Houston’s Copano Energy, L.L.C. announced that it has issued $300 million of convertible preferred equity to an affiliate of TPG Capital, a leading global private investment firm. The Series A preferred units were priced at $29.05 per unit, a 10% premium to the 30-day volume weighted average price of Copano's common units as of July 19, 2010. The preferred units are entitled to in-kind quarterly distributions of $0.72625 per unit for the first three years, and are generally convertible into common units on a one-for-one basis after July 21, 2013. Copano intends to use the proceeds from the private placement to fund its Eagle Ford Shale expansion strategy and other growth initiatives in Texas and Oklahoma.
In connection with the equity issuance, Copano has expanded its Board of Directors from seven to eight members and has appointed Michael G. MacDougall, a TPG partner, as a director. Mr. MacDougall will stand for election at Copano's 2011 annual meeting of unitholders.
"We are pleased to enter into this strategic capital partnership with TPG, a global private investment firm with significant financial resources and a long-term investment perspective," said Bruce Northcutt, Copano Energy's President and Chief Executive Officer. "TPG shares our vision for the growth of our business. We are confident that, with TPG's support of our Eagle Ford Shale expansion plans and other capital initiatives, this transaction will further our objective to increase the scale and stability of our cash flow."
"As we execute our growth initiatives, the structure of this investment provides us the financial flexibility to continue building our common unit distribution coverage.” Mr. Northcutt added. “We believe the transaction advances our common unitholders' interests over the near-term and long-term by strengthening our balance sheet and liquidity with patient, long-term capital."
Mr. MacDougall stated, "Copano is a highly successful company with a strong track record of profitable growth. We have worked closely with the senior management team over the last year to understand the company's attractive growth opportunities, including the expansion of Copano's existing capacity to serve producers in the Eagle Ford Shale, and we are excited to provide a long-term source of flexible capital to accelerate development of these opportunities. We look forward to partnering with Bruce Northcutt and his talented team for many years to come."
The preferred units were priced at $29.05 per unit, a 10% premium to the 30-day volume weighted average price of Copano's common units as of July 19, 2010.
The preferred units are entitled to quarterly distributions of $0.72625 per unit in kind for three years. After three years, Copano will have the option to pay quarterly distributions of $0.72625 per unit in kind, cash distributions at the greater of $0.72625 per unit or the distribution per common unit with respect to such quarter, or some combination thereof as determined by Copano's Board. After six years, the preferred units are entitled to quarterly cash distributions at the greater of $0.72625 per unit or the distribution per common unit with respect to such quarter unless Copano and TPG agree that such distribution will be paid in kind.
The preferred units will vote with the common units on all matters, subject to certain limitations.
Beginning July 21, 2013, the preferred units will be convertible into common units on a one-for-one basis, except the number of preferred units that may be converted is limited by the listing rules of the NASDAQ Stock Market pending approval of Copano's unitholders. Copano has agreed to hold a special meeting of its unitholders to consider the convertibility of all of the preferred units into common units. Unless and until the required unitholder vote is received, the preferred units that are not convertible into common units under applicable NASDAQ rules will instead be convertible into new Class B non-voting common units of Copano, each of which is entitled to receive 110% of the quarterly distribution paid per common unit.
BofA Merrill Lynch acted as exclusive placement agent to Copano in connection with the transaction. Morgan Stanley acted as exclusive financial advisor to Copano.
MacDougall is a partner of TPG Capital.
Houston-based Copano Energy, L.L.C. (NASDAQ: CPNO) is a midstream natural gas company with operations in Oklahoma, Texas, Wyoming and Louisiana. Its assets include approximately 6,400 miles of active natural gas gathering and transmission pipelines, 250 miles of NGL pipelines and eight natural gas processing plants, with over one Bcf per day of combined processing capacity.
TPG Capital is the global buyout group of TPG, a leading private investment firm founded in 1992, with approximately $48 billion of assets under management and offices in San Francisco, Beijing, Fort Worth, Hong Kong, London, Luxembourg, Melbourne, Moscow, Mumbai, New York, Paris, Shanghai, Singapore and Tokyo. TPG Capital has extensive experience with global public and private investments executed through leveraged buyouts, recapitalizations, spinouts, growth investments, joint ventures and restructurings. Prior investments by the firm in the energy sector include Belden & Blake Corporation, Denbury Resources, Energy Future Holdings (formerly TXU Corp.), Texas Genco Holdings, and Valerus Compression Services, L.P. Other notable TPG investments include Alltel, Beringer Wine Estates, Burger King, Continental Airlines, Harrah's Entertainment, IMS Health, J. Crew, Kraton Performance Polymers, Neiman Marcus, and Sabre Holdings.