Business Context and Reporting Period
Company: Kimbell Royalty Partners, LP
Filing Type: Form 8-K (Current Report)
Date of Report: September 28, 2018
Event Date: September 27, 2018
Context: The Partnership entered into a Material Definitive Agreement (Underwriting Agreement) to conduct a public offering of common units.
Key Financial Metrics and Transaction Details
- Offering Size: 3,000,000 Common Units at $19.00 per unit.
- Over-Allotment Option: Underwriters granted a 30-day option to purchase up to an additional 450,000 Common Units.
- Expected Net Proceeds: Approximately $53.3 million (net of underwriting discount and offering expenses).
- Use of Proceeds:
- Partnership will use proceeds to purchase 3,000,000 (or 3,450,000 if option exercised) common units in the Operating Company (OpCo Units).
- Operating Company will use proceeds to repay a portion of outstanding borrowings under the Partnership's revolving credit facility.
- Closing Date: Expected October 1, 2018, subject to customary conditions.
Material Changes and Conflicts of Interest
The filing discloses a material change in capital structure and debt levels due to the equity offering and subsequent debt repayment. A specific conflict of interest was identified under FINRA Rule 5121:
- Conflicted Underwriters: Credit Suisse Securities (USA) LLC, RBC Capital Markets, LLC, and Wells Fargo Securities, LLC are lenders under the Partnership's revolving credit facility that will be repaid with offering proceeds.
- Independent Underwriter: UBS Securities LLC acted as a "qualified independent underwriter" to ensure compliance with FINRA rules. UBS received no compensation for this specific role.
- Restrictions: Conflicted underwriters were prohibited from confirming sales to discretionary accounts without specific written approval from the account holder.
Guidance, Outlook, and Risks
Outlook: The transaction is expected to close on October 1, 2018. The primary strategic outcome is the reduction of debt under the revolving credit facility.
Risks and Contingencies:
- Closing is subject to customary conditions.
- The Partnership has agreed to indemnify underwriters against certain liabilities, including those under the Securities Act.
- Underwriters and affiliates engage in various financial activities with the Partnership, creating potential ongoing conflicts of interest.
Management Commentary: The filing text does not provide specific management commentary beyond the transaction mechanics and regulatory compliance details.
Investor Verification Checklist
- Verify the final closing date and whether the over-allotment option was exercised.
- Confirm the exact amount of debt repaid from the revolving credit facility post-closing.
- Review the full Underwriting Agreement (Exhibit 1.1) for specific indemnification terms and termination provisions.
- Monitor future filings for any changes in the Partnership's leverage ratios following the debt repayment.