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Hiland Partners Suspends Quarterly Distribution on Common and Subordinated Units. Hiland Holdings Suspends Quarterly Distribution on Common Units.

Posted on: Monday, 27 April 2009, 16:30 CDT

ENID, Okla., April 27 /PRNewswire-FirstCall/ -- The Hiland companies, Hiland Partners, LP (Nasdaq: HLND) (the "Partnership" or "HLND") and Hiland Holdings GP, LP (Nasdaq: HPGP) ("Hiland Holdings" or "HPGP") today suspended quarterly distributions on their respective outstanding units.

Quarterly Distribution Declarations

Hiland Partners, LP

The Board of Directors of Hiland Partners GP, LLC, the general partner of Hiland Partners, LP, today announced its decision to suspend quarterly distributions on the Partnership's common and subordinated units beginning with the first quarter distribution of 2009.

The decision to suspend distributions on the Partnership's common and subordinated units was based on the Board of Directors' consideration of the impact of lower commodity prices and drilling activity on the Partnership's current and projected throughput volumes, midstream segment margins and cash flows. The Board of Directors also considered future required levels of capital expenditures and the level of the Partnership's outstanding indebtedness under its secured revolving credit facility relative to such projections. Management expects that the Partnership will be in violation of the maximum consolidated funded debt to EBITDA ratio contained in the Partnership's senior secured revolving credit facility at the end of the second quarter of 2009, unless the ratio is amended, the Partnership's debt is restructured or the Partnership receives an infusion of equity capital. Management has initiated discussions with certain lenders under the credit facility as to potential ways to address the expected covenant breach. While no potential solution has been agreed to, the Partnership would expect that any solution would likely require the infusion of additional equity capital or the incurrence of subordinated indebtedness by the Partnership and the suspension of distributions for a certain period of time. There can be no assurance that any such agreement will be reached with the lenders or that any required equity or debt financing will be available to the Partnership.

Under the terms of its partnership agreement, the Partnership's common units will carry an arrearage for the first quarter's minimum quarterly distribution of $0.45 per unit that must be paid before the Partnership can make distributions to its subordinated units. The Board of Directors will set future distribution rates based on the amount of cash available for distribution after taking into account the Partnership's expected liquidity requirements.

"The commodity price environment continues to create a number of challenges," said Joseph L. Griffin, President and Chief Executive Officer of Hiland. "In addition to the downward pressure on our midstream segment margin, the continued decline in natural gas prices has negatively impacted upstream capital expenditures and related drilling activity in our service territories, resulting in decreased current and projected throughput volumes for the Partnership."

"The Partnership will continue to carefully scrutinize distribution and discretionary capital expenditure decisions given the potential covenant issues related to the Partnership's secured revolving credit facility," continued Griffin.

Hiland Holdings GP, LP

The Board of Directors of Hiland Partners GP Holdings, LLC, the general partner of Hiland Holdings GP, LP, today announced its decision to suspend quarterly distributions on its common units beginning with the first quarter of 2009. Hiland Holdings sole assets are its two percent general partner interest, 2,321,471 common units and 3,060,000 subordinated units in Hiland Partners, LP, and the incentive distribution rights of Hiland Partners, LP.

About the Hiland Companies

Hiland Partners, LP is a publicly traded midstream energy partnership engaged in purchasing, gathering, compressing, dehydrating, treating, processing and marketing of natural gas, and fractionating, or separating, and marketing of natural gas liquids, or NGLs. The Partnership also provides air compression and water injection services for use in oil and gas secondary recovery operations. The Partnership's operations are primarily located in the Mid-Continent and Rocky Mountain regions of the United States. Hiland Partners, LP's midstream assets consist of fourteen natural gas gathering systems with approximately 2,011 miles of gathering pipelines, five natural gas processing plants, seven natural gas treating facilities and three NGL fractionation facilities. The Partnership's compression assets consist of two air compression facilities and a water injection plant.

Hiland Holdings GP, LP owns the two percent general partner interest, 2,321,471 common units and 3,060,000 subordinated units in Hiland Partners, LP, and the incentive distribution rights of Hiland Partners, LP.

This press release includes certain statements concerning expectations for the future that are forward-looking statements. Such forward-looking statements are subject to a variety of known and unknown risks, uncertainties, and other factors that are difficult to predict and many of which are beyond management's control. An extensive list of factors that can affect future results are discussed in the Partnership's Annual Report on Form 10-K and other documents filed from time to time with the Securities and Exchange Commission. Any such forward looking statements are made as of the date of this press release and the Partnership undertakes no obligation to update or revise any such forward-looking statements to reflect new information or events.

SOURCE Hiland Partners, LP; Hiland Holdings GP, LP

Source: PR Newswire

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