Business Context and Reporting Period
This Form 8-K Current Report was filed by Energy Transfer LP on June 15, 2021. The filing reports the issuance of new preferred equity securities and a corresponding amendment to the Partnership Agreement to establish the rights of these new units.
Key Financial Metrics and Capital Structure
- Security Issued: 900,000 Series H Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Units.
- Issue Price: $1,000.00 per unit.
- Total Proceeds: $900,000,000 (calculated from 900,000 units at $1,000).
- Initial Distribution Rate: 6.500% per annum.
- First Distribution Date: November 15, 2021 (pro-rated initial distribution approx. $27.08 per unit).
- Reset Mechanism: After the First Reset Date (November 15, 2026), the rate resets to the Five-year U.S. Treasury Rate plus a spread of 5.694%.
- Seniority: Senior to Common Units and Class A/B units; on parity with Series A through G Preferred Units.
Material Changes
The primary material change is the expansion of the Partnership's capital structure through the issuance of the Series H Preferred Units. This issuance required the adoption of Amendment No. 9 to the Third Amended and Restated Agreement of Limited Partnership to define the specific rights, obligations, and seniority of the new security class.
Outlook, Risks, and Terms
- Redemption Terms: The Partnership may redeem the units at $1,000.00 per unit during specific Redemption Periods. In the event of certain ratings agency downgrades, the Partnership may redeem the units at $1,020.00 per unit.
- Voting Rights: Holders generally have no voting rights, except for limited rights regarding amendments materially adverse to the units, issuance of parity securities while distributions are in arrears, or issuance of senior securities.
- Liquidity: The units are perpetual with no stated maturity and no mandatory redemption or sinking fund.
Investor Verification Checklist
- Verify the final closing of the $900 million issuance and the receipt of proceeds.
- Review the full text of Amendment No. 9 (Exhibit 3.1) for specific covenants and redemption triggers.
- Monitor the Five-year U.S. Treasury Rate to project future distribution costs after the November 2026 reset date.
- Confirm the Partnership's credit rating status to assess the risk of a $1,020.00 redemption price trigger.