fwp
Filed pursuant to Rule 433
File numbers 333-123150 and
333-123150-01
September 15, 2006
FINAL TERM SHEET
ENTERPRISE PRODUCTS OPERATING L.P.
8.375% Fixed/Floating Rate Junior Subordinated Notes due 2066 (Notes)
Guaranteed to the extent described in the description of securities attached hereto as Appendix A
by Enterprise Products Partners L.P.
This issuance of Notes is a further issuance of the 8.375% Fixed/Floating Rate Junior Subordinated
Notes due 2066 of Enterprise Products Operating L.P., which were originally issued in an aggregate
principal amount of $300,000,000 on July 18, 2006, and an additional aggregate amount of
$200,000,000 of which were issued on August 25, 2006. The Notes have the same CUSIP number and
will trade interchangeably with such $500,000,000 currently outstanding aggregate principal amount
of notes. Appendix A hereto contains a description of the general terms of the Notes and certain
other information. Appendix B hereto contains a description of the capitalization of the
Enterprise Products Partners L.P. In the event that there is any inconsistency between the
information set forth in this Final Term Sheet and the information set forth in Appendix A or
Appendix B, respectively, the information set forth in this Final Term Sheet shall govern.
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Issuer:
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Enterprise Products Operating L.P. |
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Principal Amount:
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$50,000,000 |
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Security Type:
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Junior Subordinated Notes due 2066 |
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Legal Format:
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SEC Registered |
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Trade Date:
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September 15, 2006 |
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Settlement Date:
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September 20, 2006 |
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Maturity Date:
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August 1, 2066 |
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Price to Public:
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104.154% |
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Public Offering Price:
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$52,077,000 |
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Net Proceeds to Issuer After
Deducting Underwriting
Commissions and Expenses
before Accrued Interest:
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$51,615,000 |
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Use of Proceeds:
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To temporarily reduce borrowings outstanding
under our multi-year revolving credit
facility or for general partnership purposes |
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Accrued Interest to Issuer:
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$721,180.56; 8.375% accrued from July 18,
2006 to and including September 19, 2006 |
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Total Proceeds to Issuer:
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$52,336,180.56 |
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Interest during Fixed Rate
Period:
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From July 18, 2006 to August 1, 2016, at the
annual rate of 8.375%, payable semi-annually
in arrears on February 1 and August 1 of each
year, commencing on February 1, 2007, subject
to the Issuers right to defer interest on
one or more occasions for up to ten
consecutive years. |
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Interest during Floating
Rate Period:
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From August 1, 2016 through maturity at a
floating rate based on the 3-month LIBOR Rate
plus 370.75 basis points, reset quarterly,
payable quarterly in arrears on February 1,
May 1, August 1 and November 1 of each year,
subject to the Issuers right to defer
interest on one or more occasions for up to
ten consecutive years. |
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Benchmark Treasury:
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4.875% due August 15, 2016 |
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Spread to Benchmark:
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300 basis points (3.00%) |
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Treasury Strike:
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4.761% |
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Optional Redemption:
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On or after August 1, 2016, in whole or in
part at 100% of the principal amount plus
accrued and unpaid interest. |
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Prior to August 1, 2016, in whole or in part
upon payment of a make-whole redemption price
equal to (a) all accrued and unpaid interest
to but not including the redemption date,
plus (b) the greater of (1) 100% of the
principal amount of the Notes being redeemed
and (2) as determined by the Independent
Investment Banker, the sum of the present
values of remaining scheduled payments of
principal and interest on the Notes
(exclusive of interest accrued to the
redemption date) being redeemed from the
redemption date to August 1, 2016, discounted
to the redemption date on a semi-annual basis
(assuming a 360-day year consisting of twelve
30-day months) at the Treasury Yield plus 50
basis points. |
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Denomination:
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$1,000 |
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CUSIP/ISIN:
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293791AV1 / US293791AV15 |
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Sole Book-Runner:
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Lehman Brothers Inc. |
Terms used but not defined in this term sheet have the meanings assigned to them in Appendix
A.
The Issuer has filed a registration statement (including a prospectus) with the U.S. Securities and
Exchange Commission (SEC) for the offering to which this communication relates. Before you invest,
you should read the prospectus for this offering in that registration statement and other documents
the Issuer has filed with the SEC for more complete information about the Issuer and this offering. You may get these
documents for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, the Issuer
or the sole book-runner will arrange to send you the prospectus if you request it by calling:
Lehman Brothers 1-888-603-5847.
-2-
APPENDIX A
Unless the context otherwise requires, our,
we, us and Enterprise as
used in this document refer solely to Enterprise
Products Operating L.P. and do not include our parent,
Enterprise Products Partners L.P., or any of our subsidiaries or
unconsolidated affiliates. Enterprise Parent and
Parent Guarantor as used in this document refer to Enterprise Products Partners L.P. and not
its subsidiaries or unconsolidated affiliates.
RISK FACTORS
An investment in the notes involves certain risks. If any of
these risks were to occur, our business, results of operations,
cash flows and financial condition could be materially adversely
affected. In that case, the value of the notes could decline,
and you could lose part or all of your investment.
Risks Relating to the Notes
We may elect to defer interest payments on the notes at
our option for one or more periods of up to ten consecutive
years.
We may elect to defer payment of all or part of the current and
accrued interest otherwise due on the notes for one or more
periods of up to ten consecutive years, as described under
Description of the Notes Optional Deferral of
Interest. If we exercise this option, you will not receive
any current income on your investment in the notes during such
deferral period. In addition, although we are not permitted to
defer payment of interest for more than ten consecutive years,
we are permitted to defer interest for multiple periods of less
than ten years without triggering an event of default.
We will not be able to pay current interest on the notes
until we have paid all Deferred Interest, which could have the
effect of extending interest deferral periods.
We will be prohibited from paying current interest on the notes
until we have paid all Deferred Interest on the notes, even if
we have cash available from other sources. As a result, we will
not be able to pay current interest on the notes, even if we
have funds available to pay such current interest, if we do not
have available funds to pay all Deferred Interest.
The notes are subordinated to substantially all of our
direct indebtedness.
Our payment obligations under the notes are unsecured and will
be subordinate and rank junior in right of payment to all of our
current and future senior indebtedness, including
our indebtedness for borrowed money, indebtedness evidenced by
bonds, debentures, notes or similar instruments, obligations
arising from or with respect to guarantees and direct credit
substitutes, obligations associated with hedges and derivative
products, capitalized lease obligations and other senior
indebtedness, excluding our trade account payables, certain
other liabilities arising in the ordinary course of our
business, any of our indebtedness which by its terms is
expressly made equal in rank with or subordinated to the notes
and indebtedness owed by us to our majority-owned subsidiaries.
We cannot make any payments on the notes if we have defaulted on
a payment of senior indebtedness and do not cure the default
within the applicable grace period, or if the senior
indebtedness becomes immediately due because of a default and
has not yet been paid in full.
As a result of the subordination provisions discussed in
Description of the Notes Subordination;
Ranking of the Notes, in the event of our insolvency,
funds that we would otherwise use to pay the holders of the
notes will be used to pay the holders of our senior indebtedness
to the extent necessary to pay such indebtedness in full. As a
result of those payments, the notes may recover less, ratably,
than the holders of our senior indebtedness. In addition, the
holders of all of our senior indebtedness may, under certain
circumstances, restrict or prohibit us from making payments on
the notes.
The indenture does not limit our ability to incur additional
indebtedness and other obligations, including indebtedness and
other obligations that rank senior to or pari passu with the
notes. At June 30, 2006, the direct indebtedness of
Enterprise that is senior to the notes totaled approximately
$4.8 billion. In addition, the notes will be effectively
subordinated to all of our subsidiaries and unconsolidated
affiliates existing and future indebtedness and other
obligations. At June 30, 2006, indebtedness of our
subsidiaries and unconsolidated affiliates totaled approximately
$552.7 million.
A-1
If interest on the notes is deferred, holders of the notes
will be required to recognize income for United States federal
income tax purposes at the time interest accrues regardless of
their method of accounting before they actually receive interest
payments in cash.
If we defer interest payments on the notes, each holder of the
notes will be required to accrue income for United States
federal income tax purposes in the amount of the Deferred
Interest on the notes, in the form of original issue discount.
In that event, you, as a holder of notes,
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will recognize income for United States federal income tax
purposes in advance of the receipt of cash corresponding to that
income even if you are on the cash basis of accounting; and |
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will not receive the cash related to that income from us if you
dispose of your notes prior to the applicable record date for
any payments of those amounts. |
The interest rate of the notes will fluctuate when the
fixed rate period ends, and may from time to time decline below
the fixed rate.
After the conclusion of the Fixed Rate Period for the notes, on
August 1, 2016, the notes will begin to bear interest at a
floating rate equal to the
3-month LIBOR Rate for
the related interest period plus 3.7075%. The floating rate may
be volatile over time and could be substantially less than the
fixed rate. In addition to experiencing a decline in current
interest income, holders of the notes could also encounter a
reduction in the value of their notes.
We may elect to cause the redemption of the notes when
prevailing interest rates are relatively low.
We may redeem the notes:
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in whole or in part, on one or more occasions at any time on or
after August 1, 2016 at 100% of their principal amount plus
accrued and unpaid interest, as discussed under
Description of the Notes
Redemption; or |
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in whole or in part at any time prior to August 1, 2016
upon payment of the Make-Whole Redemption Price, as
discussed under Description of the Notes
Redemption. |
We may choose to redeem the notes for a variety of reasons,
including when prevailing interest rates are lower than the then
applicable interest rate on the notes. In that case, you may not
be able to reinvest the redemption proceeds in a comparable
security at an effective interest rate as high as the interest
rate on the notes.
Enterprise Parents guarantee of the notes is
subordinate to all of its senior indebtedness.
Enterprise Parents guarantee of the notes will be
subordinate and rank junior in right of payment to all of its
current and future senior indebtedness, including
Enterprise Parents indebtedness for borrowed money,
indebtedness evidenced by bonds, debentures, notes or similar
instruments, obligations arising from or with respect to
guarantees and direct credit substitutes, obligations associated
with hedges and derivative products, capitalized lease
obligations and other senior indebtedness, excluding its trade
account payables, certain other liabilities arising in the
ordinary course of its business, any indebtedness which by its
terms is expressly made equal in rank with or subordinated to
its guarantee of the notes and obligations owed by Enterprise
Parent to its majority-owned subsidiaries. Enterprise Parent
will not be permitted to make any payments under the guarantee
if it has defaulted on a payment of senior indebtedness.
We may require cash from our subsidiaries to make payments
on the notes.
We conduct the majority of our operations through our
subsidiaries and unconsolidated affiliates, some of which are
not wholly-owned, and we rely to a significant extent on
interest payments, dividends, proceeds from inter-company
transactions and loans from those entities to meet our
obligations for payment of principal and interest on our
outstanding debt obligations and corporate expenses, including
interest payments on the notes, which may be subject to
contractual restrictions. Accordingly, the notes
A-2
are structurally subordinated to all existing and future
liabilities of our subsidiaries and unconsolidated affiliates.
Holders of notes should look only to our assets and the assets
of Enterprise Parent, and not any of our subsidiaries or
unconsolidated affiliates, for payments on the notes. If we are
unable to obtain cash from such entities to fund required
payments in respect of the notes, we may be unable to make
payments of principal of or interest on the notes.
Our right to redeem or repurchase the notes is limited by
a covenant that we are making in favor of certain other
debtholders.
By their terms, the notes may be redeemed by us before their
maturity as described in Description of the
Notes Redemption. However, we are a party to a
Replacement Capital Covenant, which is described
under Certain Terms of the Replacement Capital
Covenant, that will limit our right to redeem or
repurchase notes. In the Replacement Capital Covenant, we
covenant for the benefit of holders of a designated series of
our long-term indebtedness that ranks senior to the notes that
we will not redeem or repurchase notes on or before
August 1, 2036 unless, subject to certain limitations,
during the 180 days prior to the date of that redemption or
repurchase we, Enterprise Parent or one of our or its
subsidiaries has received a specified amount of proceeds from
the sale of qualifying securities that have characteristics that
are the same as, or more equity-like than, the applicable
characteristics of the notes.
Our ability to raise proceeds from the sale of securities that
qualify under the Replacement Capital Covenant during the
180 days prior to a proposed redemption or repurchase will
depend on, among other things, the condition of our business and
our financial condition, market conditions at such time as well
as the acceptability to prospective investors of the terms of
those securities. Accordingly, there could be circumstances
where we would wish to redeem or repurchase some or all of the
notes and sufficient cash is available for that purpose, but we
are restricted from doing so because we have not been able to
obtain proceeds from the sale of securities that qualify under
the Replacement Capital Covenant.
The trustee has only limited rights of
acceleration.
The trustee may accelerate payment of the principal and accrued
and unpaid interest on the notes only upon the occurrence and
continuation of an event of default. An event of default is
generally limited to payment defaults after giving effect to our
deferral rights, and specific events of bankruptcy, insolvency
and reorganization relating to us. There is no right to
acceleration upon breaches by us of other covenants under the
indenture.
The tax accounting for the notes is uncertain.
We intend to treat the notes as our indebtedness and to treat
stated interest on the notes as ordinary interest income that is
includible in your gross income at the time the interest is paid
or accrued, in accordance with your regular method of tax
accounting. By purchasing the notes you agree to report income
on this basis. However, the determination of whether an
instrument is indebtedness is an inherently factual one. Because
there are no regulations, rulings or other authorities that
address the United States federal income tax treatment of debt
instruments that are substantially similar to the notes, other
treatments of the notes are possible, and we can offer you no
assurance that the Internal Revenue Service or a court would
agree with our conclusion. See Certain United States
Federal Income Tax Considerations.
A market may not develop for the notes.
There is no established trading market for the notes and the
notes are not listed on any exchange. An active market for the
notes may not develop or be sustained. As a result, we cannot
assure you that you will be able to sell your notes or at what
price. Although the underwriters have indicated that they intend
to make a market in the notes, as permitted by applicable laws
and regulations, they are not obligated to do so and may
discontinue that market-making at any time without notice.
A-3
If a trading market develops for the notes, trading may
occur at prices that do not fully reflect the value of Deferred
Interest and, as a result, a holder of notes who disposes of his
holdings between record dates for interest payments may incur an
adverse tax effect.
A holder of notes who disposes of notes between record dates for
payments of interest will not receive an interest payment for
the period prior to the disposition but nevertheless will be
required to include accumulated but unpaid interest through the
date of disposition as ordinary income in such holders
gross income for United Stated federal income tax purposes. If a
trading market develops, the notes may trade at prices that do
not fully reflect the value of Deferred Interest. As a result, a
holder of notes who sells notes between record dates for
interest payments may recognize a capital loss for tax purposes
as a result of a portion of the sale proceeds being allocated to
Deferred Interest. Any such capital loss may not be available to
offset the ordinary income recognized as a result of the
Deferred Interest because, subject to limited exceptions,
capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes.
The aftermarket price of the notes may be discounted
significantly if we defer interest payments.
If a deferral of an interest payment occurs or is perceived by
the market as being likely to occur, you may be unable to sell
your notes at a price that reflects the value of Deferred
Interest or the face amount of your notes. To the extent a
trading market develops for the notes, that market may not
continue during a deferral period, or during periods in which
investors perceive that there is a likelihood of a deferral, and
you may be unable to sell notes at those times, either at a
price that reflects the value of required payments under the
notes or at all.
There are restrictions on your ability to resell the
notes.
The notes may not be purchased by or transferred to certain
types of benefit plans. See Certain ERISA
Considerations.
A classification of the notes as common equity by the
National Association of Insurance Commissioners may impact
U.S. insurance company investors and the value of the
notes.
The Securities Valuation Office, or SVO, of the
National Association of Insurance Commissioners, or
NAIC, may from time to time classify securities in
U.S. insurance company investors portfolios as debt,
preferred equity or common equity instruments. Under the written
guidelines outlined by the SVO, it is not always clear which
securities will be classified as debt, preferred equity or
common equity or which features are specifically relevant in
making this determination. We understand that the SVO is
currently reviewing a number of securities for classification,
some of which may have structural features similar to the notes.
We are also aware that the SVO has classified several securities
with structural features similar to the notes, either
definitively or preliminarily, as common equity. For this
reason, there is a risk that the notes may be classified as
common equity, if reviewed and classified by the SVO. The NAIC
classification of an investment directly affects certain
U.S. insurance company investors because it determines the
amount of capital required for such an investment by such
investors, but it is not determinative in any way in respect of
any other tax, accounting or legal considerations for investors
generally. If the NAIC were to classify the notes as common
equity, the willingness of certain U.S. insurance company
investors to hold the notes could be reduced, which in turn
could reduce the price of the notes in any available
after-market.
Risks Related to Our Business
We are incorporating in this section by reference and you
should review and consider carefully the risk factors related to
our partnership and business contained in Enterprise
Parents Annual Report on
Form 10-K for the
year ended December 31, 2005, which it filed with the
Securities and Exchange Commission on February 27, 2006 and
which is incorporated by reference herein. Set forth below are
certain of the risk factors appearing in Enterprise
Parents Annual Report on
Form 10-K.
A-4
Changes in the prices of hydrocarbon products may
materially adversely affect our results of operations, cash
flows and financial condition.
We operate predominantly in the midstream energy sector which
includes gathering, transporting, processing, fractionating and
storing natural gas, NGLs and crude oil. As such, our results of
operations, cash flows and financial condition may be materially
adversely affected by changes in the prices of these hydrocarbon
products and by changes in the relative price levels among these
hydrocarbon products. Generally, the prices of natural gas,
NGLs, crude oil and other hydrocarbon products are subject to
fluctuations in response to changes in supply, demand, market
uncertainty and a variety of additional factors that are
impossible to control. These factors include:
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the level of domestic production; |
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the availability of imported oil and natural gas; |
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actions taken by foreign oil and natural gas producing nations; |
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the availability of transportation systems with adequate
capacity; |
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the availability of competitive fuels; |
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fluctuating and seasonal demand for oil, natural gas and
NGLs; and |
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conservation and the extent of governmental regulation of
production and the overall economic environment. |
We are exposed to natural gas and NGL commodity price risk under
certain of our natural gas processing and gathering and NGL
fractionation contracts that provide for our fees to be
calculated based on a regional natural gas or NGL price index or
to be paid in-kind by taking title to natural gas or NGLs. A
decrease in natural gas and NGL prices can result in lower
margins from these contracts, which may materially adversely
affect our results of operations, cash flows and financial
position.
A decline in the volume of natural gas, NGLs and crude oil
delivered to our facilities could adversely affect our results
of operations, cash flows and financial condition.
Our profitability could be materially impacted by a decline in
the volume of natural gas, NGLs and crude oil transported,
gathered or processed at our facilities. A material decrease in
natural gas or crude oil production or crude oil refining, as a
result of depressed commodity prices, a decrease in exploration
and development activities or otherwise, could result in a
decline in the volume of natural gas, NGLs and crude oil handled
by our facilities.
The crude oil, natural gas and NGLs available to our facilities
will be derived from reserves produced from existing wells,
which reserves naturally decline over time. To offset this
natural decline, our facilities will need access to additional
reserves. Additionally, some of our facilities will be dependent
on reserves that are expected to be produced from newly
discovered properties that are currently being developed.
Exploration and development of new oil and natural gas reserves
is capital intensive, particularly offshore in the Gulf of
Mexico. Many economic and business factors are beyond our
control and can adversely affect the decision by producers to
explore for and develop new reserves. These factors could
include relatively low oil and natural gas prices, cost and
availability of equipment and labor, regulatory changes, capital
budget limitations, the lack of available capital or the
probability of success in finding hydrocarbons. For example, a
sustained decline in the price of natural gas and crude oil
could result in a decrease in natural gas and crude oil
exploration and development activities in the regions where our
facilities are located. This could result in a decrease in
volumes to our offshore platforms, natural gas processing
plants, natural gas, crude oil and NGL pipelines, and NGL
fractionators, which would have a material adverse affect on our
results of operations, cash flows and financial position.
Additional reserves, if discovered, may not be developed in the
near future or at all.
A-5
A decrease in demand for NGL products by the
petrochemical, refining or heating industries could materially
adversely affect our results of operations, cash flows and
financial position.
A decrease in demand for NGL products by the petrochemical,
refining or heating industries, whether because of general
economic conditions, reduced demand by consumers for the end
products made with NGL products, increased competition from
petroleum-based products due to pricing differences, adverse
weather conditions, government regulations affecting prices and
production levels of natural gas or the content of motor
gasoline or other reasons, could materially adversely affect our
results of operations, cash flows and financial position. For
example:
Ethane. If natural gas prices increase
significantly in relation to ethane prices, it may be more
profitable for natural gas producers to leave the ethane in the
natural gas stream to be burned as fuel than to extract the
ethane from the mixed NGL stream for sale.
Propane. The demand for propane as a heating fuel
is significantly affected by weather conditions. Unusually warm
winters could cause the demand for propane to decline
significantly and could cause a significant decline in the
volumes of propane that we transport.
Isobutane. A reduction in demand for motor
gasoline additives may reduce demand for isobutane. During
periods in which the difference in market prices between
isobutane and normal butane is low or inventory values are high
relative to current prices for normal butane or isobutane, our
operating margin from selling isobutane could be reduced.
Propylene. A downturn in the domestic or
international economy could cause reduced demand for propylene,
which could cause a reduction in the volumes of propylene that
we produce and expose our investment in inventories of
propane/propylene mix to pricing risk due to requirements for
short-term price discounts in the spot or short-term propylene
markets.
If we were to become subject to entity level taxation for
federal or state tax purposes, then our cash available for
payment on the notes would be substantially reduced.
If we were treated as a corporation for United States federal
income tax purposes, we would pay United States federal income
tax on our taxable income at the corporate tax rate, which is
currently a maximum of 35%, and we likely would pay state taxes
as well. Because a tax would be imposed upon us as a
corporation, the cash available for payment on the notes would
be substantially reduced. Therefore, treatment of us as a
corporation would result in a material reduction in our
anticipated cash flows and could cause a reduction in the value
of the notes.
Current law may change, causing us to be treated as a
corporation for United States federal income tax purposes or
otherwise subjecting us to entity level taxation. For example,
because of widespread state budget deficits, certain states,
including Texas, have taken steps to subject partnerships to
entity level taxation through the imposition of state income,
franchise or other forms of taxation. To the extent any state
imposes an income tax or other tax upon us as an entity, the
cash available for payments on the notes would be reduced.
A successful IRS contest of the United States federal
income tax positions we take may adversely impact the market for
the notes, and the costs of any contests will reduce cash
available for payment on the notes.
The IRS may adopt positions that differ from the positions we
take, even positions taken with advice of counsel. It may be
necessary to resort to administrative or court proceedings to
sustain some or all of the positions we take. A court may not
agree with some or all of the positions we take. Any contest
with the IRS may materially and adversely impact the market for
the notes. In addition, the costs of any contest with the IRS,
principally legal, accounting and related fees, will result in a
reduction in the amount of cash available to us to pay the
principal of, and interest and premium, if any, on the notes.
A-6
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth Enterprise Parents ratios
of earnings to fixed charges for each of the periods indicated,
calculated pursuant to SEC rules.
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Year Ended December 31, |
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Six Months Ended |
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June 30, |
2001 |
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2002 |
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2003 |
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2004 |
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2005 |
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2006 |
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5.10 |
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2.07 |
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2.02 |
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2.69 |
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2.69 |
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2.80 |
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For purposes of computing the ratio of earnings to fixed
charges, earnings is the aggregate of the following
items:
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pre-tax income or loss from continuing operations before
adjustment for minority interests in consolidated subsidiaries
or income or loss from equity investees; |
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plus fixed charges; |
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plus distributed income of equity investees; |
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less capitalized interest; and |
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less minority interest in pre-tax income of subsidiaries that
have not incurred fixed charges. |
The term fixed charges means the sum of the
following:
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interest expensed and capitalized, including amortized premiums,
discounts and capitalized expenses related to
indebtedness; and |
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an estimate of the interest within rental expenses. |
The pro forma application of proceeds from the sale of notes in
this offering to temporarily reduce borrowings outstanding under
our revolving credit facility would not result in a change of ten
percent or greater in the ratio of earnings to fixed charges.
DESCRIPTION OF THE NOTES
We have summarized below certain material terms and
provisions of the notes. This summary is not a complete
description of all of the terms and provisions of the notes. You
should read carefully the section entitled Description of
Debt Securities in the prospectus which is included in our
Registration Statement on Form S-3 (Registration No. 333-123150) for a
description of other material terms of the notes, the Guarantee
and the indenture. For more information, we refer you to the
notes, the indenture and the supplemental indenture, forms of
which are available from us. We urge you to read the indenture
and supplemental indenture because they, and not this
description, define your rights as an owner of the notes.
The notes are being issued under an Indenture dated as of
October 4, 2004 among Enterprise Products Operating L.P.,
as issuer, Enterprise Products Partners L.P., as parent
guarantor, any subsidiary guarantors party thereto, and Wells
Fargo Bank, National Association, as trustee, as supplemented by
an amended and restated supplemental indenture establishing the
terms of the notes, which we refer to collectively as the
indenture. References in this section to
Enterprise and the terms we,
us, our and like phrases refer solely to
Enterprise Products Operating L.P. and do not include our
parent, Enterprise Products Partners L.P., or any of our
subsidiaries or unconsolidated affiliates. References in this
section to the Parent Guarantor refer solely to
Enterprise Products Partners L.P. and not its subsidiaries or
unconsolidated affiliates. References in this section to the
Guarantee refer to the Parent Guarantors
guarantee of payments on the notes.
We may from time to time, without notice to or the consent of
the holders of the notes, create and issue further notes having
the same terms and conditions as, and ranking equally and
ratably with, the notes offered hereby in all respects, except
for issue date, issue price and, if applicable, first interest
payment date.
A-7
In addition to the notes offered by this document,
as of June 30, 2006, there were outstanding under the
above-referenced indenture $500 million in aggregate
principal amount of 4.000% senior notes E due 2007,
$500 million in aggregate principal amount of
4.625% senior notes F due 2009, $650 million in
aggregate principal amount of 5.600% senior notes G
due 2014, $350 million in aggregate principal amount of
6.650% senior notes H due 2034, $250 million in
aggregate principal amount of 5.00% senior notes I due
2015, $250 million in aggregate principal amount of
5.75% senior notes J due 2035 and $500 million in
aggregate principal amount of 4.950% senior notes K
due 2010. In addition, the $300 million aggregate principal
amount of notes that we issued on July 18, 2006 and the $200
million aggregate principal amount of notes that we issued on August 25, 2006 are outstanding under the indenture.
General
The notes:
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will be issued in an aggregate principal amount of $50,000,000; |
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will be issued in denominations of $1,000 and integral multiples
thereof; |
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are general unsecured junior subordinated obligations of
Enterprise; |
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will bear interest from July 18, 2006 to August 1,
2016 at an annual rate of 8.375%, payable semi-annually in
arrears on February 1 and August 1 of each year,
commencing February 1, 2007, and thereafter, at an annual
rate equal to the
3-month LIBOR Rate for
the related interest period plus 3.7075%, payable quarterly in
arrears on February 1, May 1, August 1 and
November 1 of each year, commencing November 1, 2016; |
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provide that we may elect to defer payment of all or part of the
current and accrued interest otherwise due on the notes for
multiple periods of up to ten consecutive years as described
below under Optional Deferral of
Interest; |
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mature on August 1, 2066 and are not redeemable by us prior
to August 1, 2016 without payment of a make-whole premium; |
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are subordinated in right of payment, to the extent set forth in
the indenture, to all of our existing and future senior
indebtedness and senior obligations; and |
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are guaranteed on an unsecured and junior subordinated basis by
the Parent Guarantor, solely to the extent described below under
Parent Guarantee. |
The indenture does not limit our incurrence or issuance of other
senior, pari passu or subordinated debt, whether under the
indenture relating to the notes or any existing or other
indenture or agreement that we may enter into in the future or
otherwise. As of June 30, 2006, the direct indebtedness of
Enterprise that is senior to the notes totaled approximately
$4.8 billion.
Interest Rate and Interest Payment Dates
The notes will bear interest from July 18, 2006 to
August 1, 2016, which we refer to as the Fixed Rate
Period, at an annual rate of 8.375%, payable semi-annually
in arrears on February 1 and August 1 of each year,
commencing February 1, 2007, and thereafter, which we refer
to as the Floating Rate Period, at an annual rate
equal to the 3-month
LIBOR Rate for the related interest period plus 3.7075%, payable
quarterly in arrears on February 1, May 1,
August 1 and November 1 of each year, commencing
November 1, 2016.
Interest payments not paid when due will accrue interest at the
then applicable rate of interest on the amount of unpaid
interest, to the extent permitted by law, compounded
semi-annually during the Fixed Rate Period and quarterly during
the Floating Rate Period. The amount of interest payable during
the Fixed Rate Period will be computed based on a
360-day year consisting
of twelve 30-day
months, and the amount of interest payable during the Floating
Rate Period will be computed based on a
360-day year and the
number of days actually elapsed.
The amount of interest payable for any period shorter than a
full quarterly period will be computed on the basis of the
actual number of days elapsed per
30-day month.
A-8
Maturity
The notes will mature on August 1, 2066.
The notes are non-amortizing and do not have a sinking fund.
This means that we are not required to make any principal
payments prior to maturity or otherwise set aside amounts in
respect of the repayment of the notes prior to their maturity.
Determining the Floating Rate
Following August 1, 2016, the calculation agent will
calculate the floating rate with respect to each interest period
and the amount of interest payable on each interest payment date
during the Floating Rate Period. The floating rate determined by
the calculation agent, absent manifest error, will be binding
and conclusive upon the beneficial owners and registered holders
of the notes and us. Wells Fargo Bank, National Association will
act initially as calculation agent.
The floating rate for any interest period during the Floating
Rate Period will be the
3-month LIBOR Rate plus
3.7075%.
The 3-month LIBOR
Rate means, for each interest period during the floating
rate period, the interest rate per annum shown on Telerate
Page 3750 at or about 11:00 a.m., London time, on the
second London banking day (the LIBOR Determination
Date) preceding the first day of the interest period (the
Reset Date) for deposits in U.S. dollars with a
maturity of three months and commencing on the Reset Date. If
such rate does not appear on that page or such other page as may
replace that page for the purpose of displaying offered rates of
leading banks for London interbank deposits in
U.S. dollars, the
3-month LIBOR Rate will
be determined on the basis of the rates, at approximately
11:00 a.m., London time, on the LIBOR Determination Date,
at which U.S. dollar deposits with a maturity of three
months in an amount determined by the calculation agent as
representative of a single transaction in the relevant market
and at the relevant time are offered by four major banks in the
London interbank market selected by the calculation agent
(Reference Banks) to prime banks in the London
interbank market for the interest period commencing on the Reset
Date. The calculation agent will request the principal London
office of each of the Reference Banks to provide a quotation of
its rate. If at least two quotations are provided as requested,
the 3-month LIBOR Rate
will be the arithmetic mean of the quotations. If fewer than two
quotations are provided as requested, the
3-month LIBOR Rate will
be the interest rate per annum equal to the average of the rates
per annum quoted by three major banks in New York City or
Charlotte, North Carolina selected by the calculation agent, at
or about 11:00 a.m., New York City time, on the LIBOR
Determination Date, for loans in U.S. dollars to leading
European banks in amounts that are representative of a single
transaction in the relevant market and at the relevant time with
a maturity corresponding to the interest period and commencing
on the Reset Date. If fewer than three New York City or
Charlotte, North Carolina banks selected by the calculation
agent are quoting rates, the
3-month LIBOR Rate for
the applicable interest period will be the same as for the
immediately preceding interest period. For purposes of this
definition, London banking day means any day on
which commercial banks are open for general business (including
dealings in foreign exchange and foreign currency deposits) in
London, England. If the interest period does not correspond to a
period for which rates are available, the
3-month LIBOR Rate will
be determined through the use of straight-line interpolation by
reference to two rates, the first rate to be determined by
reference to the period of time for which rates are available
next shorter than the length of the interest period and the
second to be determined by reference to the period of time for
which rates are available next longer than the length of the
interest period.
Telerate Page 3750 means the display designated
on page 3750 on MoneyLine Telerate (or on any successor or
substitute page of such service, or any successor to or
substitute for such service, providing rate quotations
comparable to those currently provided on such page).
A-9
Payment and Transfer
Initially, the notes will be issued only in global form.
Beneficial interests in notes in global form will be shown on,
and transfers of interests in notes in global form will be made
only through, records maintained by DTC and its participants.
Notes in definitive form, if any, may be presented for
registration of transfer or exchange at the office or agency
maintained by us for such purpose (which initially will be the
corporate trust office of the trustee located at 45 Broadway,
12th Floor, New York, New York 10006).
Payment of principal of, premium, if any, and interest on notes
in global form registered in the name of DTCs nominee will
be made in immediately available funds to DTCs nominee, as
the registered holder of such global notes. If any of the notes
is no longer represented by a global note, payment of interest
on the notes in definitive form may, at our option, be made at
the corporate trust office of the trustee indicated above or by
check mailed directly to holders at their respective registered
addresses or by wire transfer to an account designated by a
holder.
The regular record date for interest payable on the notes on any
interest payment date during the Fixed Rate Period will be the
immediately preceding January 15 or July 15, as the
case may be, and during the Floating Rate Period will be the
immediately preceding January 15, April 15,
July 15 and October 15, as the case may be.
No service charge will be made for any registration of transfer
or exchange of notes, but we may require payment of a sum
sufficient to cover any transfer tax or other governmental
charge payable in connection therewith. We are not required to
register the transfer of or exchange any notes selected for
redemption or for a period of 15 days before mailing a
notice of redemption of notes.
The registered holder of notes will be treated as the owner of
such notes for all purposes, and all references in this
Description of the Notes to holders mean holders of
record, unless otherwise indicated.
Optional Deferral of Interest
So long as no event of default (as defined below under
Events of Default) has occurred and is
continuing, we may elect to defer payment of all or part of the
current and accrued interest otherwise due on the notes provided
that:
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we may not optionally defer interest payments once we have
failed to pay interest otherwise due for a period of ten
consecutive years for any reason; and |
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we may not optionally defer interest payments on or after the
maturity date of, or redemption date for, the notes. |
Deferred interest not paid on an interest payment date will bear
interest from that interest payment date until paid at the then
prevailing interest rate on the notes, compounded semi-annually
during the Fixed Rate Period and quarterly during the Floating
Rate period. We refer to such deferred interest, the interest
accrued thereon and any accrued and unpaid interest on any
interest payment date during a deferral period collectively as
Deferred Interest, and we refer to a period during
which we have elected to defer payment of interest on the notes
as an Optional Deferral Period. Once we pay all
Deferred Interest resulting from our optional deferral, such
Optional Deferral Period will end and we may later defer
interest again for a new Optional Deferral Period, subject to
the same limitations described above.
We will provide the trustee with written notice of any optional
deferral of interest at least ten and not more than 60 business
days prior to the applicable interest payment date, other than
in the case of an optional deferral in connection with certain
defaults on senior indebtedness as described under
Subordination; Ranking of the Notes, and
any such notice will be forwarded promptly by the trustee to
each holder of record of the notes.
We have no current intention to exercise our right to defer
interest payments.
A-10
Distribution Stopper
Unless each of the following conditions, which we refer to as
Payment Conditions, has been satisfied:
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all Deferred Interest on the notes has been paid in full as of
the most recent interest payment date; |
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no event of default has occurred and is continuing; and |
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the Parent Guarantor is not in default of its obligations under
the Guarantee, |
then, subject to the exceptions described below:
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we and the Parent Guarantor will not declare or make any
distributions with respect to, or redeem, purchase or make a
liquidation payment with respect to, any of our respective
equity securities; |
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we and the Parent Guarantor will not and will cause our
respective majority-owned subsidiaries not to make any payment
of interest, principal or premium, if any, on or repay,
repurchase or redeem any of our debt securities (including
securities similar to the notes) that contractually rank equally
with or junior to the notes; and |
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we and the Parent Guarantor will not and will cause our
respective majority-owned subsidiaries not to make any guarantee
payments with respect to the securities described in the
previous bullet point. |
Notwithstanding the foregoing, we, the Parent Guarantor and any
of our respective subsidiaries may take any of the following
actions at any time, including during an Optional Deferral
Period:
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make any distribution, redemption, liquidation, interest,
principal or guarantee payment in the form of our respective
equity securities; |
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make any regularly scheduled dividend or distribution payments
declared prior to the failure of the relevant Payment Condition
or the occurrence of such deferral period; |
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make any repurchases, redemptions or other acquisitions of our
respective equity securities in connection with any employee
benefit plans or any other contractual obligation entered into
prior to the failure of the relevant Payment Condition or the
occurrence of such deferral period; |
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make payments under (1) the notes and securities similar to
the notes that are pari passu with the notes and
(2) the Guarantee and similar guarantees associated with
any instruments that are pari passu with the notes, in each
case, so long as any such payments are made on a pro rata basis
with the notes and the Guarantee, respectively; |
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make payments or distributions in connection with a
reclassification of our respective equity securities, so long as
that reclassification does not result in the issuance of
securities senior to the notes; and |
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purchase fractional interests of our respective equity
securities in connection with any split, reclassification or
similar transaction. |
Redemption
We may redeem the notes before their maturity, subject to the
Replacement Capital Covenant discussed in Certain Terms of
the Replacement Capital Covenant:
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in whole or in part, on one or more occasions at any time on or
after August 1, 2016 at 100% of their principal amount plus
accrued and unpaid interest; or |
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in whole or in part at any time prior to August 1, 2016 (an
Early Redemption) upon payment of the Make-Whole
Redemption Price (as defined below under
Early Redemption). |
A-11
Notes called for redemption become due on the redemption date.
Notices of optional redemption will be mailed at least 30 but
not more than 60 days before the redemption date to each
holder of notes to be redeemed at its registered address. The
notice of optional redemption for the notes will state, among
other things, the amount of notes to be redeemed, the redemption
date, the method of calculating the redemption price and each
place that payment will be made upon presentation and surrender
of notes to be redeemed. If less than all of the notes are
redeemed at any time, the trustee will select the notes to be
redeemed on a pro rata basis or by any other method the trustee
deems fair and appropriate. Unless we default in payment of the
redemption price, interest will cease to accrue on the
redemption date with respect to any notes called for optional
redemption.
Early Redemption
We may redeem the notes in whole or in part at any time prior to
August 1, 2016 upon payment of the Make-Whole
Redemption Price.
The Make-Whole Redemption Price will be equal
to (a) all accrued and unpaid interest to but not including
the redemption date, plus (b) the greater of (1) 100%
of the principal amount of the notes being redeemed and
(2) as determined by the Independent Investment Banker, the
sum of the present values of remaining scheduled payments of
principal and interest on the notes (exclusive of interest
accrued to the redemption date) being redeemed from the
redemption date to August 1, 2016 (the Remaining
Life), discounted to the redemption date on a semi-annual
basis (assuming a
360-day year consisting
of twelve 30-day
months) at the Treasury Yield plus 0.50%.
Treasury Yield means, with respect to any redemption
date applicable to the notes, the rate per annum equal to the
semi-annual equivalent yield to maturity (computed as of the
third business day immediately preceding the redemption date) of
the Comparable Treasury Issue, assuming a price for the
Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the applicable Comparable Treasury
Price for the redemption date.
Comparable Treasury Price means, with respect to any
redemption date, (a) the bid price for the Comparable
Treasury Issue (expressed as a percentage of its principal
amount) at 4:00 p.m. on the third business day preceding
the redemption date, as set forth on Telerate Page 500 (or
such other page as may replace Telerate Page 500), or
(b) if such page (or any successor page) is not displayed
or does not contain such bid prices at such time, the average of
the Reference Treasury Dealer Quotations obtained by the trustee
for the redemption date.
Comparable Treasury Issue means the United States
Treasury security selected by the Independent Investment Banker
as having a maturity comparable to the Remaining Life that would
be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate
debt securities of comparable maturity to the Remaining Life;
however, if no maturity is within three months before or after
the end of the Remaining Life, yields for two published
maturities most closely corresponding to such United States
Treasury security will be determined and the Treasury Rate will
be interpolated or extrapolated from those yields on a
straight-line basis, rounding to the nearest month.
Independent Investment Banker means any of Wachovia
Capital Markets, LLC (and its successors) and Lehman Brothers
Inc. (and its successors) or, if no such firm is willing and
able to select the applicable Comparable Treasury Issue, an
independent investment banking institution of national standing
appointed by the trustee and reasonably acceptable to us.
Reference Treasury Dealer means (a) Wachovia
Capital Markets, LLC (and its successors) and (b) one other
primary United States government securities dealer in New York
City selected by the Independent Investment Banker, each of
which we refer to as a Primary Treasury Dealer.
However, if either of the foregoing ceases to be a Primary
Treasury Dealer, we will substitute another Primary Treasury
Dealer for such dealer.
Reference Treasury Dealer Quotations means, with
respect to each Reference Treasury Dealer and any redemption
date for the notes, an average, as determined by the trustee, of
the bid and asked prices
A-12
for the Comparable Treasury Issue (expressed in each case as a
percentage of its principal amount) quoted in writing to the
trustee by such Reference Treasury Dealer at 5:00 p.m., New
York City time, on the third business day preceding the
redemption date.
Certain Covenants
No Limitations on Liens. Holders of the notes will
not have the benefit of and will not be entitled to enforce the
covenant in the indenture restricting the ability of the Parent
Guarantor, Enterprise and their respective majority-owned
subsidiaries to, create, assume, incur or suffer to exist any
mortgage, lien, security interest, pledge, charge or other
encumbrance other than Permitted Liens (as defined in
Description of Debt Securities Certain
Covenants in the accompanying prospectus) upon any
Principal Property (as defined in Description of Debt
Securities Certain Covenants in the
accompanying prospectus) or upon any shares of capital stock of
any majority-owned subsidiary owning or leasing, either directly
or through ownership in another majority-owned subsidiary, any
Principal Property, whether owned or leased on the date of the
indenture or thereafter acquired, to secure any indebtedness for
borrowed money of the Parent Guarantor or Enterprise or any
other person.
No Restriction on Sale-Leasebacks. Holders of the
notes will not have the benefit of and will not be entitled to
enforce the covenant in the indenture restricting the ability of
the Parent Guarantor, Enterprise and their respective
majority-owned subsidiaries to enter into Sale-Leaseback
Transactions (as defined in Description of Debt
Securities Certain Covenants in the
accompanying prospectus).
Merger, Consolidation or Sale of Assets. Each of
the Parent Guarantor and Enterprise will be subject to the
restriction in the indenture governing its ability to
consolidate with or sell, lease, convey all or substantially all
of its assets to, or merge with or into, any partnership,
limited liability company or corporation, as described in
Description of Debt Securities Certain
Covenants in the accompanying prospectus.
Events of Default
Any one or more of the following events that has occurred and is
continuing will constitute an event of default:
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we fail to pay principal on the notes when due; |
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we fail to pay accrued and unpaid interest on the notes when due
and such default continues for 30 days; however, our
failure to pay interest during an Optional Deferral Period will
not constitute an event of default; |
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we fail to pay accrued and unpaid interest on the notes in full
on the first interest payment date that is more than a period of
ten consecutive years after the beginning of an Optional
Deferral Period that is continuing; |
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certain events of bankruptcy, insolvency or reorganization occur
with respect to us; or |
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the Guarantee ceases to be in full force and effect or is
declared null and void in a judicial proceeding. |
If an event of default (other than an event of default described
in the fourth bullet point above) occurs and is continuing, the
trustee by notice to us, or the holders of at least 25% in
principal amount of the outstanding notes by notice to us and
the trustee, may, and the trustee at the request of such holders
will, declare the principal of, premium, if any, and interest,
including Deferred Interest, if any, on all the notes to be due
and payable. Upon such a declaration, such principal, premium
and interest will be due and payable immediately.
If an event of default described in the fourth bullet point
above occurs and is continuing, the principal of, premium, if
any, and interest, including Deferred Interest, if any, on all
the notes will become and be immediately due and payable without
any declaration or other act on the part of the trustee or any
A-13
holders. However, the effect of such provision may be limited by
applicable law. The holders of a majority in principal amount of
the outstanding notes may rescind any such acceleration with
respect to the notes and its consequences if rescission would
not conflict with any judgment or decree of a court of competent
jurisdiction and all existing events of default with respect to
the notes, other than the nonpayment of the principal of,
premium, if any, and interest on the notes that have become due
solely by such declaration of acceleration, have been cured or
waived.
Subordination; Ranking of the Notes
Our payment obligations under the notes will, to the extent
provided in the indenture, be subordinated to the prior payment
in full of all of our present and future senior indebtedness, as
defined below. The notes will rank senior in right of payment to
all of our present and future equity securities.
The holders of our senior indebtedness will be entitled to
receive payment in full of such senior indebtedness before
holders of the notes will receive any payment of principal,
premium or interest with respect to the notes:
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upon any payment or distribution of our assets to our creditors
in connection with our total or partial liquidation or
dissolution; or |
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in a bankruptcy, receivership or similar proceeding relating to
us or our property. |
In these circumstances, until our senior indebtedness is paid in
full, any distribution to which holders of notes would otherwise
be entitled will be made to the holders of senior indebtedness,
except that such holders may receive units representing limited
partner interests and debt securities that are subordinated to
senior indebtedness to at least the same extent as the notes.
If we do not pay any principal, premium or interest with respect
to senior indebtedness within any applicable grace period
(including at maturity), or any other default on senior
indebtedness occurs and the maturity of such senior indebtedness
is accelerated in accordance with its terms, we may not:
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make any payments of principal, premium, if any, or interest
with respect to the notes; |
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make any deposit for the purpose of defeasance of the
notes; or |
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repurchase, redeem or otherwise retire any of the notes, |
unless, in either case,
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the default has been cured or waived and the declaration of
acceleration has been rescinded; |
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the senior indebtedness has been paid in full; or |
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we and the trustee receive written notice approving the payment
from the representatives of each issue of designated senior
indebtedness (as defined below). |
During the continuance of any senior indebtedness default, other
than a default described in the immediately preceding paragraph,
that may cause the maturity of any designated senior
indebtedness to be accelerated immediately without further
notice, other than any notice required to effect such
acceleration, or the expiration of any applicable grace periods,
we may not make payments on the notes for a period called the
Payment Blockage Period. A Payment Blockage Period
will commence on the receipt by us and the trustee of written
notice of the default, called a Blockage Notice,
from the representative of any designated senior indebtedness
specifying an election to effect a Payment Blockage Period, and
will expire 179 days thereafter.
Generally, designated senior indebtedness will
include any issue of senior indebtedness of at least
$100 million.
The Payment Blockage Period may be terminated before its
expiration:
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by written notice from the person or persons who gave the
Blockage Notice; |
A-14
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by repayment in full in cash of the senior indebtedness with
respect to which the Blockage Notice was given; or |
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if the default giving rise to the Payment Blockage Period is no
longer continuing. |
Unless the holders of designated senior indebtedness shall have
accelerated the maturity of the senior indebtedness, we may
resume payments on the notes after the expiration of the Payment
Blockage Period.
If we do not pay principal, premium or interest with respect to
senior indebtedness within any applicable grace period, if any
other default on senior indebtedness occurs and the maturity of
such senior indebtedness is accelerated in accordance with its
terms or if we receive a Blockage Notice, then, notwithstanding
the notice periods set forth under Optional
Deferral of Interest, we may elect to defer payment of all
or part of the current and accrued interest otherwise due on the
notes on an interest payment date by giving notice to the
trustee of such election not later than the time we must remit
payment of interest on the notes to the trustee under the
supplemental indenture on such interest payment date. Any such
notice will be forwarded promptly by the trustee to each holder
of record of the notes. However, we may only exercise this right
if we are otherwise entitled to elect to optionally defer
payment of interest on the notes as described under
Optional Deferral of Interest.
Generally, not more than one Blockage Notice may be given in any
period of 360 consecutive days. The total number of days during
which any one or more Payment Blockage Periods are in effect,
however, may not exceed an aggregate of 179 days during any
period of 360 consecutive days.
After all senior indebtedness is paid in full and until the
notes are paid in full, holders of the notes will be subrogated
to the rights of holders of senior indebtedness to receive
distributions applicable to senior indebtedness.
By reason of the subordination, in the event of our insolvency,
our creditors who are holders of senior indebtedness, as well as
certain of our general creditors, may recover more, ratably,
than the holders of the notes.
The term senior indebtedness as used in this section
includes our obligations in respect of the principal of, any
interest and premium, if any, on and any other payments in
respect of any of the following, whether currently outstanding
or hereafter created or incurred:
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indebtedness for borrowed money; |
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indebtedness evidenced by securities, bonds, notes and
debentures, including any of the same that are subordinated,
issued under indentures or other similar instruments (other than
the supplemental indenture setting forth the terms of the
notes), and other similar instruments; |
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obligations arising from or with respect to guarantees and
direct credit substitutes; |
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obligations arising from or with respect to hedges and
derivative products (including, but not limited to, interest
rate, commodity and foreign exchange contracts); |
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capitalized lease obligations; |
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obligations arising from or with respect to any letter of
credit, bankers acceptance, security purchase facility,
cash management arrangement, or similar transactions; |
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operating leases (but only to the extent the terms of such
leases expressly provide that the same constitute senior
indebtedness); |
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guarantees of any of the foregoing; and |
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any modifications, refundings, deferrals, renewals or extensions
of any of the foregoing or any other evidence of indebtedness
issued in exchange therefor, |
but does not include our obligations in respect of:
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trade accounts payable; |
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any indebtedness incurred for the purchase of goods or materials
or for services obtained in the ordinary course of business to
the extent that the same is incurred from, and owed to, the
vendor of such goods or materials or the provider of such
services; |
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any indebtedness which by its terms is expressly made equal in
rank and payment with or subordinated to the notes; and |
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indebtedness owed by us to our majority-owned subsidiaries. |
The indenture does not limit our ability to incur additional
indebtedness and other obligations, including indebtedness and
other obligations that rank senior in priority of payment to or
pari passu with the notes. At June 30, 2006, the direct
indebtedness of Enterprise that is senior to the notes totaled
approximately $4.8 billion. In addition, the notes will be
effectively subordinated to all of our subsidiaries and
unconsolidated affiliates existing and future indebtedness
and other obligations. At June 30, 2006, indebtedness of
our subsidiaries and unconsolidated affiliates totaled
approximately $552.7 million.
Parent Guarantee
The Parent Guarantor will fully and unconditionally guarantee on
an unsecured and junior subordinated basis the full and prompt
payment of principal of, premium, if any, and interest on the
notes, when and as the same become due and payable (other than
during an Optional Deferral Period), whether at stated maturity,
upon redemption, by declaration of acceleration or otherwise.
The Parent Guarantors obligations under the Guarantee
will, to the extent provided in the indenture, be subordinated
to the prior payment in full of all present and future senior
indebtedness of the Parent Guarantor, as defined below. The
Parent Guarantors obligations under the Guarantee will
rank senior in right of payment to all of its present and future
equity securities, including its common units.
The holders of the Parent Guarantors senior indebtedness
will be entitled to receive payment in full of such senior
indebtedness before holders of the notes receive from the Parent
Guarantor any payment of principal, premium or interest with
respect to the notes:
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upon any payment or distribution of the Parent Guarantors
assets to its creditors in connection with the Parent
Guarantors total or partial liquidation or
dissolution; or |
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in a bankruptcy, receivership or similar proceeding relating to
the Parent Guarantor or its property. |
In these circumstances, until the Parent Guarantors senior
indebtedness is paid in full, any distribution to which holders
of notes would otherwise be entitled under the Guarantee will be
made to the holders of its senior indebtedness, except that such
holders may receive units representing limited partner interests
and any debt securities that are subordinated to senior
indebtedness to at least the same extent as the Guarantee.
If the Parent Guarantor does not pay any principal, premium or
interest with respect to its senior indebtedness within any
applicable grace period (including at maturity), or any other
default on its senior indebtedness occurs and the maturity of
such senior indebtedness is accelerated in accordance with its
terms, the Parent Guarantor may not:
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make any payments under the Guarantee of principal, premium, if
any, or interest with respect to the notes; |
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make any deposit under the Guarantee for the purpose of
defeasance of the notes; or |
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advance monies under the Guarantee to repurchase, redeem or
otherwise retire any of the notes, |
unless, in either case,
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the default has been cured or waived and the declaration of
acceleration has been rescinded; |
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the senior indebtedness has been paid in full; or |
A-16
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the Parent Guarantor and the trustee receive written notice
approving the payment from the representatives of each issue of
designated senior indebtedness (as defined below). |
During the continuance of any senior indebtedness default, other
than a default described in the immediately preceding paragraph,
that may cause the maturity of any designated senior
indebtedness to be accelerated immediately without further
notice, other than any notice required to effect such
acceleration, or the expiration of any applicable grace periods,
the Parent Guarantor may not make payments under the Guarantee
in respect of the notes for a period called the Payment
Blockage Period. A Payment Blockage Period will commence
on the receipt by the Parent Guarantor and the trustee of
written notice of the default, called a Blockage
Notice, from the representative of any designated senior
indebtedness specifying an election to effect a Payment Blockage
Period, and will expire 179 days thereafter.
Generally, designated senior indebtedness will
include any issue of senior indebtedness of at least
$100 million.
The Payment Blockage Period may be terminated before its
expiration:
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by written notice from the person or persons who gave the
Blockage Notice; |
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by repayment in full in cash of the senior indebtedness with
respect to which the Blockage Notice was given; or |
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if the default giving rise to the Payment Blockage Period is no
longer continuing. |
Unless the holders of the designated senior indebtedness shall
have accelerated the maturity of the senior indebtedness, the
Parent Guarantor may resume making payments under the Guarantee
in respect of the notes after the expiration of the Payment
Blockage Period.
Generally, not more than one Blockage Notice may be given in any
period of 360 consecutive days. The total number of days during
which any one or more Payment Blockage Periods are in effect,
however, may not exceed an aggregate of 179 days during any
period of 360 consecutive days.
After all senior indebtedness is paid in full and until the
notes are paid in full, holders of the notes will be subrogated
to the rights of holders of senior indebtedness to receive
distributions applicable to senior indebtedness.
By reason of the subordination, in the event of the Parent
Guarantors insolvency, its creditors who are holders of
senior indebtedness, as well as certain of its general
creditors, may recover more, ratably, than the holders of the
notes will recover under the Guarantee.
The term senior indebtedness as used in this section
includes the Parent Guarantors obligations in respect of
the principal of, any interest and premium, if any, on and any
other payments in respect of any of the following, whether
currently outstanding or hereafter created or incurred:
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indebtedness for borrowed money; |
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indebtedness evidenced by securities, bonds, notes and
debentures, including any of the same that are subordinated,
issued under indentures or other similar instruments, and other
similar instruments; |
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obligations arising from or with respect to guarantees and
direct credit substitutes other than the Parent Guarantors
obligations under the Guarantee; |
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obligations arising from or with respect to hedges and
derivative products (including, but not limited to, interest
rate, commodity, and foreign exchange contracts); |
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capitalized lease obligations; |
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obligations arising from or with respect to any letter of
credit, bankers acceptance, security purchase facility,
cash management arrangement or similar transactions; |
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operating leases (but only to the extent the terms of such
leases expressly provide that the same constitute senior
indebtedness); |
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guarantees of any of the foregoing; and |
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any modifications, refundings, deferrals, renewals or extensions
of any of the foregoing or any other evidence of indebtedness
issued in exchange therefor, |
but does not include the Parent Guarantors obligations in
respect of:
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trade accounts payable; |
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any indebtedness incurred for the purchase of goods or materials
or for services obtained in the ordinary course of business to
the extent that the same is incurred from, and owed to, the
vendor of such goods or materials or the provider of such
services; |
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any indebtedness which by its terms is expressly made equal in
rank and payment with or subordinated to the Parent
Guarantors obligations under the Guarantee; and |
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indebtedness owed by the Parent Guarantor to its majority-owned
subsidiaries. |
The obligations under the Guarantee will be structurally
subordinated to all indebtedness and other liabilities of the
Parent Guarantors subsidiaries and unconsolidated
affiliates. In the event of an insolvency, liquidation,
bankruptcy proceeding or other reorganization of any such entity
all of the existing and future liabilities of such entity,
including any claims of lessors under capital and operating
leases, trade creditors and holders of preferred stock or units
of that entity have the right to be satisfied prior to receipt
by the Parent Guarantor of any payment on account of its status
as an equity owner of such entity. Moreover, the Guarantee does
not limit the Parent Guarantor or any of its subsidiaries or
unconsolidated affiliates from incurring or issuing other
secured or unsecured debt, including senior indebtedness.
Accordingly, claimants under the Guarantee should look only to
the Parent Guarantor and not to any of its subsidiaries or
unconsolidated affiliates for payments under the Guarantee.
Agreement by Purchasers of Certain Tax Treatment
Each registered holder and beneficial owner of the notes will,
by accepting the notes or a beneficial interest therein, be
deemed to have agreed that the holder intends that the notes
constitute debt and will treat the notes as debt for United
States federal, state and local tax purposes.
CERTAIN TERMS OF THE REPLACEMENT CAPITAL COVENANT
We have summarized below certain terms of the Replacement
Capital Covenant. This summary is not a complete description of
the Replacement Capital Covenant and is qualified in its
entirety by the terms and provisions of the full
document.
We are a party to a Replacement Capital Covenant under which we
have covenanted for the benefit of persons that buy, hold or
sell a specified series of our long-term indebtedness that ranks
senior to the notes, that we will not redeem or repurchase notes
on or before August 1, 2036, unless, subject to certain
limitations, during the 180 days prior to the date of that
redemption or repurchase we, Enterprise Parent or one of our or
its subsidiaries receives a specified amount of proceeds from
the sale of qualifying securities that have characteristics that
are the same as, or more equity-like than, the applicable
characteristics of the notes.
Our covenants in the Replacement Capital Covenant run only to
the benefit of holders of the designated series of our long-term
indebtedness. The Replacement Capital Covenant is not intended
for the benefit of holders of the notes and may not be enforced
by them, and the Replacement Capital Covenant is not a term of
the indenture or the notes.
Our ability to raise proceeds from qualifying securities during
the 180 days prior to a proposed redemption or repurchase
of the notes will depend on, among other things, the condition
of our business
A-18
and our financial condition, market conditions at that time as
well as the acceptability to prospective investors of the terms
of those qualifying securities.
The Replacement Capital Covenant may be terminated if the
holders of at least a majority by principal amount of the then
existing covered debt agree to terminate the Replacement Capital
Covenant, or if we no longer have outstanding any indebtedness
that qualifies as covered debt, and will terminate on
August 1, 2036 if not terminated earlier.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain United States federal
income tax considerations associated with the purchase,
ownership and disposition of the notes by United States Holders
(as defined below) and non-United States Holders (as defined
below), as of the date hereof. Except
where noted, this summary deals only with the notes held as
capital assets by holders who acquired the notes upon their
original issuance at their public offering price set forth
accompanying pricing term sheet. Some holders (including
banks, insurance companies, tax-exempt organizations, financial
institutions, regulated investment companies, mutual funds,
persons whose functional currency is not the U.S. dollar,
persons subject to alternative minimum tax, broker-dealers,
persons that hold the notes as part of a straddle, hedge,
conversion transaction or other integrated investment,
expatriates, controlled foreign corporations, passive foreign
investment companies and corporations that accumulate earnings
to avoid United States federal income tax) may be subject to
special rules not discussed below. The discussion below does not
address the effect of any state, local or foreign tax law.
Furthermore, the discussion below is based upon the provisions
of the Internal Revenue Code of 1986, as amended (the
Code), the Treasury regulations promulgated
thereunder and administrative and judicial interpretations
thereof, all as of the date hereof.
Because the foregoing are subject to change or differing
interpretations, possibly on a retroactive basis, the United
States federal income tax consequences of an investment in the
notes may be different from those discussed below.
A United States Holder of the notes means a holder
that is for United States federal income tax purposes:
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an individual citizen or resident of the United States; |
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a corporation (or other entity taxable as a corporation for
United States federal income tax purposes) created or organized
in or under the laws of the United States or any political
subdivision thereof; |
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an estate the income of which is subject to United States
federal income taxation regardless of its source; or |
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a trust if it (1) is subject to the primary supervision of
a court within the United States and one or more United States
persons have the authority to control all substantial decisions
of the trust or (2) has a valid election in effect under
applicable United States Treasury regulations to be treated as a
United States person. |
A non-United States holder means a beneficial owner
of the notes that is for United States federal income tax
purposes:
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an individual that is not a citizen or resident of the United
States; |
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a corporation (or other entity taxable as a corporation for
United States federal income tax purposes) not created or
organized in or under the laws of the United States or any
political subdivision thereof; or |
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an estate or trust other than an estate or trust that is a
United States Holder as defined above. |
If a partnership or other entity treated as a partnership for
United States federal income tax purposes holds the notes, the
United States federal income tax treatment of a partner will
generally
A-19
depend upon the status of the partner and the activities of the
partnership. If you are a partner of a partnership holding
notes, you should consult your own tax advisor on this, as well
as other issues.
There is no clear authority addressing the United States
federal income tax treatment of the notes. Accordingly, you
should consult your tax advisor in determining the tax
consequences to you of purchasing, holding and disposing of the
notes, including the application to your particular situation of
the United States federal income tax considerations discussed
below, as well as the application of state, local, or other tax
laws.
Classification of the Notes
In connection with the issuance of the notes,
Bracewell & Giuliani LLP, special tax counsel to us,
will render its opinion to us generally to the effect that,
under then current law and assuming full compliance with the
terms of the indenture and other relevant documents, and based
on the facts, assumptions and analysis contained in that
opinion, as well as representations we make, the notes will be
classified for United States federal income tax purposes upon
issuance as indebtedness of Enterprise (although there is no
clear authority directly on point). That opinion will not be
binding on the IRS or any court. The determination of whether an
instrument is indebtedness for United States federal income tax
purposes is an inherently factual one, dependent on all the
facts and circumstances, with no one factor being conclusive.
The remainder of this discussion assumes that the classification
of the notes as indebtedness of Enterprise will be respected for
United States federal income tax purposes.
United States Holders
Interest Income and Original Issue Discount
Under applicable Treasury regulations, a remote
contingency that stated interest will not be timely paid will be
ignored in determining whether a debt instrument is issued with
original issue discount, or OID. We believe that the likelihood
of our exercising our option to defer payments is remote within
the meaning of the Treasury regulations. Based on the foregoing,
we believe that the notes will not be considered to be issued
with OID at the time of their original issuance. Accordingly,
each United States Holder of notes should include in gross
income that holders allocable share of interest on the
notes in accordance with that holders method of tax
accounting.
Under applicable Treasury regulations, if the option to defer
any payment of interest was determined not to be
remote, or if we exercised that option, the notes
would be treated as issued with OID at the time of issuance or
at the time of that exercise, as the case may be. In that case,
all stated interest on the notes thereafter would be treated as
OID as long as the notes remained outstanding. Accordingly, all
of a United States Holders taxable interest income
relating to the notes would constitute OID that would have to be
included in income on an economic accrual basis before the
receipt of the cash attributable to the interest, regardless of
that holders method of tax accounting, and actual
distributions of stated interest would not be reported as
taxable income. Consequently, such a holder of notes would be
required to include OID in gross income even though we will not
make actual payments on the notes during a deferral period.
No rulings or other interpretations have been issued by the IRS
which have addressed the meaning of the term remote
as used in the applicable Treasury regulations, and it is
possible that the IRS could take a position contrary to the
interpretation in this document.
If the IRS were to challenge successfully the classification of
the notes as indebtedness, payments on the notes likely would be
treated as guaranteed payments or distributions with respect to
a preferred partnership interest. In such case, United States
Holders of the notes that are employee benefit plans, and most
other organizations exempt from United States federal income tax
including individual retirement accounts and other retirement
plans, could be subject to United States federal income tax on
their income with respect to the notes as unrelated business
taxable income.
A-20
We intend to take the position that the sale of the notes
offered by this document will be a qualified
reopening for purposes of the OID rules. Consequently, for
United States federal income tax purposes, such notes will have
the same issue date, issue price and (with respect to holders)
adjusted issue price as the notes issued on July 18, 2006.
Bond Premium
The notes will be sold with a bond premium, generally equal to
the excess, if any, of a holders tax basis over the amount
payable at maturity or, if a smaller premium would result, on an
earlier call date. A United States Holder may elect to amortize
the bond premium, in which case the amortizable bond premium is
allocated to payments of interest and treated as an offset to
interest income. If an election to amortize the bond premium is
not made, a United States Holder must include the full amount of
each interest payment in income in accordance with such
holders regular method of accounting for U.S. federal
income tax purposes and generally will receive a tax benefit
from the bond premium only upon computing such holders
gain or loss upon the sale or other disposition or payment of
the principal amount of the notes. If a United States Holder
elects to amortize the bond premium, the election will apply to
all debt instruments, other than debt instruments the interest
on which is excludible from gross income, that such holder holds
at the beginning of the first taxable year to which the election
applies or that such holder thereafter acquires. The election
may be revoked only with the consent of the IRS. United States
Holders are encouraged to consult their own tax advisors
regarding the application of the bond premium rules to their
purchases of notes.
Sale, Exchange, Redemption or Retirement of the
Notes
Upon sale, exchange, redemption or retirement of the notes, a
United States Holder will recognize gain or loss equal to the
difference between its adjusted tax basis in the notes and the
amount realized on the sale, exchange, redemption or retirement
of the notes. Assuming that we do not exercise our option to
defer payment of interest on the notes and that the notes are
not deemed to be issued with OID, a United States Holders
adjusted tax basis in the notes generally will be that
holders initial purchase price as adjusted for
amortization of bond premium, if any. If the notes are deemed to
be issued with OID, a United States Holders adjusted tax
basis in the notes generally will be its initial purchase price,
increased by OID previously includible in that holders
gross income to the date of disposition and decreased by
distributions or other payments received on the notes since and
including the date that the notes were deemed to be issued with
OID. That gain or loss generally will be a capital gain or loss,
except to the extent of any accrued interest relating to that
United States Holders ratable share of the notes required
to be included in income, and generally will be a long-term
capital gain or loss if the notes have been held for more than
one year. Capital losses generally cannot be applied to offset
ordinary income for United States federal income tax purposes.
Pre-Issuance Accrued Interest
A portion of the purchase price of the notes is attributable to
the amount of interest accrued for the period prior to the issue
date of the notes. Consequently, the notes should be treated as
having been sold for an amount that excludes any pre-issuance
accrued interest. If the notes are so treated, a portion of the
first stated interest payment equal to any excluded pre-issuance
accrued interest will be treated as a return of such
pre-issuance accrued interest and will not be taxable as
interest on the notes.
Information Reporting and Backup Withholding
Generally, interest on the notes will be subject to information
reporting on Internal Revenue Service
Form 1099-INT or,
if interest on the notes constitutes OID as discussed above
under United States Holders Interest
Income and Original Issue Discount, on Internal Revenue
Service Form 1099-OID. In addition, United States Holders
may be subject to a backup withholding tax on those payments if
they do not provide their taxpayer identification numbers to the
trustee in the manner required, fail to certify that they are
not subject to backup withholding tax, or otherwise fail to
comply with applicable backup
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withholding tax rules. United States Holders also may be subject
to information reporting and backup withholding tax with respect
to the proceeds from a sale, exchange, retirement or other
taxable disposition of the notes. Any amounts withheld under the
backup withholding rules will be allowed as a credit against the
United States Holders United States federal income tax
liability, so long as the required information is timely
furnished to the IRS.
Non-United States Holders
No withholding of United States federal income tax will apply to
interest paid on notes to a non-United States Holder under the
portfolio interest exemption, so long as:
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the interest is not effectively connected with the non-United
States Holders conduct of a trade or business in the
United States; |
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the non-United States Holder does not actually or constructively
own 10% or more of the capital or profits interests in us; |
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the non-United States Holder is not a controlled foreign
corporation that is related directly or constructively to us
through stock ownership; |
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the non-United States Holder is not a bank that acquired the
notes in consideration for an extension of credit made pursuant
to a loan agreement entered into in the ordinary course of its
trade or business; and |
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the non-United States Holder provides to the withholding agent,
in accordance with specified procedures, a statement to the
effect that such non-United States Holder is not a United States
person (generally by providing a properly executed IRS
Form W-8BEN). |
If a non-United States Holder cannot satisfy the requirements of
the portfolio interest exemption described above, interest paid
on the notes (including payments in respect of OID, if any, on
the notes) made to a non-United States Holder should be subject
to a 30% United States federal withholding tax, unless that
non-United States Holder provides the withholding agent with a
properly executed statement (i) claiming an exemption from
or reduction of withholding under an applicable United States
income tax treaty or (ii) stating that the interest is not
subject to withholding tax because it is effectively connected
with that non-United States Holders conduct of a trade or
business in the United States.
If a non-United States Holder is engaged in a trade or business
in the United States (or, if an applicable United States income
tax treaty applies, if the non-United States Holder maintains a
permanent establishment within the United States) and the
interest is effectively connected with the conduct of that trade
or business (or, if an applicable United States income tax
treaty applies, attributable to that permanent establishment),
that non-United States Holder will be subject to United States
federal income tax on the interest on a net income basis in the
same manner as if that non-United States Holder were a United
States Holder. In addition, a non-United States Holder that is a
foreign corporation engaged in a trade or business in the United
States may be subject to a 30% (or, if an applicable United
States income tax treaty applies, a lower rate as provided)
branch profits tax.
Any gain realized on the sale, exchange, redemption or
retirement of the notes generally will not be subject to United
States federal income tax unless:
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that gain is effectively connected with the non-United States
Holders conduct of a trade or business in the United
States (or, if an applicable United States income tax treaty
applies, is attributable to a permanent establishment maintained
by the non-United States Holder within the United
States); or |
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the non-United States Holder is an individual who is present in
the United States for 183 days or more in the taxable year
of the disposition and certain other conditions are met. |
In general, backup withholding and information reporting will
not apply to interest paid on the notes to a non-United States
Holder, or to proceeds from the sale, exchange, redemption or
retirement of
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the notes by a non-United States Holder, in each case, if the
non-United States Holder certifies under penalties of perjury
that it is a non-United States Holder and neither we nor our
paying agent has actual knowledge (or reason to know) to the
contrary. Any amounts withheld under the backup withholding
rules will entitle such non-United States Holder to a credit
against United States federal income tax liability and may
entitle such non-United States Holder to a refund, so long as
the required information is timely and properly furnished to the
IRS. In general, if notes are not held through a qualified
intermediary, the amount of payments made on such notes, the
name and address of the beneficial owner and the amount, if any,
of tax withheld may be reported to the IRS.
Non-United States Holders should consult their tax advisors
regarding the application of backup withholding in their
particular situation, the availability of an exemption from
backup withholding and the procedure for obtaining such an
exemption, if available.
If the IRS were to challenge successfully the classification of
the notes as indebtedness, payments on the notes likely would be
treated as guaranteed payments or distributions with respect to
a preferred partnership interest. In such case, non-United
States Holders of the notes would be treated as engaged in
a trade or business within the United States, be required to
file a United States federal income tax return and pay taxes on
their share of our income or gain and be subject to withholding.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH
ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE
APPLICABLE DEPENDING UPON A HOLDERS PARTICULAR SITUATION.
HOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION
OF THE NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS.
CERTAIN ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing or other employee
benefit plan subject to Section 406 of the Employee
Retirement Income Security Act of 1974, as amended
(ERISA), a plan subject to Section 4975 of the
Internal Revenue Code of 1986, as amended (the
Code), or an employee benefit plan or plan subject
to any state or local law or other restrictions materially
similar to Section 406 of ERISA or Section 4975 of the
Code (Similar Law) (each, a Plan),
should consider the fiduciary standards of ERISA or Similar Law
in the context of such a Plans particular circumstances
before authorizing an investment in the notes. Among other
factors, the fiduciary should consider whether such an
investment is in accordance with the documents governing the
Plan and whether the investment is appropriate for the Plan in
view of its overall investment policy and diversification of its
portfolio. The notes may not be sold to any Plan unless either
(i) the purchase and holding of the notes would not be a
transaction prohibited under Section 406 of ERISA,
Section 4975 of the Code, and Similar Law or (ii) one
of the following Prohibited Transaction Class Exemptions
(PTCE) issued by the U.S. Department of Labor
(or a materially similar exemption or exception under Similar
Law) applies to the purchase, holding and disposition of the
notes:
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PTCE 96-23 for
transactions determined by
in-house asset managers; |
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PTCE 95-60 for
transactions involving insurance company general accounts; |
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PTCE 91-38 for
transactions involving bank collective investment funds; |
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PTCE 90-1 for
transactions involving insurance company separate accounts; or |
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PTCE 84-14 for
transactions determined by independent qualified professional
asset managers. |
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Any purchaser of the notes or any interest therein will be
deemed to have represented and warranted to us on each day from
and including the date of its purchase of such notes through and
including the date of disposition of such notes that either:
(a) Plan assets under ERISA and the regulations issued
thereunder, or under any Similar Law, are not being used to
acquire the notes; or
(b) Plan assets as so defined are being used to acquire
notes but the purchase, holding and disposition of the notes,
either (1) are not and will not be a prohibited
transaction within the meaning of ERISA, the Code or
Similar Law or (2) are and will be an exempt prohibited
transaction by one or more of the following prohibited
transaction exemptions: PTCE 96-23, 95-60, 91-38, 90-1
or 84-14, or a materially similar exception under Similar
Law.
The discussion set forth above is general in nature and is not
intended to be complete. In addition, such discussion assumes
that the notes will constitute indebtedness as opposed to
equity interests under the U.S. Department of
Labors plan asset regulations or Similar Law. Although
such characterization of the notes would appear appropriate, we
can offer you no assurance that this will be the case.
Accordingly, it is important that any person considering the
purchase of notes with Plan assets consult with its counsel
regarding the consequences under ERISA, the Code or other
Similar Law, of the acquisition and ownership of notes. The sale
of the notes to a Plan is in no respect a representation by us
or the underwriters that such an investment meets all relevant
legal requirements with respect to investments by Plans
generally or any particular Plan, or that such an investment is
appropriate for Plans generally or any particular Plan.
INFORMATION INCORPORATED BY REFERENCE
Enterprise Parent files annual, quarterly and current reports,
and other information with the Commission under the Exchange Act
(Commission File No. 1-14323). You may read and copy any
document Enterprise Parent files at the Commissions public
reference room at 100 F Street, N.E., Washington, D.C.
20549. Please call the Commission at
1-800-732-0330 for
further information on the public reference room. Enterprise
Parents filings are also available to the public at the
Commissions web site at http://www.sec.gov. In
addition, documents filed by Enterprise Parent can be inspected
at the offices of the New York Stock Exchange, Inc.
20 Broad Street, New York, New York 10002.
Enterprise Parent hereby
incorporates by reference the documents listed below and any
future filings it makes with the Commission under
section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 until this offering is completed (other
than information furnished under Items 2.02 or 7.01 of any
Form 8-K, which is
not deemed filed under the Exchange Act):
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Annual Report on
Form 10-K for the
year ended December 31, 2005; |
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Quarterly Reports on
Form 10-Q for the
periods ended March 31, 2006 and June 30,
2006; and |
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Current Reports on
Form 8-K filed
with the Commission on February 16, 2006, February 17,
2006, February 27, 2006, March 3, 2006, June 26,
2006, June 26, 2006, July 13, 2006, July 19, 2006,
August 14, 2006, August 25, 2006 and
September 8, 2006. |
FORWARD-LOOKING STATEMENTS
This document and some of the documents we have
incorporated herein by reference contain various forward-looking
statements and information that are based on our beliefs and
those of our general partner, as well as assumptions made by and
information currently available to us. These forward-
A-24
looking statements are identified as any statement that does not
relate strictly to historical or current facts. When used in
this document or the documents we have incorporated
herein by reference, words such as anticipate,
project, expect, plan,
goal, forecast, intend,
could, believe, may, and
similar expressions and statements regarding our plans and
objectives for future operations, are intended to identify
forward-looking statements. Although we and our general partner
believe that such expectations reflected in such forward-looking
statements are reasonable, neither we nor our general partner
can give assurances that such expectations will prove to be
correct.
Such statements are subject to a variety of risks, uncertainties
and assumptions. If one or more of these risks or uncertainties
materialize, or if underlying assumptions prove incorrect, our
actual results may vary materially from those anticipated,
estimated, projected or expected. Among the key risk factors
that may have a direct bearing on our results of operations and
financial condition are:
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fluctuations in oil, natural gas and NGL prices and production
due to weather and other natural and economic forces; |
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a reduction in demand for our products by the petrochemical,
refining or heating industries; |
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the effects of our debt level on our future financial and
operating flexibility; |
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a decline in the volumes of NGLs delivered by our facilities; |
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the failure of our credit risk management efforts to adequately
protect us against customer non-payment; |
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terrorist attacks aimed at our facilities; and |
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our failure to successfully integrate our operations with assets
or companies we acquire. |
You should not put undue reliance on any forward-looking
statements. When considering forward-looking statements, please
review the risk factors described under Risk Factors
in this document and in the accompanying prospectus
and in Enterprise Parents Annual Report on
Form 10-K for the
year ended December 31, 2005, which was filed with the
Securities and Exchange Commission on February 27, 2006.
A-25
APPENDIX B
CAPITALIZATION
The following table sets forth Enterprise Parents capitalization as of June 30, 2006:
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on a consolidated historical basis; and |
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on an as adjusted basis to give effect to: |
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(i) |
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the sale of $300 million aggregate principal amount of the junior
subordinated notes on July 18, 2006 and the related application of net proceeds we
received from that sale to temporarily reduce borrowings under our multi-year
revolving credit facility; |
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(ii) |
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the sale of $200 million aggregate principal amount of the junior
subordinated notes on August 22, 2006 and the related application of net proceeds we
received from that sale to temporarily reduce borrowings under our multi-year
revolving credit facility; |
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(iii) |
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the sale of 12,650,000 common units by Enterprise Parent in September 2006
at a public offering price of $25.80 per common unit; the proportionate net capital
contribution of $6.4 million by the general partner of Enterprise Parent; and the
application of $23.8 million of the net proceeds of $320.3 million (after exercise of
the underwriters over-allotment option on September 11, 2006) to temporarily reduce
debt under our multi-year revolving credit facility; and |
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(iv) |
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the sale of $50 million aggregate principal amount of the junior subordinated
notes in this offering. |
For as adjusted presentation purposes only, all of the net proceeds from this offering as well
as $296.5 million of net proceeds from the September 2006 equity offering by Enterprise Parent are
shown as being retained in cash for general partnership purposes.
The as adjusted data on the following page does not reflect events subsequent to June 30, 2006
that are not significant individually or in the aggregate. These events include: (i) the
quarterly cash distribution of $214.8 million paid by Enterprise Parent in August 2006; (ii) our
acquisition of certain South Texas midstream assets (the Cerrito transaction) and related
payments, borrowings and issuance of common units in July 2006; and (iii) our acquisition of a
South Texas NGL pipeline and related payments and borrowings in August 2006.
On an as adjusted basis, after giving effect to the additional issuance of junior subordinated
notes in this offering, the September 2006 equity offering of Enterprise Parent, and the July and
August 2006 issuances of junior subordinated notes and the related application of net proceeds from
each, as adjusted interest expense would have increased by $7.8 million for the six months ended
June 30, 2006 and $15.7 million for the year ended December 31, 2005.
The historical data presented in the table on the following page are derived from and should
be read in conjunction with the historical financial statements of Enterprise Parent, which are
filed with the U.S. Securities and Exchange Commission under the Securities Exchange Act of 1934.
Such filings are available to the public at the Commissions
website at http://www.sec.gov and are
incorporated herein by reference.
Enterprise Parent Historical and As Adjusted Capitalization
As of June 30, 2006
(Dollars in millions)
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Pro forma |
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Historical |
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As adjusted |
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Cash and cash equivalents |
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$ |
24.5 |
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$ |
364.9 |
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Long-term borrowings: |
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Multi-Year Revolving Credit Facility, variable rate, due
October 2011 (1) |
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$ |
530.0 |
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$ |
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Pascagoula MBFC Loan, 8.70% fixed-rate, due March 2010 |
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54.0 |
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54.0 |
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Senior Notes B, 7.50% fixed-rate, due February 2011 |
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450.0 |
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450.0 |
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Senior Notes C, 6.375% fixed-rate, due February 2013 |
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350.0 |
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350.0 |
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Senior Notes D, 6.875% fixed-rate, due March 2033 |
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500.0 |
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500.0 |
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Senior Notes E, 4.00% fixed-rate, due October 2007 |
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500.0 |
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500.0 |
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Senior Notes F, 4.625% fixed-rate, due October 2009 |
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500.0 |
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500.0 |
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Senior Notes G, 5.60% fixed-rate, due October 2014 |
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650.0 |
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650.0 |
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Senior Notes H, 6.65% fixed-rate, due October 2034 |
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350.0 |
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350.0 |
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Senior Notes I, 5.00% fixed-rate, due March 2015 |
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250.0 |
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250.0 |
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Senior Notes J, 5.75% fixed-rate, due March 2035 |
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250.0 |
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250.0 |
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Senior Notes K, 5.20% fixed-rate, due May 2010 |
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500.0 |
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500.0 |
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Dixie revolving credit facility, due June 2007 |
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10.0 |
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10.0 |
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GulfTerra senior subordinated notes |
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5.1 |
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5.1 |
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Total senior debt obligations |
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4,899.1 |
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4,369.1 |
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Junior Subordinated Notes, due August 2066 |
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550.0 |
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Other, including unamortized discounts and premiums |
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(77.7 |
) |
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(69.2 |
) |
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Total debt obligations |
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4,821.4 |
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4,849.9 |
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Minority interest |
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120.7 |
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120.7 |
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Partners equity: |
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Limited partners |
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5,857.6 |
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6,171.4 |
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General partner |
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119.5 |
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125.9 |
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Accumulated other comprehensive income |
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10.9 |
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10.9 |
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Total partners equity |
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5,988.0 |
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6,308.2 |
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Total capitalization |
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$ |
10,930.1 |
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$ |
11,278.8 |
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(1) |
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Borrowings with respect to commitments of $48 million under our multi-year revolving
credit facility mature in October 2010 and borrowings with respect to commitments of $1.2 billion
mature in October 2011. As of September 14, 2006, we had no debt outstanding under our multi-year
revolving credit facility. |