PAA closes $1.6B private placement of 8% perpetual Series A convertible preferred units

Plains All American Pipeline LP (NYSE: PAA) has closed its sale of approximately 61 million units of a newly authorized series of 8% perpetual Series A convertible preferred units at a price of $26.25 per unit.

The preferred units will pay quarterly distributions at an annual rate of $2.10 per unit. After two years, the preferred units are convertible at the holders’ option into PAA common units on a one-for-one basis (subject to customary anti-dilution adjustments), and are convertible at PAA’s option in certain circumstances after three years.

The net proceeds, after deducting offering expenses and the transaction fee due to the purchasers and including the general partner’s proportionate 2% equity contribution, are $1.6 billion. This amount represents an increase of $140 million in additional net proceeds relative to anticipated net proceeds announced on Jan. 12, due to additional commitments received by PAA since that date.

PAA expects to use the proceeds for capital expenditures, repayment of debt, and general partnership purposes. The primary purchasers included affiliates of EnCap Investments LP, EnCap Flatrock Midstream, the Energy Minerals Group, Kayne Anderson Capital Advisors LP, First Reserve Advisors LLC, and Stonepeak Partners LP.

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