ONEOK closes $9 billion Apollo investment to fund acquisition and debt reduction

ONEOK, Inc. (NYSE: OKE) closed the previously announced $9 billion minority equity investment with funds and affiliates managed by Apollo on September 10. Apollo received a nonvoting Class B minority interest in ONEOK Holdings, L.L.C. The capital is intended to fund the previously announced acquisition of Brazos Midland, LLC and extinguishment of $5 billion of certain outstanding indebtedness of ONEOK's operating company and its subsidiaries.

Class B units and contribution mechanics

The financing close provides the cash for those intended uses; the filing does not report completion of the Brazos Midland acquisition. Under the contribution agreement, Apollo affiliate AP Falcon Holdings LLC contributed $9 billion for 900,000,000 Class B Units, and Holdings passed that cash to ONEOK, L.L.C., the operating company known as OpCo. ONEOK contributed all of OpCo's equity to Holdings in exchange for 6,023,076,923 Class A Units.

Intended Brazos Midland funding and $5 billion debt path

ONEOK said the minority interest is structurally subordinate to the company's debt. The company also said it reviewed the transaction with its credit rating agencies and that all of them consider it credit-enhancing. That is ONEOK's description of the agencies' assessment, rather than an announcement of a rating upgrade.

Holding-company reorganization

The investment closed after a holding-company reorganization. Under a merger agreement entered September 9, Legacy ONEOK merged into Falcon Merger Sub, L.L.C. on September 10. The surviving subsidiary was renamed ONEOK, L.L.C.; its parent, Falcon TopCo, Inc., was renamed ONEOK, Inc. and became the successor issuer.

Credit review and midstream context

Each Legacy ONEOK common share converted into one successor ONEOK common share with the same designations and rights. The transaction was a holding-company formation, not a buyout of public shareholders, and did not require a stockholder vote under Oklahoma Section 1081.G.

Credit review and midstream context

The distinction for investors is between the financing now completed and the uses still described as intended: funding the previously announced Brazos Midland acquisition and extinguishing $5 billion of certain outstanding indebtedness. Tulsa-based ONEOK operates a midstream network spanning approximately 60,000 miles of pipelines.