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American Midstream scrapping Q4 investor payouts to boost debt reduction

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American Midstream scrapping Q4 investor payouts to boost debt reduction

American Midstream Partners LP will not distribute cash to investors for the fourth quarter of 2018 after amending a credit agreement to reduce the pipeline company's pile of debt.

Under the terms of the agreement, the master limited partnership may not pay any cash distributions unless its leverage ratio is less than 5x, according to a Dec. 27 document filed with the SEC. American Midstream did not disclose its current leverage ratio, but said it does not expect to pay investors for the most recent quarter.

When S&P Global Ratings lowered its senior unsecured debt rating for American Midstream to B from B+ in September, it cited a "base-case projected debt-to-EBITDA of ... 5x-6x in 2019" even after the MLP announced a 75% distribution cut in July in the wake of a failed merger with Southcross Energy Partners LP.

American Midstream share prices plummeted in 2018 to settle at $3.03 per unit on Dec. 31.

Private equity heavyweight ArcLight Capital Partners LLC in September made an unsolicited offer to acquire American Midstream for $6.10 per common unit. ArcLight is the largest institutional holder at American Midstream, with a 24.96% stake in the partnership, and owns 77.80% of American Midstream's general partner.

American Midstream operates about 5,100 miles of pipelines, gas processing plants and other midstream infrastructure in the Permian Basin, Eagle Ford Shale, East Texas, Bakken Shale and Gulf Coast areas.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.