SEC Company Response from EQT Corp (EQT) (CIK 0000033213) (EQT) — Sep 8, 2017
EQT Corp (EQT) (CIK 0000033213)
Date: Sept. 8, 2017 · CIK: 0000033213 · Accession: 0001104659-17-056331
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 333-219508
Referenced dates: August 24, 2017
Letter
EQT Corporation Registration Statement on Form S-4 Filed July 27, 2017 File No. 333-219508
Dear Mr. Schwall:
On behalf of EQT Corporation (“EQT” or the “Company”), we are submitting this letter in response to comments from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) to the Company’s Registration Statement on Form S-4 filed with the Commission on July 27, 2017 (the “Registration Statement”) contained in your letter dated August 24, 2017 (the “Comment Letter”).
We note that, in connection with this letter, the Company is filing an amendment to the Registration Statement (“Amendment No. 1”) electronically via the EDGAR system on the date hereof.
We are separately furnishing to the Staff two courtesy copies of Amendment No. 1 marked to show the changes made to the Registration Statement.
For the Staff’s convenience, the text of the Staff’s comment is set forth below in bold and corresponds to the numbered comment contained in the Comment Letter, followed by the Company’s response. Terms not otherwise defined in this letter shall have the meanings set forth in the Registration Statement.
General
1. Please revise your amended filing to address the class action complaint filed on August 2, 2017 in Delaware federal court, challenging the proposed merger and alleging violations of Sections 14(a) and 20(a) of the Exchange Act.
Response: The Registration Statement has been revised in response to the Staff’s comment. Please see page 144 of Amendment No. 1.
The Merger
Background of the Merger, page 56
2. Please provide us supplementally with copies of any non-public information — board books, documents, financial forecasts (including “preliminary financial and strategic considerations”), projections and presentations — used by the companies in the merger negotiations. We may have additional comments.
Response: The presentation materials prepared by Citigroup Global Markets Inc. (“Citi”) in connection with its opinion, dated June 19, 2017, to the EQT board summarized under the caption “Opinion of EQT’s Financial Advisor” are being provided to the Staff under separate cover by counsel for Citi on a confidential and supplemental basis pursuant to Rule 418 under the Securities Act of 1933, as amended, and Rule 12b-4 under the Securities Exchange Act of 1934, as amended. In accordance with such Rules, counsel for Citi has requested that these materials be returned promptly following completion of the Staff’s review thereof. Such materials are not, and will not be, filed with or deemed to be part of the Registration Statement, including any amendments thereto. By separate letter, counsel for Citi also has requested confidential treatment of these materials pursuant to the provisions of 17 C.F.R. § 200.83.
The confidential presentation materials prepared by Barclays Capital Inc. (“Barclays”) in connection with its opinion, dated June 19, 2017, to the board of Rice Energy Inc. (“Rice”) summarized under the caption “Opinion of Rice’s Financial Advisor” are being provided to the Staff under separate cover by counsel for Barclays on a confidential and supplemental basis pursuant to Rule 418 under the Securities Act of 1933, as amended, and Rule 12b-4 under the Securities Exchange Act of 1934, as amended. In accordance with such Rules, counsel for Barclays is requesting that these materials be returned promptly following completion of the Staff’s review thereof. Such materials are not, and will not be, filed with or deemed to be part of the Registration Statement, including any amendments thereto. Counsel for Barclays is also requesting confidential treatment of these materials pursuant to the provisions of 17 C.F.R. § 200.83.
3. Explain why Rice and EQT decided not to pursue further discussions in July of 2015.
Response: The Registration Statement has been revised in response to the Staff’s comment. Please see page 58 of Amendment No. 1.
4. We note from your disclosure that Company A discontinued merger negotiations in August 2016, on account of changes in the trading price of Rice Energy’s stock relative to its own. In order to place the Rice Energy board’s consideration of possible alternatives in context, please revise to discuss whether the Rice Energy board attempted to re-engage Company A in March 2017 once the company agreed to reconvene merger discussions with EQT.
Response: The Registration Statement has been revised in response to the Staff’s comment. Please see page 63 of Amendment No. 1.
5. Unlike your discussion of earlier terms proposed by EQT, you do not indicate the premium offered on May 4, 2017 or in later discussions. Nor do you indicate the market price of each company so that investors can calculate the premium. Please advise or revise.
Response: The Registration Statement has been revised in response to the Staff’s comment. Please see pages 63-64 of Amendment No. 1.
6. We note a number of references to “open deal points” in your later discussion in this section, after EQT and Rice Energy began to consider formal proposals. Please revise to more fully describe these deliberations and clarify how the terms evolved during the course of these discussions. Please also elaborate on the financial underpinnings of the implied value calculations reflected in the various proposals and counterproposals.
Response: The Registration Statement has been revised in response to the Staff’s comment. Please see pages 65-68 of Amendment No. 1.
7. To the extent that the series of calls conducted on June 4, 2017 impacted any executive officers, please also provide more details.
Response: The Staff is hereby advised that the series of calls conducted on June 4, 2017 did not impact any executive officers.
8. Please expand further on the Rice Energy board’s rationale in concluding that Company C could not potentially provide a proposal superior to the EQT proposal, in light of your representation that Company C had not yet provided significant detail regarding an alternative combination transaction on the June 15, 2017 call.
Response: The Registration Statement has been revised in response to the Staff’s comment. Please see pages 63 and 67 of Amendment No. 1.
Opinion of EQT’s Financial Advisor, page 85
Opinion of Rice’s Financial Advisor, page 106
9. Please supplement your disclosure in the above-referenced sections to explain whether Rice Energy equity award conversions impacted the analysis undertaken by Citi and Barclays, respectively, in connection with the rendering of the fairness opinions.
Response: The Registration Statement has been revised in response to the Staff’s comment. Please see pages 89 and 110 of Amendment No. 1.
Unaudited Pro Forma Condensed Combined Financial Statements
Note 2 — Pro Forma Adjustments and Assumptions, page 167
10. Revise to provide a qualitative description of the factors that make up the goodwill recognized on a pro forma basis in connection with the merger consistent with FASB ASC 805-30-50-1a. In addition, separately disclose each significant class of intangible asset recognized on a pro forma basis.
Response: The Registration Statement has been revised in response to the Staff’s comment. Please see pages 170-171 of Amendment No. 1.
11. Pro forma adjustment (c) relates to the planned issuance of new senior notes, the planned upsize of your revolving credit facility, and the planned extinguishment of outstanding indebtedness of Rice Energy Inc. As these adjustments appear to relate to actions management intends to take in response to the merger transaction, tell us how they are consistent with Rules 11-02(a) and 11-02(b)(6) of Regulation S-X.
Response: The Company respectfully advises the Staff that it believes that the planned issuance of senior notes, the planned extinguishment of indebtedness of Rice and the upsizing of EQT’s revolving credit facility are factually supportable, directly attributable to the transaction, and expected to have a continuing impact on the statement of operations and, as such, are properly included in the pro forma financial statements in accordance with Rules 11-02(a) and 11-02(b)(6) of Regulation S-X.
Financing is necessary to fund the cash portion of the merger consideration and other transactions relating to the merger. While the Company secured bridge loan facility commitments to ensure that, together with cash on hand and borrowings under EQT’s revolving credit facility, sufficient cash would be available at closing, the interest rate and terms of the bridge facility commitments are significantly less favorable than those EQT believes it can obtain with longer-term traditional financing in a capital markets transaction. Likewise, the interest rate and terms on the indebtedness of Rice are significantly less favorable than what EQT believes it can obtain in such a capital markets transaction given the Company’s investment grade credit rating. As a result, the Company expects to issue new senior notes to assist in funding the cash consideration required for the merger and the extinguishment of certain Rice indebtedness in connection with closing. The new senior notes are expected to be mandatorily redeemable in the event the merger does not close by a certain date.
Given these circumstances, the planned issuance of new senior notes and extinguishment of the Rice indebtedness are directly attributable to the merger. These activities are factually supportable given the observation of current or recent interest rates, terms and capital market activity for transactions of comparable size by companies of comparable credit rating. These transactions will have a continuing impact on the statement of operations through the reduction in interest expense as a result of these transactions.
With respect to the upsizing of EQT’s revolving credit facility, the Company completed an amendment of the facility during the third quarter in anticipation of the merger. The amended facility currently has commitments equal to those under EQT’s previously existing facility, but includes an incremental $1 billion of commitments that will become available in connection with closing the merger. EQT’s previously existing facility did not expire until 2019; the Company amended the facility at this time in anticipation of the merger. As such, the planned upsizing of EQT’s revolving credit facility is directly attributable to the merger and is factually supportable with the actual interest rate and financing fees incurred on the transaction. This upsize will have a continuing impact on the statement of operations through the amortization of the related financing fees into interest expense.
The Registration Statement has been revised in response to the Staff’s comment. Please see pages 171-172 of Amendment No. 1.
12. Revise your disclosure related to adjustment (i) to explain your basis for using a tax rate for your pro forma income tax adjustments which appears to differ from the statutory rate.
Response: The Registration Statement has been revised in response to the Staff’s comment. Please see page 173 of Amendment No. 1.
Note 4 — Supplemental Pro Forma Natural Gas, NGLs and Crude Oil Reserves Information, page 174
13. Revise your disclosure of pro forma proved reserves to provide the total reserve quantities for all products. Refer to SAB Topic 2D along with FASB ASC 932-235-50-4 and 55-2.
Response: The Registration Statement has been revised in response to the Staff’s comment. Please see pages 176-178 of Amendment No. 1.
* * * * * *
We hope that the foregoing has been responsive to the Staff’s comments. If you have any questions or comments regarding the foregoing, please do not hesitate to contact me at (212) 403-1347 or by email at SACohen@wlrk.com or Victor Goldfeld at (212) 403-1005 or by email at VGoldfeld@wlrk.com.
Sincerely,
/s/ Steven A. Cohen
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CORRESP 1 filename1.htm Wachtell, Lipton, Rosen & Katz MARTIN LIPTON HERBERT M. WACHTELL PAUL VIZCARRONDO, JR. PETER C. HEIN HAROLD S. NOVIKOFF THEODORE N. MIRVIS EDWARD D. HERLIHY DANIEL A. NEFF ANDREW R. BROWNSTEIN MARC WOLINSKY STEVEN A. ROSENBLUM JOHN F. SAVARESE SCOTT K. CHARLES JODI J. SCHWARTZ ADAM O. EMMERICH GEORGE T. CONWAY III RALPH M. LEVENE RICHARD G. MASON MICHAEL J. SEGAL DAVID M. SILK ROBIN PANOVKA DAVID A. KATZ ILENE KNABLE GOTTS JEFFREY M. WINTNER TREVOR S. NORWITZ BEN M. GERMANA ANDREW J. NUSSBAUM RACHELLE SILVERBERG STEVEN A. COHEN DEBORAH L. PAUL DAVID C. KARP RICHARD K. KIM JOSHUA R. CAMMAKER MARK GORDON JOSEPH D. LARSON LAWRENCE S. MAKOW JEANNEMARIE O’BRIEN WAYNE M. CARLIN STEPHEN R. DiPRIMA NICHOLAS G. DEMMO IGOR KIRMAN JONATHAN M. MOSES 51 WEST 52ND STREET T. EIKO STANGE JOHN F. LYNCH WILLIAM SAVITT ERIC M. ROSOF GREGORY E. OSTLING DAVID B. ANDERS ANDREA K. WAHLQUIST ADAM J. SHAPIRO NELSON O. FITTS JOSHUA M. HOLMES DAVID E. SHAPIRO DAMIAN G. DIDDEN IAN BOCZKO MATTHEW M. GUEST DAVID E. KAHAN DAVID K. LAM BENJAMIN M. ROTH JOSHUA A. FELTMAN ELAINE P. GOLIN EMIL A. KLEINHAUS KARESSA L. CAIN RONALD C. CHEN GORDON S. MOODIE DONGJU SONG BRADLEY R. WILSON GRAHAM W. MELI GREGORY E. PESSIN CARRIE M. REILLY MARK F. VEBLEN VICTOR GOLDFELD EDWARD J. LEE BRANDON C. PRICE KEVIN S. SCHWARTZ MICHAEL S. BENN SABASTIAN V. NILES ALISON ZIESKE PREISS TIJANA J. DVORNIC JENNA E. LEVINE RYAN A. McLEOD NEW YORK, N.Y. 10019-6150 TELEPHONE: (212) 403 -1000 FACSIMILE: (212) 403 -2000 GEORGE A. KATZ (1965-1989) JAMES H. FOGELSON (1967-1991) LEONARD M. ROSEN (1965-2014) OF COUNSEL WILLIAM T. ALLEN DAVID S. NEILL MARTIN J.E. ARMS BERNARD W. NUSSBAUM MICHAEL H. BYOWITZ LAWRENCE B. PEDOWITZ PETER C. CANELLOS ERIC S. ROBINSON DAVID M. EINHORN PATRICIA A. ROBINSON* KENNETH B. FORREST ERIC M. ROTH THEODORE GEWERTZ PAUL K. ROWE RICHARD D. KATCHER DAVID A. SCHWARTZ MEYER G. KOPLOW MICHAEL W. SCHWARTZ DOUGLAS K. MAYER STEPHANIE J. SELIGMAN ROBERT B. MAZUR ELLIOTT V. STEIN MARSHALL L. MILLER WARREN R. STERN PHILIP MINDLIN PATRICIA A. VLAHAKIS ROBERT M. MORGENTHAU AMY R. WOLF * ADMITTED IN THE DISTRICT OF COLUMBIA COUNSEL DAVID M. ADLERSTEIN PAULA N. GORDON AMANDA K. ALLEXON NANCY B. GREENBAUM LOUIS J. BARASH MARK A. KOENIG FRANCO CASTELLI LAUREN M. KOFKE DIANNA CHEN J. AUSTIN LYONS ANDREW J.H. CHEUNG ALICIA C. McCARTHY PAMELA EHRENKRANZ S. CHRISTOPHER SZCZERBAN KATHRYN GETTLES-ATWA JEFFREY A. WATIKER ADAM M. GOGOLAK September 8, 2017 H. Roger Schwall Assistant Director Office of Natural Resources U.S. Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Re: EQT Corporation Registration Statement on Form S-4 Filed July 27, 2017 File No. 333-219508 Dear Mr. Schwall: On behalf of EQT Corporation (“EQT” or the “Company”), we are submitting this letter in response to comments from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) to the Company’s Registration Statement on Form S-4 filed with the Commission on July 27, 2017 (the “Registration Statement”) contained in your letter dated August 24, 2017 (the “Comment Letter”). We note that, in connection with this letter, the Company is filing an amendment to the Registration Statement (“Amendment No. 1”) electronically via the EDGAR system on the date hereof. We are separately furnishing to the Staff two courtesy copies of Amendment No. 1 marked to show the changes made to the Registration Statement. For the Staff’s convenience, the text of the Staff’s comment is set forth below in bold and corresponds to the numbered comment contained in the Comment Letter, followed by the Company’s response. Terms not otherwise defined in this letter shall have the meanings set forth in the Registration Statement. General 1. Please revise your amended filing to address the class action complaint filed on August 2, 2017 in Delaware federal court, challenging the proposed merger and alleging violations of Sections 14(a) and 20(a) of the Exchange Act. Response: The Registration Statement has been revised in response to the Staff’s comment. Please see page 144 of Amendment No. 1. The Merger Background of the Merger, page 56 2. Please provide us supplementally with copies of any non-public information — board books, documents, financial forecasts (including “preliminary financial and strategic considerations”), projections and presentations — used by the companies in the merger negotiations. We may have additional comments. Response: The presentation materials prepared by Citigroup Global Markets Inc. (“Citi”) in connection with its opinion, dated June 19, 2017, to the EQT board summarized under the caption “Opinion of EQT’s Financial Advisor” are being provided to the Staff under separate cover by counsel for Citi on a confidential and supplemental basis pursuant to Rule 418 under the Securities Act of 1933, as amended, and Rule 12b-4 under the Securities Exchange Act of 1934, as amended. In accordance with such Rules, counsel for Citi has requested that these materials be returned promptly following completion of the Staff’s review thereof. Such materials are not, and will not be, filed with or deemed to be part of the Registration Statement, including any amendments thereto. By separate letter, counsel for Citi also has requested confidential treatment of these materials pursuant to the provisions of 17 C.F.R. § 200.83. The confidential presentation materials prepared by Barclays Capital Inc. (“Barclays”) in connection with its opinion, dated June 19, 2017, to the board of Rice Energy Inc. (“Rice”) summarized under the caption “Opinion of Rice’s Financial Advisor” are being provided to the Staff under separate cover by counsel for Barclays on a confidential and supplemental basis pursuant to Rule 418 under the Securities Act of 1933, as amended, and Rule 12b-4 under the Securities Exchange Act of 1934, as amended. In accordance with such Rules, counsel for Barclays is requesting that these materials be returned promptly following completion of the Staff’s review thereof. Such materials are not, and will not be, filed with or deemed to be part of the Registration Statement, including any amendments thereto. Counsel for Barclays is also requesting confidential treatment of these materials pursuant to the provisions of 17 C.F.R. § 200.83. 2 3. Explain why Rice and EQT decided not to pursue further discussions in July of 2015. Response: The Registration Statement has been revised in response to the Staff’s comment. Please see page 58 of Amendment No. 1. 4. We note from your disclosure that Company A discontinued merger negotiations in August 2016, on account of changes in the trading price of Rice Energy’s stock relative to its own. In order to place the Rice Energy board’s consideration of possible alternatives in context, please revise to discuss whether the Rice Energy board attempted to re-engage Company A in March 2017 once the company agreed to reconvene merger discussions with EQT. Response: The Registration Statement has been revised in response to the Staff’s comment. Please see page 63 of Amendment No. 1. 5. Unlike your discussion of earlier terms proposed by EQT, you do not indicate the premium offered on May 4, 2017 or in later discussions. Nor do you indicate the market price of each company so that investors can calculate the premium. Please advise or revise. Response: The Registration Statement has been revised in response to the Staff’s comment. Please see pages 63-64 of Amendment No. 1. 6. We note a number of references to “open deal points” in your later discussion in this section, after EQT and Rice Energy began to consider formal proposals. Please revise to more fully describe these deliberations and clarify how the terms evolved during the course of these discussions. Please also elaborate on the financial underpinnings of the implied value calculations reflected in the various proposals and counterproposals. Response: The Registration Statement has been revised in response to the Staff’s comment. Please see pages 65-68 of Amendment No. 1. 7. To the extent that the series of calls conducted on June 4, 2017 impacted any executive officers, please also provide more details. Response: The Staff is hereby advised that the series of calls conducted on June 4, 2017 did not impact any executive officers. 8. Please expand further on the Rice Energy board’s rationale in concluding that Company C could not potentially provide a proposal superior to the EQT proposal, in light of your representation that Company C had not yet provided significant detail regarding an alternative combination transaction on the June 15, 2017 call. Response: The Registration Statement has been revised in response to the Staff’s comment. Please see pages 63 and 67 of Amendment No. 1. 3 Opinion of EQT’s Financial Advisor, page 85 Opinion of Rice’s Financial Advisor, page 106 9. Please supplement your disclosure in the above-referenced sections to explain whether Rice Energy equity award conversions impacted the analysis undertaken by Citi and Barclays, respectively, in connection with the rendering of the fairness opinions. Response: The Registration Statement has been revised in response to the Staff’s comment. Please see pages 89 and 110 of Amendment No. 1. Unaudited Pro Forma Condensed Combined Financial Statements Note 2 — Pro Forma Adjustments and Assumptions, page 167 10. Revise to provide a qualitative description of the factors that make up the goodwill recognized on a pro forma basis in connection with the merger consistent with FASB ASC 805-30-50-1a. In addition, separately disclose each significant class of intangible asset recognized on a pro forma basis. Response: The Registration Statement has been revised in response to the Staff’s comment. Please see pages 170-171 of Amendment No. 1. 11. Pro forma adjustment (c) relates to the planned issuance of new senior notes, the planned upsize of your revolving credit facility, and the planned extinguishment of outstanding indebtedness of Rice Energy Inc. As these adjustments appear to relate to actions management intends to take in response to the merger transaction, tell us how they are consistent with Rules 11-02(a) and 11-02(b)(6) of Regulation S-X. Response: The Company respectfully advises the Staff that it believes that the planned issuance of senior notes, the planned extinguishment of indebtedness of Rice and the upsizing of EQT’s revolving credit facility are factually supportable, directly attributable to the transaction, and expected to have a continuing impact on the statement of operations and, as such, are properly included in the pro forma financial statements in accordance with Rules 11-02(a) and 11-02(b)(6) of Regulation S-X. Financing is necessary to fund the cash portion of the merger consideration and other transactions relating to the merger. While the Company secured bridge loan facility commitments to ensure that, together with cash on hand and borrowings under EQT’s revolving credit facility, sufficient cash would be available at closing, the interest rate and terms of the bridge facility commitments are significantly less favorable than those EQT believes it can obtain with longer-term traditional financing in a capital markets transaction. Likewise, the interest rate and terms on the indebtedness of Rice are significantly less favorable than what EQT believes it can obtain in such a capital markets transaction given the Company’s investment grade credit rating. As a result, the Company expects to issue new senior notes to assist in funding the cash consideration required for the merger and the extinguishment of certain Rice indebtedness in connection with closing. The new senior notes are expected to be mandatorily redeemable in the event the merger does not close by a certain date. 4 Given these circumstances, the planned issuance of new senior notes and extinguishment of the Rice indebtedness are directly attributable to the merger. These activities are factually supportable given the observation of current or recent interest rates, terms and capital market activity for transactions of comparable size by companies of comparable credit rating. These transactions will have a continuing impact on the statement of operations through the reduction in interest expense as a result of these transactions. With respect to the upsizing of EQT’s revolving credit facility, the Company completed an amendment of the facility during the third quarter in anticipation of the merger. The amended facility currently has commitments equal to those under EQT’s previously existing facility, but includes an incremental $1 billion of commitments that will become available in connection with closing the merger. EQT’s previously existing facility did not expire until 2019; the Company amended the facility at this time in anticipation of the merger. As such, the planned upsizing of EQT’s revolving credit facility is directly attributable to the merger and is factually supportable with the actual interest rate and financing fees incurred on the transaction. This upsize will have a continuing impact on the statement of operations through the amortization of the related financing fees into interest expense. The Registration Statement has been revised in response to the Staff’s comment. Please see pages 171-172 of Amendment No. 1. 12. Revise your disclosure related to adjustment (i) to explain your basis for using a tax rate for your pro forma income tax adjustments which appears to differ from the statutory rate. Response: The Registration Statement has been revised in response to the Staff’s comment. Please see page 173 of Amendment No. 1. Note 4 — Supplemental Pro Forma Natural Gas, NGLs and Crude Oil Reserves Information, page 174 13. Revise your disclosure of pro forma proved reserves to provide the total reserve quantities for all products. Refer to SAB Topic 2D along with FASB ASC 932-235-50-4 and 55-2. Response: The Registration Statement has been revised in response to the Staff’s comment. Please see pages 176-178 of Amendment No. 1. * * * * * * 5 We hope that the foregoing has been responsive to the Staff’s comments. If you have any questions or comments regarding the foregoing, please do not hesitate to contact me at (212) 403-1347 or by email at SACohen@wlrk.com or Victor Goldfeld at (212) 403-1005 or by email at VGoldfeld@wlrk.com. Sincerely, /s/ Steven A. Cohen Steven A. Cohen cc: Lewis B. Gardner, EQT Corporation Victor Goldfeld, Wachtell, Lipton, Rosen & Katz William E. Jordan, Rice Energy Inc. Stephen M. Gill, Vinson & Elkins LLP 6