Rice Energy agrees to investments of up to $500M in Rice Midstream Holdings

Rice Energy Inc. (NYSE: RICE) has agreed to nonbinding terms with an energy infrastructure fund to invest up to $500 million in preferred equity in Rice Midstream Holdings LLC (RMH), a wholly owned subsidiary of Rice, and common equity in a new wholly owned subsidiary of RMH, to be called GP Holdings, which will be formed to hold the common units, subordinated units and incentive distribution rights in Rice Midstream Partners LP (NYSE: RMP) currently held by RMH.

The closing of the transaction is expected to occur in the first quarter of 2016. At closing, Rice Energy plans to utilize $375 million, of which it intends to use a portion to repay all outstanding borrowings under RMH's revolving credit facility, and the remainder to fund Rice's 2016 development of its core Marcellus and Utica shale wells.

Analysts with Seaport Global Securities said the deal “creatively utilizes the often overlooked value of RICE’s midstream assets not held in RMP to ensure that RICE’s balance sheet stays in check in FY16 (deal should plug any E&P cash flow outspend).”

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