November 9, 2011 [OPIS] - A typically unremarkable third-quarter earnings conference call turned downright somber yesterday morning.
TransMontaigne executives acknowledged that their principle shareholder, Morgan Stanley, recently informed them that it would not approve any significant funds for acquisitions. That includes an early withdrawal by the master limited partnership (MLP) to end its participation in a black oil storage project with Kinder Morgan.
Yesterday, Kinder Morgan updated the “Battleground Oil Specialty Terminal Company LLC” project, known colloquially as BOSTCO and trumpeted a third-quarter completion date for the 6.6-million-bbl storage project. Last month, TransMontaigne sold 50% of its interest in the project and yesterday said that it would most likely sell the remaining 50% of BOSTCO to Kinder Morgan.
TransMontaigne will get an option to buy a 50% interest back within 12 months of the likely sale, but execs were clearly disappointed by Morgan Stanley’s decision.
TransMontaigne CEO Chuck Dunlap later noted that Morgan Stanley had not shared “what is driving their decisions” and stressed that the MLP would get
its investment back.
The decision by Morgan is related to the “changing and uncertain” regulatory environment tied to the Federal Reserve’s examination of Morgan Stanley’s status as a financial holding company. The TransMontaigne CEO said that Morgan Stanley would not approve any “significant” investment, and suggested that what the bank determines is “significant” will be determined on a case-by-case basis.
Not coincidentally, Morgan Stanley did on Monday extend a throughput agreement with TransMontaigne for Midwestern terminals that now runs through May 2014. Morgan Stanley similarly has a long-term throughput agreement in southeastern locations that has a term ending Dec. 31, 2014.
But the move to cut off funding for “significant” growth suggests to some that TransMontaigne is not likely to be among the master limited partnerships looking at terminals and pipelines on the market in coming months. Some M&A watchers even believe that the company could be put up for sale, although execs said that the bank has not pointed toward that possibility.
