All Unit Holders Encouraged to Directly Contact the Independent Directors to Voice Their Support of a Firm Stance
Estimates Full Value of AMID of at Least $9.00 per Common Unit
CHARLOTTE, N.C., Jan. 10, 2019 (GLOBE NEWSWIRE) -- Craig W. Thomas, a concerned unitholder of American Midstream Partners, LP (“AMID”), encourages the three independent directors of AMID (Mr. Peter A. Fassulo, Mr. Donald R. Kendall Jr., and Mr. Gerald A. Tywoniuk) to reject publicly the two bids from AMID’s private equity sponsor and stay public for most of 2019 so that high-probability improvements in EBITDA, leverage ratios (and a reduction in debt), and a resumption of the distribution are realized.
Mr. Thomas believes that the private equity firm ArcLight Capital Partners and its affiliates (“ArcLight”) have engaged in a campaign of self-interested tactics and timing designed to take AMID private at an extremely low price per unit while AMID’s profitability and distribution are at temporary and short-lived lows. Mr. Thomas believes that under ArcLight’s stewardship of AMID (given its effective control of the partnership through six of nine board seats and a current 51.0% ownership interest on a fully converted basis):
- ArcLight sold a 15.5% interest in the Delta House Offshore Production System in October 2017 to AMID that within the same quarter of deal closing announced major expected shortfalls in throughput. Mr. Thomas estimates that ArcLight’s support payments to AMID fall short of the actual EBITDA deficit. EBITDA and credit ratios have suffered as a result of the temporary shortfall and contributed to distribution cuts which lowered the unit price.
- Oversaw an AMID finance department that has been routinely delinquent in filing Form 10-Q’s and Form 10-K’s denting AMID’s credibility in the markets.
- AMID pursued the Southcross Energy Partners, LP and Southcross Energy GP, LLC (“SXE”) transaction without committed financing that required a break-up fee.
- AMID filed the required documents to pursue an equity offering creating a further overhang. Many investment banks were restricted in their research coverage of AMID during this period further limiting the ability of AMID to attract new investors.
- AMID cut the distribution by 75% in July 2018, causing the closing unit price to fall from $11.55 per unit to $6.60 on the day of the announcement.
- AMID announced the termination of the SXE transaction on August 1, 2018 requiring the payment of the $17mm break-up fee.
- ArcLight made a non-binding offer of $6.10 per unit on September 28, 2018.
- AMID suspended investor Q&A on the Q3 2018 earnings call in November 2018.
- AMID eliminated the distribution on December 31, 2018, causing the closing unit price to fall from $4.33 per unit to $3.03 on the day of the announcement.
- ArcLight lowered its non-binding bid to $4.50 per unit on January 3, 2019, four days after AMID eliminated the distribution (many institutions and index funds require their MLP’s to pay a distribution and are forced sellers on distribution suspensions).
- AMID did not extend the maturity of its credit facility (while ArcLight is likely negotiating its take private facility at the same time). Instead, AMID agreed to eliminate the distribution until total leverage returned to less than 5x.
- ArcLight timed its effort during quarters when EBITDA is artificially low due to one-off factors and used the dividend suspension and subsequent price action to set a low bar for its take-private offers.
Mr. Thomas suggests that the independent directors take the following steps:
- Demand full payment from ArcLight for the entire EBITDA shortfall from Delta House.
- Hire bankers (now) and shop AMID to non-affiliated entities later in 2019.
- Publicly reject AMID’s two offers as insufficient.
- Allow Delta House to reach its nameplate capacity in early 2019 (we believe Delta House is close to reaching 135,000 barrels per day) and allow the financials to reflect these improved results to potential acquirors and credit facility lenders.
- Allow more time for AMID to remain public so that AMID’s EBITDA can normalize and for the substantial investments made in 2018 and the option in the Enterprise Products gas-processing plant to be exercised (there is a one-quarter lag for improved EBITDA at Delta House to show up in AMID’s financials in the form of “Distributions from Unconsolidated Affiliates”, thus, a normalized Q1 2019 will not be reported until the Q2 2019 results in August 2019).
- Allow AMID to remain public until at least August 2019 so that AMID can sell additional non-core assets at more that 10x EBITDA, harvest the benefit from investments made in 2018, have Delta House demonstrate its full earnings power, lower total leverage below 5x through all of the above, and resume the distribution.
- Extend AMID’s current credit facility by one year
Mr. Thomas believes AMID’s future is bright from here (even with the possibility for below normal EBITDA in Q4 2018 and Q1 2019 due to Delta House) and the common units are worth at least $9.00 based on Delta House normalizing and these additional investments coming to fruition ($180mm in normalized run rate EBITDA at a multiple of 10x which is less than what AMID sold the Marine Products Terminals and the Refined Products Terminals). Mr. Thomas further believes that AMID should remain public to realize improvements that are at hand (Delta House is likely at full capacity today).
Mr. Thomas believes that additional asset sales and the normalization of EBITDA will allow AMID to resume a distribution in short order and that this price swoon will be short-lived.
Mr. Thomas encourages the independent directors to stand-up to ArcLight and immediately implement the above suggestions. He further encourages all unitholders to reach out to the three independent directors and share their views in writing at:
2103 CityWest Boulevard
Building 4
Suite 800
Houston, TX 77042
Mr. Thomas said, “The independent directors are the last line in defense against ArcLight and its tactics as they must approve a transaction. I along with other unitholders are supportive of standing firm. I encourage all unitholders to reach out to Peter, Donald, and Gerald in writing and encourage them to reject the two bids so that AMID has more time to bring Delta House up to full capacity, sell assets, and resume the distribution.”
Mr. Thomas is a professional investor with more than 15 years of investing experience, including as a portfolio manager and a Director of Research at S.A.C. Capital Advisors and an analyst at Goff Moore Strategic Partners and Rainwater, Inc. He is currently the co-founder of Shareholder Advocates for Value Enhancement (S.A.V.E.) and manages various investment partnerships.
Craig W. Thomas, craig@savepartners.com