Business Context and Reporting Period
This Form 8-K filing by NGL Energy Partners LP, dated June 13, 2017, reports the execution of the Fourth Amended and Restated Agreement of Limited Partnership and the closing of a registered public offering of preferred units.
Key Financial Metrics and Capital Structure
The filing details the issuance of 8,400,000 Class B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units. Key terms include:
- Liquidation Preference: $25.00 per unit.
- Initial Distribution Rate: 9.00% per annum ($2.25 per unit) from the original issue date until July 1, 2022.
- Floating Rate: On or after July 1, 2022, the rate adjusts to Three-Month LIBOR plus 721.3 basis points.
- Payment Schedule: Quarterly in arrears, commencing October 15, 2017.
- Ranking: Senior to Common Units; on parity with 10.75% Class A Convertible Preferred Units.
The filing text does not provide specific values for revenue, profit, cash flow, operating margins, total debt, or liquidity ratios.
Material Changes
The primary material change is the amendment of the Partnership Agreement to authorize the Class B Preferred Units and the subsequent issuance of 8,400,000 units. This issuance included 1,000,000 units issued pursuant to the partial exercise of the underwriters' option to cover overallotments.
Outlook, Risks, and Contingencies
Redemption Rights: The Partnership may redeem the units in whole or in part on or after July 1, 2022, at $25.00 per unit plus accumulated unpaid distributions. Redemption is also permitted within 120 days of a Change of Control.
Conversion Rights: Upon a Change of Control, holders may convert units into Common Units at a ratio equal to the lesser of the liquidation preference plus accrued distributions divided by the Common Unit Price, or 3.63636 units per Class B Preferred Unit.
Voting Rights: The units generally have no voting rights except to approve amendments with a material adverse effect or the issuance of Senior Securities or additional Parity Securities while distributions are in arrears.
Liquidity Risk: Distributions are payable only when, as, and if declared by the General Partner out of legally available funds.
Investor Verification Checklist
- Verify the total capital raised from the 8,400,000 Class B Preferred Units issuance.
- Confirm the current status of the underwriters' overallotment option (partially exercised).
- Review the full text of the Fourth Amended and Restated Agreement of Limited Partnership (Exhibit 3.1) for detailed legal terms.
- Assess the impact of the new 9.00% fixed-to-floating obligation on the Partnership's future cash flow and distribution coverage.
- Monitor the Partnership's ability to pay quarterly distributions commencing October 15, 2017.