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Partners Equity and Cash Distributions
9 Months Ended
Sep. 30, 2023
Partners' Equity and Cash Distributions  
Partners' Equity and Cash Distributions

Note 13.    Partners’ Equity and Cash Distributions

Partners’ Equity

Common Units and General Partner Interest

At September 30, 2023, there were 33,995,563 common units issued, including 6,395,995 common units held by affiliates of the General Partner, including directors and executive officers, collectively representing a 99.33% limited partner interest in the Partnership, and 230,303 general partner units representing a 0.67% general partner interest in the Partnership. There have been no changes to common units or the general partner interest during the three and nine months ended September 30, 2023.

Series A Preferred Units

At September 30, 2023, there were 2,760,000 Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units issued representing limited partner interests (the “Series A Preferred Units”) for $25.00 per Series A Preferred Unit. There have been no changes to the Series A Preferred Units during the three and nine months ended September 30, 2023.

Series B Preferred Units

At September 30, 2023, there were 3,000,000 9.50% Series B Fixed Rate Cumulative Redeemable Perpetual Preferred Units issued representing limited partners interests (the “Series B Preferred Units”) for $25.00 per Series B Preferred Unit. There have been no changes to the Series B Preferred Units during the three and nine months ended September 30, 2023.

Cash Distributions

Common Units

The Partnership intends to make cash distributions to common unitholders on a quarterly basis, although there is no assurance as to the future cash distributions since they are dependent upon future earnings, capital requirements, financial condition and other factors. The Credit Agreement prohibits the Partnership from making cash distributions if any potential default or Event of Default, as defined in the Credit Agreement, occurs or would result from the cash distribution. The indentures governing the Partnership’s outstanding senior notes also limit the Partnership’s ability to make distributions to its common unitholders in certain circumstances.

Within 45 days after the end of each quarter, the Partnership will distribute all of its Available Cash (as defined in its partnership agreement) to common unitholders of record on the applicable record date.

The Partnership will make distributions of Available Cash from distributable cash flow for any quarter in the following manner: 99.33% to the common unitholders, pro rata, and 0.67% to the General Partner, until the Partnership distributes for each outstanding common unit an amount equal to the minimum quarterly distribution for that quarter; and thereafter, cash in excess of the minimum quarterly distribution is distributed to the common unitholders and the General Partner based on the percentages as provided below.

As holder of the IDRs, the General Partner is entitled to incentive distributions if the amount that the Partnership distributes with respect to any quarter exceeds specified target levels shown below:

Marginal Percentage

 

Total Quarterly Distribution

Interest in Distributions

 

    

Target Amount

    

Unitholders

    

General Partner

  

First Target Distribution

up to $0.4625

 

99.33

%  

0.67

%

Second Target Distribution

 

above $0.4625 up to $0.5375

 

86.33

%  

13.67

%

Third Target Distribution

 

above $0.5375 up to $0.6625

 

76.33

%  

23.67

%

Thereafter

 

above $0.6625

 

51.33

%  

48.67

%

The Partnership paid the following cash distributions to common unitholders during 2023 (in thousands, except per unit data):

For the

    

Per Unit

    

    

    

    

 

Cash Distribution

Quarter

Cash

Common

General

Incentive

Total Cash

 

Payment Date

    

Ended

Distribution

Units

Partner

Distribution

Distribution

 

2/14/2023 (1)

12/31/22

$

1.5725

$

53,458

$

569

$

1,383

$

55,410

5/15/2023 (2)

03/31/23

 

0.6550

 

22,267

 

162

 

1,587

 

24,016

8/14/2023 (2)

06/30/23

 

0.6750

 

22,947

 

169

 

2,062

 

25,178

(1)This distribution consists of a quarterly distribution of $0.6350 per unit and a one-time special distribution of $0.9375 per unit. The quarterly distribution of $0.6350 per unit resulted in the Partnership reaching its third target level distribution for this quarter. As a result, the General Partner, as the holder of the IDRs, received an incentive distribution with respect to the $0.6350 per unit distribution. The General Partner agreed to waive its incentive distribution rights with respect to the one-time special distribution of $0.9375 per unit.
(2)This distribution resulted in the Partnership reaching its third target level distribution for this quarter. As a result, the General Partner, as the holder of the IDRs, received an incentive distribution.

In addition, on October 24, 2023, the board of directors of the General Partner declared a quarterly cash distribution of $0.6850 per unit ($2.74 per unit on an annualized basis) on all of its outstanding common units for the period from July 1, 2023 through September 30, 2023. On November 14, 2023, the Partnership will pay this cash distribution to its common unitholders of record as of the close of business on November 8, 2023.

Preferred Units

Distributions on the Series A Preferred Units are cumulative from August 7, 2018, the original issue date of the Series A Preferred Units, and payable quarterly in arrears on February 15, May 15, August 15 and November 15 of each year (each, a “Series A Distribution Payment Date”), commencing on November 15, 2018, to holders of record as of the opening of business on the February 1, May 1, August 1 or November 1 next preceding the Series A Distribution Payment Date, in each case, when, as, and if declared by the General Partner out of legally available funds for such purpose. Distributions on the Series A Preferred Units will be paid out of Available Cash with respect to the quarter immediately preceding the applicable Series A Distribution Payment Date. The initial distribution rate for the Series A Preferred Units from and including the date of original issue to, but excluding, August 15, 2023 was 9.75% per annum of the $25.00 liquidation preference per unit. On and after August 15, 2023, distributions on the Series A Preferred Units accumulate for each distribution period at a percentage of the $25.00 liquidation preference equal to (i) an annual floating rate of a substitute or successor base rate that a calculation agent has determined to be the most comparable to the three-month LIBOR plus (ii) a spread of 6.774% per annum. For the successor base rate comparable to the three-month LIBOR, the calculation agent has selected the industry-accepted substitute which is the 3-month CME Term SOFR plus the applicable tenor spread of 0.26161% per annum.

At any time on or after August 15, 2023, the Partnership may redeem, in whole or in part, the Series A Preferred Units at a redemption price in cash of $25.00 per Series A Preferred Unit plus an amount equal to all accumulated and unpaid distributions thereon to, but excluding, the date of redemption, whether or not declared. The Partnership must provide not less than 30 days’ and not more than 60 days’ advance written notice of any such redemption. Any such redemptions would be effected only out of funds legally available for such purposes and would be subject to compliance with the provisions of the Partnership’s outstanding indebtedness.

Distributions on the Series B Preferred Units are cumulative from March 24, 2021, the original issue date of the Series B Preferred Units, and payable quarterly in arrears on February 15, May 15, August 15 and November 15 of each year (each, a “Series B Distribution Payment Date”), commencing on May 15, 2021, to holders of record as of the opening of business on the February 1, May 1, August 1 or November 1 next preceding the Series B Distribution Payment Date, in each case, when, as, and if declared by the General Partner out of legally available funds for such purpose. Distributions on the Series B Preferred Units will be paid out of Available Cash with respect to the quarter immediately preceding the applicable Series B Distribution Payment Date.

At any time on or after May 15, 2026, the Partnership may redeem, in whole or in part, the Series B Preferred Units at a redemption price in cash of $25.00 per Series B Preferred Unit plus an amount equal to all accumulated and unpaid distributions thereon to, but excluding, the date of redemption, whether or not declared. The Partnership must provide not less than 30 days’ and not more than 60 days’ advance written notice of any such redemption.

The Partnership paid the following cash distributions on the Series A Preferred Units and the Series B Preferred Units during 2023 (in thousands, except per unit data):

Series A Preferred Units

Series B Preferred Units

 

For the

Per Unit

Per Unit

Cash Distribution

Quarterly Period

Cash

Total Cash

Cash

Total Cash

 

Payment Date

    

Covering

Distribution

    

Distribution

Distribution

    

Distribution

 

2/15/2023

11/15/22 - 2/14/23

$

0.609375

$

1,682

$

0.59375

$

1,781

5/15/2023

2/15/23 - 5/14/23

0.609375

1,682

0.59375

1,781

8/15/2023

5/15/23 - 8/14/23

0.609375

1,682

0.59375

1,781

In addition, on October 16, 2023, the board of directors (“the Board”) of the General Partner declared a quarterly cash distribution of $0.77501 per unit ($3.10 per unit on an annualized basis) on the Series A Preferred Units for the period from August 15, 2023 through November 14, 2023. The applicable distribution rate on the Series A Preferred Units for such period, as calculated by the Partnership’s calculation agent, is approximately 12.40%. This distribution will be payable on November 15, 2023 to holders of record as of the opening of business on November 1, 2023.

The Board also declared a quarterly cash distribution of $0.59375 per unit ($2.375 per unit on an annualized basis) on the Series B Preferred Units for the period from August 15, 2023 through November 14, 2023. This distribution will be payable on November 15, 2023 to holders of record as of the opening of business on November 1, 2023.