Business Context and Reporting Period
This Form 6-K filing by KNOT Offshore Partners LP (the "Partnership") covers the month of February 2017. The report details the closing of a private placement transaction for Series A Convertible Preferred Units and the execution of related amendments and agreements.
Key Financial Metrics and Transaction Details
- Transaction Size: Issued 2,083,333 Series A Preferred Units at an issue price of $24.00 per unit.
- Gross Proceeds: $50 million.
- Net Proceeds: Approximately $48.5 million after deducting estimated fees and expenses.
- Use of Proceeds: General partnership purposes, including potential acquisitions, capital expenditures, or repayment of indebtedness.
- Dividend Rate: Cumulative, quarterly distributions at an annual rate of 8.0% of the Issue Price.
- Liquidation Preference: $24.00 per unit plus accumulated unpaid distributions, ranking senior to Common Units.
- Debt Covenants: Holders must consent to additional indebtedness if total indebtedness exceeds 70% of total capitalization.
Material Changes and Contractual Amendments
On February 2, 2017, the Partnership amended the original Series A Preferred Unit Purchase Agreement to permit the sale of up to an additional $49 million of Series A Preferred Units at any time prior to June 30, 2017. The Partnership also executed the Second Amended and Restated Agreement of Limited Partnership to define the rights of the new security class.
Outlook, Risks, and Unusual Items
- Conversion Terms: Units are convertible into Common Units at the holder's option after February 2, 2019. The conversion rate is generally one-for-one but is subject to quarterly redetermination based on book value.
- Redemption Rights: The Partnership may redeem units between February 2, 2019, and February 2, 2027. Upon a change of control, holders may require redemption at 100% of the Issue Price.
- Voting Rights: Units have voting rights identical to Common Units, except they cannot nominate directors unless distributions are unpaid for four consecutive quarters (a "Trigger Event").
- Registration Rights: The Partnership agreed to file a shelf registration statement for the underlying Common Units by February 2, 2019.
- Financial Reporting: The filing does not provide specific revenue, profit, cash flow, or margin figures for the period.
Investor Verification Checklist
- Verify the exact amount of the additional $49 million tranche sold under the amended agreement, if any, prior to the June 30, 2017 deadline.
- Confirm the Partnership's current total indebtedness relative to total capitalization to assess the 70% debt covenant threshold.
- Review the Second Amended and Restated Partnership Agreement (Exhibit 3.2) for specific details on book value calculations affecting conversion rates.
- Monitor the status of the shelf registration statement required to be effective by February 2, 2019.
- Assess the impact of the 8.0% cumulative dividend obligation on future cash flows available for Common Unit distributions.