Monday, natural gas service providers Exterran Holdings, Inc. (EXH) and Exterran Partners, LP (EXLP) jointly announced a deal, by which Exterran Partners will acquire certain contracts for a total value of about $144 million, including anticipated transaction costs. Further, Exterran Partners said it plans to fund the transaction through a new asset backed securitization facility worth around $58 million and issue of $86 million new equity to Exterran Holdings.
Exterran Partners said the acquisition deal includes contracts serving 18 customers from Exterran Holdings and its affiliates, along with nearly 900 compressor units comprising approximately 273 thousand horsepower. The deal will include nearly 6%, by available horsepower, of the combined US contract operations business of both Exterran Holdings and Exterran Partners.
The Houston, Texas-based companies said, in funding the transaction, Exterran Partners plans to borrow about $58 million under a new asset-backed securitization facility and issue nearly $86 million of new equity to Exterran Holdings, comprised of about 4.74 million common units and approximately 97 thousand general partner units.
Michael Anderson, senior vice president and chief financial officer of Exterran Holdings said, "Exterran Holdings expects to use a portion of the transaction proceeds to enhance its capital position through the reduction of debt."
Additionally, Exterran Partners said it has received a financing commitment for a new $150 million asset-backed securitization facility, to be arranged by Wells Fargo Securities, LLC and provided by Wachovia Bank, N.A., a wholly-owned subsidiary of Wells Fargo & Co. (WFC).
The facility, which matures in 2013, is estimated to provide debt capacity to help fund the present deal and also future acquisition deals. Exterran Partners added that interest payable on the new facility is foreseen to accrue at a variable rate of one month LIBOR plus 3.5%. Exterran Partners will be required to enter into fixed interest rate swaps with regard to at least 85% of outstanding borrowings under the facility.
Exterran Partners' Chief Financial Officer David Miller said, "The transaction is expected to expand Exterran Partners' contract operations fleet to comprise approximately 31%, by available horsepower, of the combined Exterran Holdings and Exterran Partners U.S. contract operations business."
With the closing of the transaction, omnibus agreement between Exterran Partners and Exterran Holdings will be amended to reflect adjustments in cap on selling, general and administrative costs allocable from Exterran Holdings to Exterran Partners, based on costs incurred by Exterran Holdings on behalf of Exterran Partners from $6.0 million per quarter to $7.6 million per quarter, while cap on operating costs remain at $21.75 per horsepower per quarter. The caps will be extended for a year and will terminate on December 31, 2010, unless otherwise extended. The deal is estimated to close in November 2009.
EXH closed Friday's regular trading at $22.54 per share on the New York Stock Exchange.
EXLP closed Friday's regular trading at $17.86 per share on the Nasdaq.
WFC closed Friday's regular trading at $26.28 per share on the New York Stock Exchange.
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