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Project Tangerine Transaction Overview

Project Tangerine Transaction Overview. Presented to Board of Directors, Citrus Corp. Nov. XX, 2000. Achieve an “effective” sale of Citrus Trading Corp. (“CTC”) for Citrus Corp. (Citrus) Allow an earnings gain for the owners of CTC with no tax liability

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Project Tangerine Transaction Overview

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  1. Project TangerineTransaction Overview Presented to Board of Directors, Citrus Corp. Nov. XX, 2000

  2. Achieve an “effective” sale of Citrus Trading Corp. (“CTC”) for Citrus Corp. (Citrus) Allow an earnings gain for the owners of CTC with no tax liability Exchange Citrus’ interest in the complex contractual assets of CTC with an easy to understand preferred and common interests in NewCo Free-up CTC human resources for potential redeployment to other value-added activities Allow CTC to benefit in any upside from the assets not otherwise available in an outright sale Structural Goals of NewCo

  3. CTC Contributes Assets to NewCo ENRON EL PASO 50% 50% ENA CITRUS CORP. 100% 100% Services / $ 100% Citrus Trading (“CTC”) Common Units Preferred & Common Units FGT CESI NewCo Assets 3

  4. 1. A New LLC is formed (NewCo). 2. CTC contributes its contractual assets for two types of LLC interests (preferred and common). 3. ENA contributes operations, personnel, marketing and other services for a LLC membership interest (common). 4. CTC’s preferred membership interest provides it a preferred distribution stream including a 7% coupon rate until Payout (as defined below) is reached. 5. NewCo’s net cash flow after preferred distributions will be allocated monthly on a 50% ENA and 50% CTC basis until Payout. At Payout, the sharing ratio will flip to 25% ENA and 75% CTC. Approach for NewCo Structure

  5. NewCo’s capital structure will include three types of membership units: Series A Voting Units (“Series A”) will be issued 50% and 50% to ENA and CTC, respectively; The Series B Preferred Units (“Series B”) will be issued 100% to CTC and will entitle Series B holders to the Preferred Distribution until Payout; The Series C Common Units (“Series C”) will be issued 50% and 50% to ENA and CTC, respectively. Upon the occurrence of Payout, ENA’s Series C sharing ratio shall be reduced to 25% and CTC’s Series C sharing ratio shall be increased to 75%. Capital Structure of NewCo

  6. Payout shall mean the point at which CTC has received Preferred Distributions totaling [$111MM] At Payout, CTC becomes “whole” on an accrual basis to its current expected cash flow from the assets Payout

  7. ENA will continue to be responsible for the payment of the Pan/Nat Annuity (to NewCo in place of CTC) ENA will be responsible for all of the day to day operations of NewCo ENA will manage all NewCo sales and receive its $0.05/MMBTU management fee accordingly Sonat/El Paso will continue to supply gas to NewCo just as it supplied CTC Implications of NewCo Structure

  8. Should Citrus Do Tangerine? PROS Could allow immediate recognition of CTC value with no current tax liability Free-up CTC human resources for redeployment to other activities CTC shares in any future upside in the contracts vs. a straight sale CONS Tangerine does not create an immediate cash flow event for Citrus Tangerine structure not as simplistic as straight sale

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