Inergy Midstream L.P. has indicated its IPO price range as being $19-$21/common unit and will offer 16 million units when the company goes public. It will trade on the NYSE under the symbol ‘NRGM’. The company was formed from the midstream assets (pipelines and natural gas and NGL storage) of Inergy, L.P. (NYSE: NRGY). The offering’s underwriters are Morgan Stanley (NYSE: MS) and Bank of America Corp. (NYSE: BAC), which have been granted an option to purchase an additional 2.4 million common units.
The new company’s assets are located primarily in the Marcellus shale gas play in Pennsylvania and New York. According to the company’s Form S-1, Inergy Midstream owns 41 billion cubic feet of working gas storage in four locations and 355 million cubic feet/day of intra- and inter-state gas transmission pipelines. The company expects to complete its new MARC I pipeline in July 2012, which will add 550 million cubic feet/day of capacity.
Under the terms of the offering, Inergy L.P. will own 78.5% of the new company’s common units and through a string of subsidiaries 100% of the incentive distribution rights. The initial quarterly distribution payment will be $0.37/common unit.
Common unit holders receive 100% of quarterly distributions up to $0.37, and 50% of the amount above that figure. The incentive distribution rights holder gets the other 50% of the excess above $0.37.
The general partner of Midstream is called NRGM, GP LLC, and it has no economic interest in the new company. The incentive distribution rights are paid to Inergy Midstream Holdings, L.P., which owns NRGM GP. Inergy, L.P. owns Inergy Midstream Holdings and receives its incentive distribution payments through that company.
The IPO will generate about $320 million at the middle of the pricing range, and Midstream will use the proceeds to pay off a $300 million debt owed to JPMorgan Chase & Co. (NYSE: JPM). Because the net proceeds from the offering are expectyed to total $297.2 million, Midstream will also borrow $2.8 million to meet the payment. The company also plans to open a $500 million revolving credit facility and to borrow $80 million from that facility to pay the first distribution to unitholders. Nearly 80% of the distribution will be paid to Inergy L.P.
The Form S-1 is available here.