Long-Term Debt

As of June 30, 2013 and December 31, 2012, long-term debt consisted of the following (in thousands):



	June 30, 2013		December 31, 2012
Partnership's bank credit facility (due 2016), interest based on Prime and/or LIBOR plus an applicable margin, interest rate at June 30, 2013 and December 31, 2012 was 5.0% and 4.3%, respectively	$	—	$	71,000
Subsidiary Borrower’s credit facility (due 2016), interest based on LIBOR plus 5.0%, interest rate at June 30, 2013 was 5.3%	26,412		—
Partnership's senior unsecured notes (due 2018), net of discount of $8.7 million and $9.7 million, respectively, which bear interest at the rate of 8.875%	716,253		715,305
Partnership's senior unsecured notes (due 2022), which bear interest at the rate of 7.125%	250,000		250,000
Debt classified as long-term	$	992,665	$	1,036,305

Subsidiary Borrower’s Credit Facility. On March 5, 2013, XTXI Capital, LLC, a wholly-owned subsidiary of the Company (“Subsidiary Borrower”), entered into a Credit Agreement (the “Subsidiary Credit Agreement”) with Citibank, N.A., as Administrative Agent, Collateral Agent and a Lender, and the other lenders party thereto. The Subsidiary Credit Agreement initially permitted Subsidiary Borrower to borrow up to $75.0 million on a revolving credit basis. The maturity date of the Subsidiary Credit Agreement is March 5, 2016.

In May 2013, Subsidiary Borrower exercised the accordion feature of the Subsidiary Credit Agreement, thereby increasing the amount Subsidiary Borrower is permitted to borrow on a revolving credit basis from $75.0 million to up to $90.0 million. Subsidiary Borrower intends to distribute these additional funds to the Company for its additional $25.0 million investment commitment in E2 for the construction of a third natural gas compression and condensate stabilization facility in the ORV. As of June 30, 2013, there was $26.4 million borrowed under the Subsidiary Credit Agreement, leaving approximately $63.6 million available for future borrowing based on the borrowing capacity of $90.0 million.

Subsidiary Borrower’s obligations under the Subsidiary Credit Agreement are guaranteed by the Company (the “Guaranty”) and are secured by a first priority lien on 10,700,000 common units representing limited partner interests (“Common Units”) in the Partnership, which Common Units have been contributed by the Company to Subsidiary Borrower (together with any additional Common Units subsequently pledged as collateral under the Subsidiary Credit Agreement, the “Pledged Units”).

Borrowings under the Subsidiary Credit Agreement bear interest at a per annum rate equal to the reserve-adjusted British Banks Association LIBOR Rate plus 5.00%. Subsidiary Borrower pays a commitment fee of 0.75% per annum on the unused availability under the Subsidiary Credit Agreement. Subject to the $90.0 million cap on outstanding borrowings and the percentage obtained by dividing (A) the total net outstanding borrowings under the Subsidiary Credit Agreement by (B) the product of (x) the number of Common Units included in the Pledged Units on such date and (y) the closing sale price per Common Unit on such date (the “Loan to Equity Value Percentage”) not equaling or exceeding 47%, Subsidiary Borrower may elect to pay interest, fees and expenses in connection with the Subsidiary Credit Agreement in kind by adding such amounts to the principal amount of the borrowings under the Subsidiary Credit Agreement.

The Subsidiary Credit Agreement requires mandatory prepayments of all amounts outstanding thereunder if the Company ceases to own all of the equity interests of Subsidiary Borrower. In addition, if the Loan to Equity Value Percentage exceeds 47%, Subsidiary Borrower must prepay the loan, pledge additional Common Units as collateral and/or direct the collateral agent to sell Pledged Units to achieve a Loan to Equity Value Percentage that is less than 42.5%.

The Subsidiary Credit Agreement prohibits Subsidiary Borrower from making any distributions or other payments to the Company (including any distributions resulting from Subsidiary Borrower’s receipt of distributions from the Partnership) if the Loan to Equity Value Percentage exceeds 47% or any event of default exists under the Subsidiary Credit Agreement. The Subsidiary Credit Agreement also limits the Company’s ability and the ability of its subsidiaries (other than the Partnership) to sell Common Units in certain circumstances.

The Subsidiary Credit Agreement contains various other covenants that, among other restrictions, limit Subsidiary Borrower’s ability to incur indebtedness, enter into acquisition or disposition transactions and engage in any business activities. The Subsidiary Credit Agreement does not include any financial covenants.

Events of default under the Subsidiary Credit Agreement include, among others, (i) Subsidiary Borrower’s failure to pay principal or interest when due, (ii) Subsidiary Borrower’s or the Company’s failure to comply with agreements, obligations or covenants in the Subsidiary Credit Agreement, the Guaranty or any other loan document, (iii) material inaccuracy of any representation or warranty, (iv) certain change of control events, bankruptcy and other insolvency events and (v) the occurrence of certain events relating to the Common Units.

If an event of default relating to bankruptcy or other insolvency events occur, all indebtedness under the Subsidiary Credit Agreement will immediately become due and payable. If any other event of default exists under the Subsidiary Credit Agreement, the lenders may accelerate the maturity of the obligations outstanding under the Subsidiary Credit Agreement, Subsidiary Borrower will be unable to borrow funds and the lenders may exercise other rights and remedies. In addition, if any event of default exists under the Subsidiary Credit Agreement, the lenders may commence foreclosure or other actions against the Pledged Units. If the Company defaults on its obligations under the Guaranty, then the lenders could declare all amounts outstanding under the Subsidiary Credit Agreement immediately due and payable (with accrued interest). If Subsidiary Borrower and the Company are unable to pay such amounts, the lenders may foreclose on the Pledged Units. Citibank, N.A., as the agent under the Subsidiary Credit Agreement, has the right to demand additional collateral or amend the Subsidiary Credit Agreement if certain events occur that adversely impact the composition and quality of the Pledged Units or Citibank, N.A’s position as a secured creditor.

The Partnership’s Credit Facility. As of June 30, 2013, there was $63.2 million in outstanding letters of credit and no outstanding borrowings under the Partnership’s bank credit facility, leaving approximately $571.8 million available for future borrowing based on the borrowing capacity of $635.0 million. As of June 30, 2013, based on the Partnership’s maximum permitted consolidated leverage ratio (as defined in the amended credit facility), the Partnership could borrow approximately $363.5 million of additional funds.

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.

The Partnership’s credit facility is guaranteed by substantially all of the Partnership’s subsidiaries and is secured by first priority liens on substantially all of its 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 the Partnership’s equity interests in substantially all of its subsidiaries. The Partnership may prepay all loans under the Partnership’s credit facility at any time without premium or penalty (other than customary LIBOR breakage costs), subject to certain notice requirements. The Partnership’s 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 Partnership’s credit facility.

All other material terms of the Partnership’s credit facility are described in Part II, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Indebtedness” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. The Partnership expects to be in compliance with all credit facility covenants for at least the next twelve months.