Summit Midstream Corporation Announces Pricing of Offering of $250 Million of Additional 8.625% Senior Secured Second Lien Notes Due 2029

Rhea-AI Summary

Summit Midstream (NYSE: SMC) has announced the pricing of an additional $250 million of 8.625% Senior Secured Second Lien Notes due 2029 at 103.375% of par. These Additional Notes will be combined with the existing $575 million notes under the same terms and conditions.

The company plans to use the proceeds to repay a portion of its asset-based lending credit facility (ABL Facility) and for general corporate purposes, including offering-related expenses. The offering is expected to close around January 10, 2025.

The Additional Notes will be guaranteed on a senior second-priority basis by SMC and certain subsidiaries, secured by the same collateral as the ABL Facility. The offering is exclusively available to qualified institutional buyers under Rule 144A and non-U.S. persons under Regulation S of the Securities Act.

Positive

• Successful pricing of $250 million additional notes indicates strong market interest
• Debt refinancing could improve financial flexibility through ABL facility repayment

Negative

• Increased debt burden with 8.625% interest rate
• Additional secured debt could limit future borrowing capacity

Insights

Fixed Income Analyst

Summit Midstream's $250M additional notes offering at 103.375% of par with an 8.625% coupon represents a strategic debt restructuring move. The premium pricing above par indicates strong market demand and investor confidence in SMC's credit profile. The consolidation with existing $575M notes creates a more liquid $825M total issuance, which typically enhances trading efficiency and potentially reduces overall borrowing costs.

The refinancing of the ABL facility with longer-term secured notes improves the company's debt maturity profile and provides more financial flexibility. The 8.625% coupon rate, while relatively high, reflects current market conditions and the second-lien nature of the security. The successful pricing above par suggests the yield is attractive to institutional investors given the risk profile.

For a midstream company with a $398M market cap, this $250M note issuance is substantial and demonstrates the company's ability to access capital markets effectively. The second-lien structure, while subordinate to the ABL facility, provides adequate security for investors while maintaining operational flexibility for SMC.

Corporate Finance Strategist

This debt offering showcases intelligent liability management. By using the proceeds to pay down the ABL facility, SMC is effectively converting short-term, variable-rate debt into longer-term, fixed-rate financing. This protects against interest rate volatility and provides more predictable cash flow obligations.

The premium pricing achieved (103.375%) will result in an effective yield lower than the stated 8.625% coupon for new investors, indicating strong market appetite. For SMC, this translates to additional proceeds of approximately $8.4M above principal, helping offset transaction costs.

The timing of this offering is strategic, capitalizing on current market conditions before potential economic uncertainties in 2025. The Rule 144A/Reg S structure targets sophisticated institutional investors, typically resulting in a more stable investor base and potentially better secondary market liquidity.

HOUSTON, Jan. 7, 2025 /PRNewswire/ -- Summit Midstream Corporation (NYSE: SMC) ("SMC" or the "Company") announced today that Summit Midstream Holdings, LLC (the "Issuer"), which is a subsidiary of the Company, has priced the previously announced offering (the "Offering") of $250.0 million in aggregate principal amount of additional 8.625% Senior Secured Second Lien Notes due 2029 (the "Additional Notes") at 103.375% of par, plus accrued and unpaid interest from July 26, 2024 to, but excluding, the issue date. The Additional Notes will be issued under the same indenture as the Issuer's $575.0 million in aggregate principal amount of 8.625% Senior Secured Second Lien Notes due 2029 (the "Existing Notes"), will have substantially identical terms as the Existing Notes, other than the issue date and issue price, and will form a single series and vote together with the Existing Notes. The Company intends to use the net proceeds from the Offering to (i) repay a portion of the outstanding borrowings under the Company's asset-based lending credit facility (the "ABL Facility") and (ii) for general corporate purposes, including to pay fees and expenses associated with the Offering. The Offering is expected to close on or about January 10, 2025, subject to customary closing conditions.

The Additional Notes will be guaranteed on a senior second-priority basis by the Company and certain of the Company's existing and future subsidiaries and will initially be secured on a second-priority basis by the same collateral that is pledged for the benefit of the Company's lenders under the ABL Facility.

The Additional Notes and the related guarantees are being offered only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and to non-U.S. persons outside the United States only in compliance with Regulation S under the Securities Act. The offer and sale of the Additional Notes and the related guarantees have not been registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws.

This press release does not constitute an offer to sell or the solicitation of an offer to buy any security, nor shall there be any sale of the Additional Notes and the related guarantees or any other security of the Company, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction. Any offers of the Additional Notes will be made only by means of a private offering memorandum.

About Summit Midstream Corporation

SMC is a value-driven corporation focused on developing, owning and operating midstream energy infrastructure assets that are strategically located in the core producing areas of unconventional resource basins, primarily shale formations, in the continental United States. SMC provides natural gas, crude oil and produced water gathering, processing and transportation services pursuant to primarily long-term, fee-based agreements with customers and counterparties in five unconventional resource basins: (i) the Williston Basin, which includes the Bakken and Three Forks shale formations in North Dakota; (ii) the Denver-Julesburg Basin, which includes the Niobrara and Codell shale formations in Colorado and Wyoming; (iii) the Fort Worth Basin, which includes the Barnett Shale formation in Texas; (iv) the Arkoma Basin, which includes the Woodford and Caney shale formations in Oklahoma; and (v) the Piceance Basin, which includes the Mesaverde formation as well as the Mancos and Niobrara shale formations in Colorado. SMC has an equity method investment in Double E Pipeline, LLC, which provides interstate natural gas transportation service from multiple receipt points in the Delaware Basin to various delivery points in and around the Waha Hub in Texas. SMC is headquartered in Houston, Texas.

Forward-Looking Statements

This press release includes certain statements concerning expectations for the future that are forward-looking within the meaning of the federal securities laws. Forward-looking statements include, without limitation, any statement that may project, indicate or imply future results, events, performance or achievements and may contain the words "expect," "intend," "plan," "anticipate," "estimate," "believe," "will be," "will continue," "will likely result," and similar expressions, or future conditional verbs such as "may," "will," "should," "would" and "could," including, but not limited to, statements regarding the Issuer's plans to issue the Additional Notes, the expected timing of the closing of the Offering, the intended use of the net proceeds therefrom and other aspects of the Offering and the Additional Notes. In addition, any statement concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies and possible actions taken by SMC or its subsidiaries are also forward-looking statements. Forward-looking statements also contain known and unknown risks and uncertainties (many of which are difficult to predict and beyond management's control) that may cause SMC's actual results in future periods to differ materially from anticipated or projected results. An extensive list of specific material risks and uncertainties affecting SMC is contained in its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024, which the Company filed with the Securities and Exchange Commission (the "SEC") on November 12, 2024, as amended and updated from time to time, including by the Company's Current Report on Form 8-K filed with the SEC on January 7, 2025. Any forward-looking statements in this press release are made as of the date of this press release and SMC undertakes no obligation to update or revise any forward-looking statements to reflect new information or events.

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SOURCE Summit Midstream Corporation

FAQ

What is the size and pricing of SMC's new notes offering in January 2025?

SMC priced $250 million of additional 8.625% Senior Secured Second Lien Notes due 2029 at 103.375% of par.

How will SMC use the proceeds from its January 2025 notes offering?

SMC will use the proceeds to repay a portion of its asset-based lending credit facility and for general corporate purposes, including offering-related expenses.

When is SMC's new notes offering expected to close?

The offering is expected to close on or about January 10, 2025, subject to customary closing conditions.

What is the total amount of SMC's 8.625% Senior Secured Second Lien Notes after the additional offering?

After the additional offering, the total amount will be $825 million, combining the new $250 million with the existing $575 million notes.

Who is eligible to purchase SMC's Additional Notes?

The notes are only available to qualified institutional buyers under Rule 144A and non-U.S. persons under Regulation S of the Securities Act.