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Long-Term Debt
 12 Months Ended
Dec. 31, 2012
Debt Disclosure [Abstract]  
Long-Term Debt

(5) Long-Term Debt

 

As of December 31, 2012 and 2011, long-term debt consisted of the following (in thousands):

 

 

   2012 2011
Bank credit facility (due 2016), interest based on Prime and/or LIBOR plus an applicable      
 margin, interest rate at December 31, 2012 and December 31, 2011 was 4.3% and 2.9%, respectively $ 71,000 $ 85,000
Senior unsecured notes (due 2018), net of discount of $9.7 million and $11.6 million, respectively,       
 which bear interest at the rate of 8.875%   715,305   713,409
Senior unsecured notes (due 2022), which bear interest at the rate of 7.125%   250,000   -
     1,036,305   798,409
 Debt classified as long-term  $ 1,036,305 $ 798,409

Maturities. Maturities for the long-term debt as of December 31, 2012 are as follows (in thousands):

 

2013   -
2014   -
2015   -
2016 $ 71,000
2017   -
Thereafter  975,000
Subtotal  1,046,000
Less discount  (9,695)
Total outstanding debt$ 1,036,305
   

Credit Facility. In January 2012, the Partnership amended its credit facility to increase the Partnership's borrowing capacity from $485.0 million to $635.0 million and amend certain terms under the facility to provide additional financial flexibility during the remaining four-year term of the facility.

 

The Partnership amended the credit facility again in May 2012. This amendment, among other things, increased the maximum permitted consolidated leverage ratio (as defined in the amended credit facility, being generally computed as the ratio of total funded debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges) during the Clearfield acquisition period (as defined in the amended credit facility, being generally the four quarterly measurement periods after closing the Clearfield acquisition) from 5.0 to 1.0 to 5.5 to 1.0.

 

In August 2012, the Partnership amended the credit facility to include projected EBITDA from material projects (as defined in the amendment, but generally being the construction or expansion of any capital project by the Partnership or any of its subsidiaries that is expected to cost more than $20.0 million and the Partnership's “Riverside Phase II” project) in its EBITDA for purposes of calculating compliance with the amended credit agreement's minimum interest coverage ratio, maximum leverage ratio and maximum senior leverage ratio. The amount of projected EBITDA from material projects that is included in such financial covenant calculations is subject to the approval of Bank of America, N.A. (the “Administrative Agent”), and it will be based on contracts related to the material project, expected expenses, the completion percentage of the material project, the expected commercial operation date of the material project, and other factors deemed appropriate by the Administrative Agent. The aggregate amount of all material project EBITDA adjustments during any period shall be limited to 15% of the total actual consolidated EBITDA for such period (which total actual consolidated EBITDA shall be determined without including any material project EBITDA adjustments).

 

In January 2013, the Partnership amended the credit facility to, among other things, (i) decrease the minimum consolidated interest coverage ratio (as defined in the amended credit agreement, being generally computed as the ratio of consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges to consolidated interest charges) to 2.25 to 1.0 for the fiscal quarters ending September 30, 2013 and December 31, 2013, with a minimum ratio of 2.50 to 1.0 for each fiscal quarter ending thereafter, (ii) increase the maximum permitted consolidated leverage ratio (as defined in the amended credit agreement, being generally computed as the ratio of total funded debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges) to 5.50 to 1.0 for each fiscal quarter ending on or prior to December 31, 2013, with a maximum ratio of 5.25 to 1.0 for each fiscal quarter ending thereafter, and (iii) eliminate the existing and any future step-up in the maximum permitted consolidated leverage ratio for acquisitions.

 

As of December 31, 2012, there was $71.0 million of borrowing and $62.2 million in outstanding letters of credit, under the bank credit facility leaving approximately $501.8 million available for future borrowing based on a borrowing capacity of $635.0 million. However, the financial covenants in the amended credit facility limit the amount of funds that we can borrow. As of December 31, 2012, based on the financial covenants in the amended credit facility, we could borrow approximately $334.6 million of additional funds.

 

The credit facility is guaranteed by substantially all of our subsidiaries and is secured by first priority liens on substantially all of our assets and those of the guarantors, including all material pipeline, gas gathering and processing assets, all material working capital assets and a pledge of all of our equity interests in substantially all of our subsidiaries.

 

We may prepay all loans under the credit facility at any time without premium or penalty (other than customary LIBOR breakage costs), subject to certain notice requirements. The credit facility requires mandatory prepayments of amounts outstanding thereunder with the net proceeds of certain asset sales, extraordinary receipts, equity issuances and debt incurrences, but these mandatory prepayments do not require any reduction of the lenders' commitments under the credit facility.

 

Under the amended credit facility, borrowings bear interest at our option at the Eurodollar Rate (the British Bankers Association LIBOR Rate) plus an applicable margin or the Base Rate (the highest of the Federal Funds Rate plus 0.50%, the 30-day Eurodollar Rate plus 1.0%, or the administrative agent's prime rate) plus an applicable margin. We pay a per annum fee (as described below) on all letters of credit issued under the amended credit facility and a commitment fee of between 0.375% and 0.50% per annum on the unused availability under the amended credit facility. The commitment fee, letter of credit fee and the applicable margins for the interest rate vary quarterly based on our leverage ratio (as defined in the credit facility, being generally computed as the ratio of total funded debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges) and are as follows:

 

     Eurodollar Rate   
     Loans and  Letter of
  Base Rate  Letter of Credit Commitment
Leverage Ratio  Loans Fees Fees
Greater than or equal to 4.50 to 1.00   2.00%  3.00%  0.50%
Greater than or equal to 4.00 to 1.00 and less than 4.50 to 1.00   1.75%  2.75%  0.50%
Greater than or equal to 3.50 to 1.00 and less than 4.00 to 1.00   1.50%  2.50%  0.50%
Greater than or equal to 3.00 to 1.00 and less than 3.50 to 1.00   1.25%  2.25%  0.50%
Less than 3.00 to 1.00   1.00%  2.00%  0.38%

The amended credit facility includes financial covenants that are tested on a quarterly basis, based on the rolling four-quarter period that ends on the last day of each fiscal quarter. The maximum permitted leverage ratio (as defined in the credit facility, but generally computed as the ratio of total funded debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges) is 5.50 to 1.00 for the fiscal quarters ending on or before December 31, 2013 with a maximum ratio of 5.25 to 1.00 for each fiscal quarter thereafter. The maximum permitted senior leverage ratio (as defined in the credit facility, but generally computed as the ratio of total secured funded debt to consolidated earnings before interest, taxes, depreciation, amortization and certain other non cash charges) is 2.75 to 1.00. The minimum consolidated interest coverage ratio (as defined in the credit facility, but generally computed as the ratio of consolidated earnings before interest, taxes, depreciation, amortization and certain other non-cash charges to consolidated interest charges) is 2.25 to 1.00 for the fiscal quarters ending on or before December 31, 2013, with a minimum ratio of 2.50 to 1.0 for each fiscal quarter ending thereafter.

 

In addition, the credit facility contains various covenants that, among other restrictions, limit the Partnerhship's ability to:

 

  • grant or assume liens;

     

  • make investments;

     

  • incur or assume indebtedness;

     

  • engage in mergers or acquisitions;

     

  • sell, transfer, assign or convey assets;

     

  • repurchase the Partnership's equity, make distributions and certain other restricted payments;

     

  • change the nature of the Partnership's business;

     

  • engage in transactions with affiliates;

     

  • enter into certain burdensome agreements;

     

  • make certain amendments to the omnibus agreement or the Partnership's subsidiaries' organizational documents;

     

  • prepay the senior unsecured notes and certain other indebtedness; and

     

  • enter into certain hedging contracts.

 

The credit facility permits the Partnership to make quarterly distributions to unitholders so long as no default exists under the credit facility.

 

Each of the following is an event of default under the credit facility:

 

  • failure to pay any principal, interest, fees, expenses or other amounts when due;

     

  • failure to meet the quarterly financial covenants;

     

  • failure to observe any other agreement, obligation, or covenant in the credit facility or any related loan document, subject to cure periods for certain failures;

     

  • the failure of any representation or warranty to be materially true and correct when made;

     

  • The Partnership's or any of its subsidiaries default under other indebtedness that exceeds a threshold amount;

     

  • judgments against the Partnership or any of its material subsidiaries, in excess of a threshold amount;

     

  • certain ERISA events involving the Partnership or any of its material subsidiaries, in excess of a threshold amount;

     

  • bankruptcy or other insolvency events involving the Partnership or any of its material subsidiaries; and

     

  • a change in control (as defined in the credit facility).

 

If an event of default relating to bankruptcy or other insolvency events occurs, all indebtedness under the credit facility will immediately become due and payable. If any other event of default exists under the credit facility, the lenders may accelerate the maturity of the obligations outstanding under the credit facility and exercise other rights and remedies. In addition, if any event of default exists under the credit facility, the lenders may commence foreclosure or other actions against the collateral.

 

If any default occurs under the credit facility, or if the Partnership is unable to make any of the representations and warranties in the credit facility, the Partnership will be unable to borrow funds or have letters of credit issued under the credit facility.

 

The Partnership expects to be in compliance with the covenants in the credit facility for at least the next twelve months.

Senior Unsecured Notes. On February 10, 2010, the Partnership and Crosstex Energy Finance Corporation issued $725.0 million in aggregate principal amount of 8.875% senior unsecured notes (the “2018 Notes”) due on February 15, 2018 at an issue price of 97.907% to yield 9.25% to maturity including the original issue discount (OID). Net proceeds from the sale of the notes of $689.7 million (net of transaction costs and OID), together with borrowings under the credit facility discussed above, were used to repay in full amounts outstanding under the prior bank credit facility and senior secured notes and to pay related fees, costs and expenses, including the settlement of interest rate swaps associated with the prior credit facility. Interest payments on the notes are due semi-annually in arrears in February and August.

 

On May 24, 2012, the Partnership and Crosstex Energy Finance Corporation issued $250.0 million in aggregate principal amount of 7.125% senior unsecured notes (the “2022 Notes” and together with the 2018 Notes, the “Senior Notes”) due on June 1, 2022 at an issue price of 100% of the principal amount to yield 7.125% to maturity. The interest payments are due semi-annually in arrears in June and December. Net proceeds from the sale of the notes of $245.1 million (net of transaction costs) were used to fund the Clearfield acquisition and for general partnership purposes, including capital expenditures for the Cajun-Sibon NGLs pipeline expansion.

 

The indentures governing the Senior Notes contain covenants that, among other things, limit the Partnership's ability and the ability of certain of its subsidiaries to:

 

  • sell assets including equity interests in its subsidiaries;

     

  • pay distributions on, redeem or repurchase units or redeem or repurchase its subordinated debt (as discussed in more detail below);

     

  • make investments;

     

  • incur or guarantee additional indebtedness or issue preferred units;

     

  • create or incur certain liens;

     

  • enter into agreements that restrict distributions or other payments from its restricted subsidiaries to the Partnership;

     

  • consolidate, merge or transfer all or substantially all of its assets;

     

  • engage in transactions with affiliates;

     

  • create unrestricted subsidiaries;

     

  • enter into sale and leaseback transactions; or

     

  • engage in certain business activities.

 

The indentures provide that if the Partnership's fixed charge coverage ratio (the ratio of consolidated cash flow to fixed charges, which generally represents the ratio of adjusted EBITDA to interest charges with further adjustments as defined per the indenture) for the most recently ended four full fiscal quarters is not less than 2.00 to 1.0, the Partnership will be permitted to pay distributions to its unitholders in an amount equal to available cash from operating surplus (each as defined in our partnership agreement) with respect to its preceding fiscal quarter plus a number of items, including the net cash proceeds received by the Partnership as a capital contribution or from the issuance of equity interests since the date of the indenture, to the extent not previously expended. If the Partnership's fixed charge coverage ratio is less than 2.00 to 1.0, the Partnership will be able to pay distributions to its unitholders in an amount equal to a specified basket (less amounts previously expended pursuant to such basket), plus the same number of items discussed in the preceding sentence to the extent not previously expended. The Partnership was in compliance with this covenant as of December 31, 2012.

 

If the Senior Notes achieve an investment grade rating from each of Moody's Investors Service, Inc. and Standard & Poor's Ratings Services, many of the covenants discussed above will terminate. Our current ratings on our bonds from Moody's Investors Service, Inc. and Standard & Poor's Rating Services are B2 and B+, respectively.

 

Prior to February 15, 2014, the Partnership may redeem the 2018 Notes, in whole or in part, at a “make-whole” redemption price. On or after February 15, 2014, the Partnership may redeem all or a part of the notes at redemption prices (expressed as percentages of principal amount) equal to 104.438% for the twelve-month period beginning on February 15, 2014, 102.219% for the twelve-month period beginning February 15, 2015 and 100.00% for the twelve-month period beginning on February 15, 2016 and at any time thereafter, plus accrued and unpaid interest, if any, to the applicable redemption date on the notes.

 

The Partnership may redeem up to 35% of the 2022 Notes at any time prior to June 1, 2015 in an amount not greater than the cash proceeds from equity offerings at a redemption price of 107.125% of the principal amount of the 2022 Notes (plus accrued and unpaid interest to the redemption date) provided that:

 

  • at least 65% of the aggregate principal amount of the 2022 Notes remains outstanding immediately after the occurrence of such redemption; and

     

  • the redemption occurs within 180 days of the date of the closing of the equity offering.

 

Prior to June 1, 2017, the Partnership may redeem all or a part of the 2022 Notes at the redemption price equal to the sum of the principal amount thereof, plus a make-whole premium at the redemption date, plus accrued and unpaid interest to the redemption date.

 

On or after June 1, 2017, the Partnership may redeem all or a part of the 2022 Notes at redemption prices (expressed as percentages of principal amount) equal to 103.563% for the twelve-month period beginning on June 1, 2017, 102.375% for the twelve-month period beginning on June 1, 2018, 101.188% for the twelve-month period beginning on June 1, 2019 and 100.000% for the twelve-month period beginning on June 1, 2020 and at any time thereafter, plus accrued and unpaid interest, if any, to the applicable redemption date on the 2022 Notes.

 

Each of the following is an event of default under the indenture:

 

  • failure to pay any principal or interest when due;

     

  • failure to observe any other agreement, obligation, or other covenant in the indenture, subject to the cure periods for certain failures;

     

  • the Partnership's or any of its subsidiaries' default under other indebtedness that exceeds a certain threshold amount;

     

  • failures by the Partnership or any of its subsidiaries to pay final judgments that exceed a certain threshold amount; and

     

  • bankruptcy or other insolvency events involving the Partnership or any of its material subsidiaries.

 

If an event of default relating to bankruptcy or other insolvency events occurs, the Senior Notes will immediately become due and payable. If any other event of default exists under the indenture, the trustee under the indenture or the holders of the Senior Notes may accelerate the maturity of the Senior Notes and exercise other rights and remedies.