Summit Midstream Partners updates on drop-down transaction

Summit Midstream Partners LP (NYSE: SMLP) has entered into an agreement with a wholly owned subsidiary of Summit Midstream Partners LLC (Summit Investments) to acquire all of the issued and outstanding membership interests of Summit Utica, Meadowlark Midstream, and Tioga Midstream. In addition, SMLP will acquire Summit Investments' 40% equity interest in each of Ohio Gathering and Ohio Condensate.

The total transaction is estimated at $1.2 billion with consideration structured as a $360 million initial payment and a deferred payment estimated at $800 million to $900 million due in 2020. The deferred payment will be based on a 6.5x multiple of the average of 2018 and 2019 adjusted EBITDA from the drop-down assets, adjusted for the initial payment, and the capital expenditures and adjusted EBITDA from the drop-down assets incurred during the deferral period. 

In conjunction with the drop down, SMLP has increased its revolving credit facility from $700 million to $1.25 billion. Given the deferral structure and the increased capacity available under its credit facility, SMLP will not need to access the capital markets to meet its currently planned capital expenditure program. The deferred payment due in 2020 may be made in cash or SMLP units, at the discretion of SMLP, further eliminating the potential need for the capital markets. 

The transaction, which SMLP expects to be immediately accretive to distributable cash flow on a per unit basis, is expected to close in March.

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