It appears that Crosstex was unable to work things out with current debtholders. I figure they wanted lower interest rates, later dates on maturities, and potentially even better ratios.
I think many of us thought that the reduction of debt through the preferreds was something that the debtholders and Crosstex may have negotiated as part of a plan to refinance the debt. After seeing this private placement, I believe this was not orchestrated by the debtholders at all and may have been part of a plan from management and/or Blackstone.
The bad news is that Crosstex will appear to be unable to get current debt refinanced and is now having to look at market to find better rates and/or maturity dates.
The good news is that Crosstex must be somewhat confident that they can pull this off in this difficult environment. As a poster mentioned, there is no dire emergency to do the refinance or placement right now. They could have waited for quite a while on market to improve to do this.
Another positive is that the word "unsecured" means that there probably be limited restrictions on this new debt. I believe a good portion of current debt is secured.
Now, more bad news. I think unsecured debt demands a higher interest rate as you are increasing your risk. For example, I can get a car loan at a pretty darn good rate since it is secured by the car itself. If I get a loan without collateral (like that would happen), they will require a much higher interest rate.
I have not had time to research typical rates on different forms of debt, but I expect the interest rate to be quite high. Just think, BlackStone is getting minimum 10% on the preferred shares which are very limited in recovery if Crosstex fails. The unsecured debt will likely be somewhere around 9 to 9.5% in my hasty estimation.
Here is the big positive, however, which is why this is very good for Crosstex if they can pull it off. All of this debt would mature in 2018. Thus, Crosstex only pays interest on this debt. NO PRINCIPAL PAYMENTS - NOTHING! Cash that would have gone to principal payments on part of existing debt is now freed up for growth opportunities. We can more quickly grow the company for the next five or six years and then worry about refinancing again.
Between your post and mine it looks like the yield will be around 6.82 to 7 percent, per the figures given in Bloomberg for investment grade bonds rated at B+. With the kickoff being given by Merrill/Bank of America it looks like we are going to have some extra cash for the dividends if the debt instrument sellers lock the interest rate in at the figures given out on Bloomberg. YIPPEE..KIYAY..
Bet the stock soars Wednesday through Friday and even more if a good dividend was announced.
Also management stated that analysts predictions of the high end of what XTEX was expected to make for the year, i.e $200M would be surpassed. The analysts are going to have to re-think their positions on XTEX now.
Also think of all the MLPs that are paying just over a dollar in distributions and are selling in the mid 20's. Plus they have a lot more units outstanding than XTEX.