Altus Midstream Company announced that Altus Midstream LP has entered into definitive agreements to issue $625 million of preferred equity in a private placement and amend its credit facility, which will allow Altus Midstream’s revolver capacity to increase to $650 million during the Initial Period (as defined in Altus Midstream’s credit agreement), an increase of $200 million.

“Upon closing the preferred equity financing, the amended revolver and preferred equity will satisfy our needs for external capital for the foreseeable future,” said Clay Bretches, Altus CEO and president. “This incremental financing will facilitate our ability to efficiently finance the exercise of all three remaining JV pipeline equity options, two of which we plan to exercise in 2019 – the Permian Highway natural gas pipeline and the Shin Oak NGL pipeline, as well as our gathering and processing business.”

“Following an extensive and competitive process, we chose to issue private preferred equity at Altus Midstream, a deal in which we are pleased to partner with outstanding investors led by Magnetar Capital and The Carlyle Group’s Energy Mezzanine Opportunities team. This financing, along with our amended revolver, confirms that our gathering and processing assets and JV pipelines are highly valued for their ability to deliver long-term returns for our investors,” said Ben Rodgers, Altus chief financial officer. “Upon closing, these financings will provide us with significant incremental liquidity with pricing and terms that are competitive with recent comparable transactions in the midstream space. They also solidify our financing outlook by funding our planned growth projects without issuing additional common equity or warrants.”

The preferred equity will have a 7 percent per annum distribution rate, payable quarterly with a payment-in-kind option at Altus Midstream’s discretion for the first six quarters. The preferred equity will be redeemable at any time by Altus Midstream based on delivering the greater of an 11.5 percent internal rate of return (IRR) and 1.3x multiple of invested capital. The distribution rate and IRR thresholds increase to the extent the preferred equity is outstanding after five years. Closing and funding of the preferred equity financing is expected to occur by June 28, 2019, subject to customary closing conditions.

The lead preferred equity investors are Magnetar Capital and The Carlyle Group’s Energy Mezzanine Opportunities team. Other supporting investors include certain funds or accounts managed by affiliates of Apollo Capital Management, L.P., FS Energy and Power Fund, as advised by a joint venture of FS Investments and EIG Global Energy Partners, funds managed by Tortoise Capital Advisors, L.L.C., Salient Capital Advisors, LLC and Yaupon Capital Management. Credit Suisse and J.P. Morgan served as joint placement agents to Altus Midstream in connection with the private placement of preferred equity.

Altus Midstream’s bank group features 100 percent crossover with the bank group of Apache Corporation, which, through direct and indirect interests, owns 79 percent of Altus Midstream. Under the amended revolver, at the time Altus Midstream receives funds for at least $500 million of preferred equity, commitments during the Initial Period will increase by $200 million to a total of $650 million. Altus Midstream expects to exit the Initial Period later this year, which, per the terms of the existing agreement, will allow for an increase in borrowing capacity to $800 million.