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NuStar Energy L.P. has announced that it has entered into an agreement with an affiliate of Lindsay Goldberg LLC, a private investment firm, to divest all of its 50% voting interest in an asphalt joint venture that owns a refinery located in Paulsboro, New Jersey, a terminal located in Savannah, Georgia, and the related working capital.

Lindsay Goldberg LLC currently owns the other 50% voting interest in the asphalt joint venture. Closing for the transaction is expected to occur no later than February 28, 2014.

As a result of this transaction, a $250 million, seven-year revolving credit facility between NuStar Logistics and the joint venture will be converted to a $175 million term loan at closing and reduced to a $150 million term loan six months after closing. The transaction calls for the term loan to be repaid with excess cash flows generated by the asphalt business over the next several years and for the loan to be paid off in full by no later than September 2019.

NuStar Logistics will continue to provide up to $150 million of credit support for the asphalt business, in the form of guarantees and letters of credit, for two years after the closing date. This support amount will begin declining two years after closing and will terminate no later than September 2019.

"This transaction, coupled with the January 1, 2014 termination of our crude oil supply agreement with PDVSA, significantly reduces our financial liability related to asphalt refining," said Brad Barron, President and CEO of NuStar Energy. "It lowers our financial obligations by $100 million – dropping by $75 million immediately, and then dropping by another $25 million within six months. Most importantly, our earnings will no longer be burdened by the volatility and significant losses generated by the asphalt joint venture. As a result of this divestiture, we can focus on growing our more stable storage and pipeline fee-based operations."

Expected Fourth Quarter 2013 Non-Cash Charges

Fourth quarter 2013 earnings before interest, taxes, depreciation and amortization (EBITDA) and earnings per unit (EPU) are expected to be negatively impacted by approximately $400 million of non-cash charges. Due to changing market conditions in certain geographic areas, as well as the underperformance of a few facilities, the company says it plans to write down the asset values and the value of goodwill assigned to several of its storage facilities.

NuStar said the expected non-cash write-downs will impact fourth quarter EBITDA and EPU but will not impact distributable cash flow or the debt to EBITDA covenant calculation in the company’s debt agreements. After these charges, the company expects fourth quarter 2013 EPU to be a loss of around $4.75 per unit. Excluding the non-cash charges and other adjustments, the company says it should generate EPU of approximately $0.20 per unit. This revised outlook is based on the company’s current estimate of results from operations for the fourth quarter of 2013.