Business Context and Reporting Period
This Form 8-K Current Report was filed by NGL Energy Partners LP on June 6, 2017. The filing discloses the entry into a material definitive agreement regarding an underwritten public offering of preferred units.
Key Financial Metrics and Transaction Details
- Security Issued: 9.00% Class B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units.
- Offering Size: 7,400,000 Firm Units at $25.00 per unit.
- Over-Allotment Option: Underwriters granted a 30-day option to purchase up to 1,110,000 additional units.
- Net Proceeds: Approximately $179 million (assuming no exercise of the over-allotment option).
- Distribution Rate: 9.00% per annum ($2.25 per unit) from issuance until July 1, 2022. Thereafter, the rate will be three-month LIBOR plus 721.3 basis points.
- Use of Proceeds: Repayment of indebtedness under the revolving credit agreement, with potential re-borrowing for general partnership purposes or to retire other senior indebtedness.
Material Changes and Agreements
The primary material change is the execution of an Underwriting Agreement with UBS Securities LLC, Morgan Stanley & Co. LLC, and RBC Capital Markets, LLC. Closing is scheduled for June 13, 2017.
Additionally, the Partnership entered into a Waiver and Option Agreement with holders of 10.75% Class A Convertible Preferred Units. These holders waived their preemptive rights regarding the Class B offering and were granted an option to purchase up to 41.6777% of the Class B units sold as a new Class C Preferred Unit series.
Guidance, Risks, and Contingencies
The filing does not provide updated operational guidance or financial outlook beyond the specific terms of the offering. The obligations of the underwriters are subject to customary closing conditions. The filing notes a related party transaction involving Jared Parker, a Managing Director of Oaktree Capital Management L.P., which manages funds comprising the Class A Preferred Unitholders.
Investor Verification Checklist
- Verify the final closing date and whether the underwriters exercised the 1,110,000 unit over-allotment option.
- Confirm the actual net proceeds received after deducting underwriting discounts and offering expenses.
- Review the specific terms of the Class C Preferred Units issued to Class A holders under the Waiver and Option Agreement.
- Monitor the Partnership's debt levels post-closing to confirm the repayment of revolving credit facility indebtedness.