Morgan Stanley pays $1.75bn for US midstream company

The infrastructure arm of the bank’s asset management business is financing the acquisition of Brazos Midstream’s Delaware Basin subsidiaries through its NHIP II fund.

Morgan Stanley Infrastructure has acquired an oil and gas midstream company operating in the West Texas Delaware Basin for $1.75 billion in cash.

The infrastructure platform of Morgan Stanley Investment Management purchased Brazos Midstream Holdings from Old Ironsides Energy, a Boston-based fund manager investing in oil and natural gas.

Brazos was created in 2015 with the backing of Old Ironsides Energy to acquire and develop midstream assets in the Delaware Basin in West Texas. The company owns 350 miles of natural gas and crude oil pipelines and processing facilities and 50,000 barrels of oil storage capacity.

Morgan Stanley said it is financing the acquisition through North Haven Infrastructure Partners II, a vehicle it closed in 2016 on $3.6 billion. NHIP II invests between $200 million and $400 million in energy, utilities and transportation assets, mostly in North America and Europe, that show signs of potential for value enhancement through operational improvements.

The deal includes committed debt financing of $950 million – a $900 million term loan and a $50 million revolving credit facility.

Brazos, based in Fort Worth, Texas, said Morgan Stanley Infrastructure’s acquisition will provide growth capital, including for the development of a third natural gas processing facility expected to begin operations later this year. Brazos will retain its name and will operate as a portfolio company of NHIP II, according to a statement. Its management team will also remain in place.

Overall, Morgan Stanley Investment Management has around $482 billion in assets under management, of which $48 billion is in real assets.

Old Ironsides Energy is reportedly raising its third vehicle, Old Ironsides Energy Fund III, which will invest primarily in conventional energy in North America. Launched in October 2017, the firm has so far raised $300.3 million, according to Infrastructure Investor data. It is unclear how much Old Ironsides Energy is targeting for its latest vehicle, but in 2015 it closed Old Ironsides Energy Fund II on $1.3 billion.