NuStar Energy LP of San Antonio, Texas, announced Monday that it has entered into an agreement with an affiliate of Lindsay Goldberg LLC, a private investment firm, to divest all of its 50-percent voting interest in an asphalt joint venture that owns a refinery located in Paulsboro, N.J., a terminal in Savannah and the related working capital.
Lindsay Goldberg LLC currently owns the other 50-percent voting interest in the asphalt joint venture. Closing for the transaction is expected to occur no later than Feb. 28.
As a result of this transaction, a $250-million, 7-year revolving credit facility between NuStar Logistics and the joint venture will be converted to a $175 million term loan at closing and reduced to a $150 million term loan six months after closing. The transaction calls for the term loan to be repaid with excess cash flows generated by the asphalt business over the next several years and for the loan to be paid off in full by no later than September 2019.
NuStar Logistics will continue to provide up to $150 million of credit support for the asphalt business, in the form of guarantees and letters of credit, for two years after the closing date. This support amount will begin declining two years after closing and will terminate no later than September 2019.
“This transaction, coupled with the Jan. 1, 2014 termination of our crude oil supply agreement with PDVSA, significantly reduces our financial liability related to asphalt refining,” said Brad Barron, president and CEO of NuStar Energy.
“It lowers our financial obligations by $100 million — dropping by $75 million immediately, and then dropping by another $25 million within six months. Most importantly, our earnings will no longer be burdened by the volatility and significant losses generated by the asphalt joint venture.
“As a result of this divestiture, we can focus on growing our more stable storage and pipeline fee-based operations.”