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

Rhea-AI Summary

Summit Midstream (NYSE: SMC) has announced an offering of $250 million in additional 8.625% Senior Secured Second Lien Notes due 2029. These Additional Notes will be issued under the same indenture as the company's existing $575 million notes of the same type and will have substantially identical terms, except for the issue date and price. The net proceeds from this offering will be used to repay a portion of the outstanding borrowings under the company's asset-based lending credit facility and for general corporate purposes, including paying fees and expenses associated with the offering.

The Additional Notes will be guaranteed on a senior second-priority basis by the company and certain of its existing and future subsidiaries. Initially, they will be secured on a second-priority basis by the same collateral pledged for the benefit of the company's lenders under the ABL Facility. The offering is to qualified institutional buyers under Rule 144A and non-U.S. persons outside the United States in compliance with Regulation S under the Securities Act of 1933.

This press release does not constitute an offer to sell or a solicitation to buy any security, nor will there be any sale of the Additional Notes or related guarantees in any jurisdiction where such activities would be unlawful.

Positive

• The offering will raise $250 million in additional capital.
• Proceeds will be used to repay outstanding borrowings, reducing debt.

Negative

• The issuance of Additional Notes increases the company's debt load.

Insights

Fixed Income Analyst

This debt offering marks a significant financial move for Summit Midstream. The $250 million additional notes at 8.625% interest will join the existing $575 million notes, bringing the total second-lien debt to $825 million. The high yield rate reflects current market conditions and SMC's credit profile. The decision to repay the ABL facility suggests a strategic shift from revolving credit to longer-term fixed-rate debt, which could provide more stability in the rising rate environment.

The second-lien position and the high yield rate indicate elevated risk levels, as these notes are subordinate to first-lien debt in the capital structure. However, the secured nature of the notes, backed by company assets, provides some protection for noteholders. The offering's restriction to qualified institutional buyers under Rule 144A suggests sophisticated investors will need to carefully evaluate the risk-reward profile, considering SMC's $404.6 million market cap relative to its growing debt load.

Corporate Finance Strategist

The strategic implications of this debt restructuring deserve careful attention. By replacing ABL borrowings with fixed-rate notes, SMC is effectively locking in its cost of capital for a longer term, though at a premium rate. This could be viewed as a defensive move against potential future interest rate volatility. The decision to issue additional notes under the same indenture as existing ones streamlines the debt structure and potentially improves operational flexibility.

For a company with a market cap of $404.65 million taking on additional debt of $250 million, the leverage metrics warrant scrutiny. This financing strategy suggests management is prioritizing operational liquidity over balance sheet optimization. The "general corporate purposes" portion of the use of proceeds leaves room for potential strategic investments or working capital enhancement, though it also introduces some uncertainty about the specific allocation of capital.

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 commenced an 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"). 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 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 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 on November 12, 2024, as amended and updated from time to time. 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 purpose of Summit Midstream's $250 million note offering?

The purpose is to repay a portion of the outstanding borrowings under the company's asset-based lending credit facility and for general corporate purposes.

What are the terms of the new notes issued by Summit Midstream (SMC)?

The new notes have an interest rate of 8.625% and are due in 2029, with terms identical to the company's existing $575 million notes except for the issue date and price.

How will the additional notes be secured?

The additional notes will be secured on a second-priority basis by the same collateral pledged for the benefit of the company's lenders under the ABL Facility.

Who can purchase the new notes issued by Summit Midstream (SMC)?

The notes are offered to qualified institutional buyers under Rule 144A and non-U.S. persons outside the United States in compliance with Regulation S under the Securities Act.

Will the $250 million note offering by Summit Midstream affect its debt levels?

Yes, the issuance of additional notes will increase the company's debt load.

What will the proceeds from the Summit Midstream (SMC) note offering be used for?

The proceeds will be used to repay outstanding borrowings under the company's asset-based lending credit facility and for general corporate purposes.