Morgan Stanley Infrastructure acquires gas pipeline stake

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Morgan Stanley Infrastructure acquires gas pipeline stake

Magnum Hunter Resources Corporation announced yesterday that it has signed a transaction agreement with Morgan Stanley Infrastructure Inc. (MSI) relating to a separate purchase agreement between MSI and Ridgeline Midstream Holdings, LLC, an affiliate of ArcLight Capital Partners, LLC.

MSI is acquiring the equity interests in Eureka Hunter Holdings, LLC owned by ArcLight. The closing is expected to occur in early October 2014.

Eureka Hunter is Magnum Hunter's majority owned subsidiary through which various midstream services in West Virginia and Ohio are conducted, including the company's Eureka Hunter Pipeline.

Under the above mentioned agreement betwen Magnum and MSI, all the preferred equity interests in Eureka Hunter acquired by MSI from ArcLight (approximately 41%) will be converted from preferred equity interests into common equity interests of Eureka Hunter, and all common equity owned by MSI will have a liquidation preference.

Additionally, Magnum Hunter will sell to MSI in a second closing, anticipated in mid-January 2015, an additional common equity interest in Eureka Hunter of approximately 6.5% of the total common equity interests in Eureka Hunter for $65 million, representing an implied equity value of Eureka Hunter of $1.0 billion.

Such closing, together with follow on capital contributions expected to be made by MSI in 2014, will result in Magnum Hunter and MSI owning equal equity interests in Eureka Hunter which collectively will constitute an approximately 98% equity interest in Eureka Hunter.

Mr. Gary C. Evans, Chairman of the Board and Chief Executive Officer of Magnum Hunter and Eureka Hunter, commented:

"With the agreement signed yesterday, we accomplished the following events. First, there will no longer be a cash preferred dividend payment to any equity holder which is a savings of approximately $16 million per year to Eureka Hunter. Second, we have eliminated Magnum Hunter's need to fund future capital costs at the Eureka Hunter level for rolling six month periods. Third, we have agreed to sell to our new business partner an equity interest that values the entire enterprise at $1 billion. Lastly, we have found a new equity partner that has a similar vision and business philosophy as our management team and board which will allow this tremendous asset to grow and prosper in preparation for an anticipated MLP offering sometime next year."

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