Cypress Energy Partners, L.P. (Cypress), based in Tulsa, Oklahoma, is a master limited partnership traded on the New York Stock Exchange (NYSE: CELP) that provides independent pipeline inspection, integrity, and support services for pipeline owners and operators, public utilities, and energy companies and also provides water and environmental services to oil and gas companies.
Cypress required additional capital to strengthen its balance sheet and to receive a clean audit, critical items for a publicly traded entity. Cypress management had discussed with several large investment banks the alternatives with respect to raising capital from third party institutional sources. Unfortunately, the indicative terms were unappealing. However, Cypress was able to negotiate improved terms with an insider, which was also a large holder of Cypress units. Due to the inherent conflicts of interest, the Board of Directors created a Special Conflicts Committee to ensure that any transaction with an insider was fair to all its unit holders.
We were engaged by the Special Conflicts Committee of the Board of Directors to provide a fairness opinion with regard to the issuance of a $43.5 million capital raise/private placement of convertible preferred units. We analyzed a number of private placements completed by master limited partnerships in the recent past to ensure the terms of Cypress' units were fair to the unit holders relative to other completed transactions. Cypress was able to confidently consummate the private placement, obtain the needed capital and receive a clean audit.