s allocable share of interest on the Notes in accordance with that holder’s method of tax accounting.

 

Under applicable Treasury regulations, if the option to defer any payment of interest was determined not to be “remote,” or if we exercised that option, the Notes would be treated as issued with OID at the time of issuance or at the time of that exercise, as the case may be. In that case, all stated interest on the Notes thereafter would be treated as OID as long as the Notes remained outstanding. Accordingly, all of a United States Holder’s taxable interest income relating to the Notes would constitute OID that would have to be included in income on an economic accrual basis before the receipt of the cash attributable to the interest, regardless of that holder’s method of tax accounting, and actual distributions of stated interest would not be reported as taxable income. Consequently, such a holder of Notes would be required to include OID in gross income even though we will not make actual payments on the Notes during a deferral period.

 

No rulings or other interpretations have been issued by the IRS which have addressed the meaning of the term “remote” as used in the applicable Treasury regulations, and it is possible that the IRS could take a position contrary to the interpretation in this prospectus supplement.

 

If the IRS were to challenge successfully the classification of the Notes as indebtedness, payments on the Notes likely would be treated as guaranteed payments or distributions with respect to a preferred partnership interest. In such case, United States Holders of the Notes that are employee benefit plans, and most other organizations exempt from United States federal income tax including individual retirement accounts and other retirement plans, could be subject to United States federal income tax on their income with respect to the Notes as unrelated business taxable income.

 

Sale, Exchange, Redemption or Retirement of the Notes

 

Upon sale, exchange, redemption or retirement of the Notes, a United States Holder will recognize gain or loss equal to the difference between its adjusted tax basis in the Notes and the amount realized on the sale, exchange, redemption or retirement of the Notes. Assuming that we do not exercise our option to defer payment of interest on the Notes and that the Notes are not deemed to be issued with OID, a United States Holder’s adjusted tax basis in the Notes generally will be that holder’s initial purchase price. If the Notes are deemed to be issued with OID, a United States Holder’s adjusted tax basis in the Notes generally will be its initial purchase price, increased by OID previously includible in that holder’s gross income to the

date of disposition and decreased by distributions or other payments received on the Notes since and including the date that the Notes were deemed to be issued with OID. That gain or loss generally will be a capital gain or loss, except to the extent of any accrued interest relating to that United States Holder’s ratable share of the Notes required to be included in income, and generally will be a long-term capital gain or loss if the Notes have been held for more than one year. Capital losses generally cannot be applied to offset ordinary income for United States federal income tax purposes.

 

Information Reporting and Backup Withholding

 

Generally, interest on the Notes will be subject to information reporting on Internal Revenue Service Form 1099-INT or, if interest on the Notes constitutes OID as discussed above under “— United States Holders — Interest Income and Original Issue Discount,” on Internal Revenue Service Form 1099-OID. In addition, United States Holders may be subject to a backup withholding tax on those payments if they do not provide their taxpayer identification numbers to the trustee in the manner required, fail to certify that they are not subject to backup withholding tax, or otherwise fail to comply with applicable backup withholding tax rules. United States Holders also may be subject to information reporting and backup withholding tax with respect to the proceeds from a sale, exchange, retirement or other taxable disposition of the Notes. Any amounts withheld under the backup withholding rules will be allowed as a credit against the United States Holder’s United States federal income tax liability, so long as the required information is timely furnished to the IRS.

 

Non-United States Holders

 

No withholding of United States federal income tax will apply to interest paid on Notes to a non-United States Holder under the “portfolio interest exemption,” so long as:

 

 

If a non-United States Holder cannot satisfy the requirements of the portfolio interest exemption described above, interest paid on the Notes (including payments in respect of OID, if any, on the Notes) made to a non-United States Holder should be subject to a 30% United States federal withholding tax, unless that non-United States Holder provides the withholding agent with a properly executed statement (i) claiming an exemption from or reduction of withholding under an applicable United States income tax treaty or (ii) stating that the interest is not subject to withholding tax because it is effectively connected with that non-United States Holder’s conduct of a trade or business in the United States.

 

If a non-United States Holder is engaged in a trade or business in the United States (or, if an applicable United States income tax treaty applies, if the non-United States Holder maintains a permanent establishment within the United States) and the interest is effectively connected with the conduct of that trade or business (or, if an applicable United States income tax treaty applies, attributable to that permanent establishment), that non-United States Holder will be subject to United States federal income tax on the interest on a net income basis in the same manner as if that non-United States Holder were a

United States Holder. In addition, a non-United States Holder that is a foreign corporation engaged in a trade or business in the United States may be subject to a 30% (or, if an applicable United States income tax treaty applies, a lower rate as provided) branch profits tax.

 

Any gain realized on the sale, exchange, redemption or retirement of the Notes generally will not be subject to United States federal income tax unless:

 

 

In general, backup withholding and information reporting will not apply to interest paid on the Notes to a non-United States Holder, or to proceeds from the sale, exchange, redemption or retirement of the Notes by a non-United States Holder, in each case, if the non-United States Holder certifies under penalties of perjury that it is a non-United States Holder and neither we nor our paying agent has actual knowledge (or reason to know) to the contrary. Any amounts withheld under the backup withholding rules will entitle such non-United States Holder to a credit against United States federal income tax liability and may entitle such non-United States Holder to a refund, so long as the required information is timely and properly furnished to the IRS. In general, if Notes are not held through a qualified intermediary, the amount of payments made on such Notes, the name and address of the beneficial owner and the amount, if any, of tax withheld may be reported to the IRS.

 

Non-United States Holders should consult their tax advisors regarding the application of backup withholding in their particular situation, the availability of an exemption from backup withholding and the procedure for obtaining such an exemption, if available.

 

If the IRS were to challenge successfully the classification of the Notes as indebtedness, payments on the Notes likely would be treated as guaranteed payments or distributions with respect to a preferred partnership interest. In such case, non-United States Holders of the Notes would be treated as engaged in a trade or business within the United States, be required to file a United States federal income tax return and pay taxes on their share of our income or gain and be subject to withholding.

 

THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER’S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.

 

A fiduciary of a pension, profit-sharing or other employee benefit plan subject to Section 406 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), a plan or other arrangement subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”), or a plan or other arrangement subject to any other law or other restrictions materially similar to Section 406 of ERISA or Section 4975 of the Code (“Similar Law”) (each, a “Plan”), should consider the fiduciary standards of ERISA or Similar Law in the context of such a Plan’s particular circumstances before authorizing an investment in the Notes. Among other factors, the fiduciary should consider whether such an investment is in accordance with the documents governing the Plan and whether the investment is appropriate for the Plan in view of its overall investment policy and the prudence and diversification requirements of ERISA or Similar Law.

 

The Notes may not be sold to any Plan unless either (i) the purchase and holding of the Notes would not be a transaction prohibited under Section 406 of ERISA, Section 4975 of the Code or Similar Law, or (ii) an exemption under ERISA, the Code or Similar Law or one of the following Prohibited Transaction Class Exemptions (“PTCE”) issued by the U.S. Department of Labor (or a materially similar exemption or exception under Similar Law) applies to the purchase, holding and disposition of the Notes:

 

 

Any purchaser of the Notes or any interest therein and any subsequent transferee will be deemed to have represented and warranted to us on each day from and including the date of its purchase of such Notes through and including the date of its disposition of such Notes that either:

 

(a) Plan assets under ERISA and the regulations issued thereunder, or under any Similar Law, are not being used to acquire the Notes; or

 

(b) Plan assets as so defined are being used to acquire such Notes but the purchase, holding and disposition of such Notes either (1) are not and will not be a “prohibited transaction” within the meaning of ERISA, the Code or Similar Law or (2) are and will be exempt from the prohibited transaction rules under ERISA, the Code and Similar Law under a provision of ERISA, the Code or Similar Law or by one or more of the following prohibited transaction exemptions: PTCE 96-23, 95-60, 91-38, 90-1 or 84-14, or a materially similar exemption or exception under Similar Law.

 

The discussion set forth above is general in nature and is not intended to be complete. In addition, such discussion assumes that the Notes will constitute indebtedness as opposed to “equity” interests under the U.S. Department of Labor’s plan asset regulations or Similar Law. Although such characterization of the Notes would appear appropriate, we can offer you no assurance that this will be the case. Accordingly, it is important that any person considering the purchase of Notes with Plan assets consult with its counsel regarding the consequences under ERISA, the Code or other Similar Law of the acquisition and ownership of the Notes. Purchasers of the Notes have exclusive responsibility for ensuring that their purchase and holding of the Notes do not violate the fiduciary or prohibited transaction rules of ERISA, the Code or any Similar Law. The sale of the Notes to a Plan is in no respect a representation by us or the underwriters that such an investment meets all relevant legal requirements with respect to investments by Plans generally or any particular Plan, or that such an investment is appropriate for Plans generally or any particular Plan.

 

We, the Subsidiary Guarantors and the underwriters named below have entered into an underwriting agreement, dated May 15, 2007, with respect to the Notes. Subject to certain conditions, each underwriter has severally agreed to purchase the principal amount of Notes set forth opposite its name in the following table. J.P. Morgan Securities Inc. and Wachovia Capital Markets, LLC are the representatives of the underwriters.

 

 

The underwriters are committed to take and pay for all of the Notes being offered, if any are taken.

 

We will pay as compensation to the underwriters discounts and commissions in the following amounts.

 

 

The Notes sold by the underwriters to the public will initially be offered at the public offering price set forth on the cover of this prospectus supplement. Any Notes sold by the underwriters to securities dealers may be sold at a discount from the initial public offering price of up to $5.00 per Note. If all the Notes are not sold at the public offering price, the underwriters may change the offering price and the other selling terms.

 

The Notes are a new issue of securities with no established trading market. We have been advised by the underwriters that they presently intend to make a market in the Notes but they are not obligated to do so and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the Notes.

 

In connection with this offering, the underwriters may purchase and sell the Notes in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of Notes than they are required to purchase in this offering. Stabilizing transactions consist of certain bids for or purchases of Notes made by the underwriters in the open market prior to the completion of this offering.

 

The underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased Notes sold by or for the account of such underwriter in stabilizing or short covering transactions.

 

Purchases to cover a short position and stabilizing transactions may have the effect of preventing or retarding a decline in the market price of the Notes, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the Notes. As a result, the price of the Notes may be higher than the price that otherwise might exist in the open market. If these activities are

commenced, they may be discontinued by the underwriters at any time. These transactions may be effected in over-the-counter market or otherwise.

 

We estimate that our total out-of-pocket expenses of this offering, excluding underwriting discounts and commissions, will be approximately $500,000. The underwriters have agreed to reimburse us for certain of our expenses incurred in connection with the offering of the Notes in an amount equal to approximately $375,000.

 

We have agreed to indemnify the underwriters against certain liabilities including liabilities under the Securities Act.

 

Any offerings of Notes will be conducted in accordance with the provisions of Rule 2810 of the NASD Rules of Fair Conduct or any successor provision.

 

In compliance with guidelines of the NASD, the maximum commission or discount to be received by any NASD member or independent broker dealer may not exceed 8% of the aggregate principal amount of the securities offered pursuant to this prospectus supplement. It is anticipated that the maximum commission or discount to be received in any particular offering of securities will be significantly less than this amount.

 

From time to time the underwriters engage in transactions with us in the ordinary course of business. The underwriters have performed investment banking services for us in the last two years and have received fees for these services. In addition, affiliates of certain of the underwriters are lenders under our revolving credit facility and, accordingly, will receive a portion of the proceeds of this offering. Because certain affiliates of the underwriters are lenders under our multi-year revolving credit facility, this offering is being conducted in accordance with Rule 2710(h) of the NASD. That rule requires that the public offering price of the Notes can be no higher than that recommended by a “qualified independent underwriter”, as defined by the NASD. BNY Capital Markets, Inc. has served in that capacity and performed due diligence investigations and reviewed and participated in the preparation of this prospectus supplement.

 

Bracewell & Giuliani LLP, Houston, Texas, will pass on the validity of the Notes, the Guarantees and certain federal income tax matters related to the Notes for us and the Subsidiary Guarantors. Certain legal matters with respect to the Notes and the Guarantees will be passed upon for the underwriters by Cadwalader, Wickersham & Taft LLP, New York, New York.

 

The (1) consolidated financial statements and the related consolidated financial statement schedule and management’s report on the effectiveness of internal control over financial reporting of TEPPCO Partners as of December 31, 2006 incorporated in this prospectus supplement by reference from TEPPCO Partners’ Annual Report on Form 10-K for the year ended December 31, 2006, (2) consolidated financial statements and the related consolidated financial schedule of TE Products Pipeline Company, Limited Partnership (“TE Products”) as of December 31, 2006 incorporated in this prospectus supplement by reference from TE Products’ Annual Report on Form 10-K for the year ended December 31, 2006 and (3) the balance sheet of Texas Eastern Products Pipeline Company, LLC as of December 31, 2006, incorporated in this prospectus supplement by reference from TEPPCO Partners’ Current Report on Form 8-K filed with the Securities and Exchange Commission on March 20, 2007, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports, which are incorporated herein by reference, and have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.

 

The consolidated financial statements of TEPPCO Partners and subsidiaries and TE Products and subsidiaries as of December 31, 2005, and for each of the years in the two-year period ended December 31,

2005 have been incorporated by reference herein in reliance upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.

 

We and TE Products file annual, quarterly and current reports, and other information with the Commission under the Exchange Act (Commission File Nos. 1-10403 and 1-13603, respectively). You may read and copy any document we or it files at the Commission’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the Commission at 1-800-732-0330 for further information on the public reference room. Such filings are also available to the public at the Commission’s web site at http://www.sec.gov. In addition, documents filed by us can be inspected at the offices of the New York Stock Exchange, Inc. 20 Broad Street, New York, New York 10002. We maintain an Internet Website at www.teppco.com. On the Investor Relations page of that site, we provide access to our Commission filings free of charge as soon as reasonably practicable after filing with the Commission. The information on our Internet Website is not incorporated in this prospectus supplement or the accompanying prospectus by reference and you should not consider it a part of this prospectus supplement or the accompanying prospectus.

 

The Commission allows us and TE Products to incorporate by reference into this prospectus supplement and the accompanying prospectus the information we or TE Products file with the Commission, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus supplement, and later information that we or TE Products file with the Commission will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings we or TE Products make with the Commission under section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until this offering is completed (other than information furnished under Items 2.02 or 7.01 of any Form 8-K, which is not incorporated by reference herein):

 

TEPPCO Partners, L.P.

 

 

TE Products Pipeline Company, Limited Partnership

 

 

We will provide without charge to each person, including any beneficial owner, to whom this prospectus supplement has been delivered, a copy of any and all Commission filings. You may request a copy of these filings by writing or telephoning us at:

 

TEPPCO Partners, L.P.

1100 Louisiana Street, Suite 1800

Houston, Texas 77002

Attention: Investor Relations

Telephone: (713) 381-4707

 

This prospectus supplement, the accompanying prospectus and some of the documents we have incorporated herein and therein by reference contain statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements that express belief, expectation, estimates or intentions, as well as those that are not statements of historical facts are forward-looking statements. The words “proposed,” “anticipate,” “potential,” “may,” “will,” “could,” “should,” “expect,” “estimate,” “believe,” “intend,” “plan,” “seek” and similar expressions are intended to identify forward-looking statements. Without limiting the broader description of forward-looking statements above, we specifically note that statements included or incorporated by reference herein that address activities, events or developments that we expect or anticipate will or may occur in the future, including such things as future distributions, estimated future capital expenditures (including the amount and nature thereof), business strategy and measures to implement strategy, competitive strengths, goals, expansion and growth of our business and operations, plans, references to future success, references to intentions as to future matters and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. While we believe our expectations reflected in these forward-looking statements are reasonable, whether actual results and developments will conform with our expectations and predictions is subject to a number of risks and uncertainties, including general economic, market or business conditions, the opportunities (or lack thereof) that may be presented to and pursued by us, competitive actions by other pipeline companies, changes in laws or regulations and other factors, many of which are beyond our control. For example, the demand for refined products is dependent upon the price, prevailing economic conditions and demographic changes in the markets served, trucking and railroad freight, agricultural usage and military usage; the demand for propane is sensitive to the weather and prevailing economic conditions; the demand for petrochemicals is dependent upon prices for products produced from petrochemicals; the demand for crude oil and petroleum products is dependent upon the price of crude oil and the products produced from the refining of crude oil; and the demand for natural gas is dependent upon the price of natural gas and the locations in which natural gas is drilled. We are also subject to regulatory factors such as the amounts we are allowed to charge our customers for the services we provide on our regulated pipeline systems. Consequently, all of the forward-looking statements made or incorporated by reference in this document are qualified by these cautionary statements, and we cannot assure you that actual results or developments that we anticipate will be realized or, even if substantially realized, will have the expected consequences to or effect on us or our business or operations. Also note that we provide a cautionary discussion of risks and uncertainties under the captions “Risk Factors,” in this prospectus supplement, in the accompanying prospectus, in our Annual Report on Form 10-K for the year ended December 31, 2006 and in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2006 and our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007.

 

The forward-looking statements contained or incorporated by reference herein speak only as of the date hereof. Except as required by the federal and state securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or any other reason. All forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained herein, in the accompanying prospectus, in our Annual Report on Form 10-K, in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2007 and in our future periodic reports filed with the Securities and Exchange Commission. In light of these risks, uncertainties and assumptions, the forward-looking events discussed herein may not occur or may occur in a manner that is materially different from the description thereof in the forward-looking statements.