Equity

9 Months Ended

Dec. 31, 2023

Partnership Equity

The Partnership’s equity consists of a 0.1% GP interest and a 99.9% limited partner interest, which consists of common units. Our GP has the right, but not the obligation, to contribute a proportionate amount of capital to the Partnership to maintain its 0.1% GP interest. Our GP is not required to guarantee or pay any of our debts and obligations. At December 31, 2023, we owned 8.69% of our GP.

General Partner Contributions

In connection with the issuance of common units for the vesting of restricted units during the nine months ended December 31, 2023, we issued 586 notional units to our GP for less than $0.1 million in order to maintain its 0.1% interest in the Partnership.

Suspension of Common Unit and Preferred Unit Distributions

The board of directors of our GP temporarily suspended all distributions (common unit distributions which began with the quarter ended December 31, 2020 and preferred unit distributions which began with the quarter ended March 31, 2021) in order to deleverage our balance sheet and meet the financial performance ratios set within the 2026 Indenture, as discussed further in Note 7.

Class B Preferred Units

As of December 31, 2023, there were 12,585,642 of our Class B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class B Preferred Units”) outstanding.

The current distribution rate for the Class B Preferred Units is a floating rate of the three-month LIBOR interest rate (5.59% for the quarter ended December 31, 2023) plus a spread of 7.213%. Effective July 3, 2023, the reference to LIBOR in the formulation for the distribution rate in these securities was replaced with three-month CME Term SOFR, as calculated and published by CME Group Benchmark Administration, Ltd., plus a tenor spread adjustment of 0.26161%, in accordance with the Adjustable Interest Rate (LIBOR) Act (“LIBOR Act”), and the rules implementing the LIBOR Act. For the quarter ended December 31, 2023, we did not declare or pay distributions to the holders of the Class B Preferred Units, thus the quarterly distribution for December 31, 2023 is $0.8004 and the cumulative distribution since suspension for each Class B Preferred Unit is $7.8051, not including interest. In addition, the amount of cumulative but unpaid distributions shall continue to accumulate at the then applicable rate until all unpaid distributions have been paid in full. The total amount earned as of December 31, 2023 is approximately $111.9 million.

Class C Preferred Units

As of December 31, 2023, there were 1,800,000 of our Class C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class C Preferred Units”) outstanding.

The current distribution rate for the Class C Preferred Units is 9.625% per year of the $25.00 liquidation preference per unit (equal to $2.41 per unit per year). For the quarter ended December 31, 2023, we did not declare or pay distributions to the holders of the Class C Preferred Units, thus the quarterly distribution for December 31, 2023 is $0.6016 and the cumulative distribution since suspension for each Class C Preferred Unit is $7.2189, not including interest. In addition, the amount of cumulative but unpaid distributions shall continue to accumulate at the then applicable rate until all unpaid distributions have been paid in full. The total amount earned as of December 31, 2023 is approximately $14.6 million.

On and after April 15, 2024, distributions on the Class C Preferred Units will accumulate at a percentage of the $25.00 liquidation preference equal to the applicable three-month LIBOR interest rate (or alternative rate as determined in accordance with the Partnership Agreement) plus a spread of 7.384%.

Class D Preferred Units

As of December 31, 2023, there were 600,000 preferred units (“Class D Preferred Units”) and warrants exercisable to purchase an aggregate of 25,500,000 common units outstanding.

The following table summarizes the outstanding warrants at December 31, 2023:


Issuance Date and Description	Number of Warrants	Exercise Price
July 2, 2019
Premium warrants	10,000,000	$	17.45
Par warrants	7,000,000	$	14.54
October 31, 2019
Premium warrants	5,000,000	$	16.28
Par warrants	3,500,000	$	13.56

All outstanding warrants are currently exercisable and any unexercised warrants will expire on the tenth anniversary of the date of issuance. The warrants will not participate in cash distributions.

The current distribution rate for the Class D Preferred Units is 10.00% (equal to $100.00 per every $1,000 in unit value per year), and includes an additional 0.50% rate increase due to a Class D distribution payment default, as defined within the Partnership Agreement. For the quarter ended December 31, 2023, we did not declare or pay distributions to the holders of the Class D Preferred Units, thus the estimated average quarterly distribution at December 31, 2023 is $27.31 and the estimated average cumulative distribution since suspension for each Class D Preferred unit is $334.27, not including interest. In addition, the amount of cumulative but unpaid distributions shall continue to accumulate at the then applicable rate until all unpaid distributions have been paid in full. The estimated total amount earned as of December 31, 2023 is $230.1 million.

On or after July 1, 2024, the holders of our Class D Preferred Units can elect, from time to time, for the distributions to be calculated based on a floating rate equal to the applicable three-month LIBOR interest rate (or alternative rate as determined in accordance with the Partnership Agreement) plus a spread of 7.00% (“Class D Variable Rate,” as defined in the Partnership Agreement). Each Class D Variable Rate election shall be effective for at least four quarters following such election.

Total Preferred Unit Distributions in Arrears

The estimated total preferred unit distributions in arrears for all classes of preferred units are $356.6 million as of December 31, 2023.

On February 6, 2024, the board of directors of our GP declared a cash distribution of 50% of the outstanding arrearages earned through December 31, 2023 to be paid to the holders of the Class B Preferred Units and the Class C Preferred Units in accordance with the partnership agreement. Each holder of the Class B Preferred Units will receive a distribution of $4.4439 per unit and each holder of the Class C Preferred Units will receive a distribution of $4.0746 per unit on February 27, 2024, to the holders of record at the close of trading on February 16, 2024.

Additionally, the board of directors of our GP declared a cash distribution of approximately $115.0 million, which represents 50% of the outstanding arrearages earned on the Class D Preferred Units through December 31, 2023. This distribution payment will also be paid on February 27, 2024.

Equity-Based Incentive Compensation

Our GP adopted a long-term incentive plan (“LTIP”), which allowed for the issuance of equity-based compensation. Our GP granted certain restricted units to employees and directors, which vest in tranches, subject to the continued service of the recipients through the vesting date (“Service Awards”). The Service Awards may also vest upon a change of control, at the discretion of the board of directors of our GP. No distributions accrue to or are paid on the Service Awards during the vesting period. As the LTIP expired on May 10, 2021, we had no common units available for grant during the nine months ended December 31, 2023.

The following table summarizes the Service Award activity during the nine months ended December 31, 2023:


		Weighted-Average
		Grant Date
	Number of	Fair Value
	Units	Per Unit
Unvested Service Award units at March 31, 2023	627,975	$2.15
Units vested and issued	(606,725)	$2.15
Units forfeited	(21,250)	$2.15
Unvested Service Award units at December 31, 2023	—	$2.15

In connection with the vesting of certain Service Awards during the nine months ended December 31, 2023, 21,302 of the newly-vested common units were surrendered by employees in satisfaction of $0.1 million of employee withholding taxes paid by the Partnership. Pursuant to the expiration of the LTIP discussed above, those surrendered units are not available for future grants.

Service Awards are valued at the average of the high/low sales price as of the grant date less the present value of the expected distribution stream over the vesting period using a risk-free interest rate. We record the expense for each Service Award on a straight-line basis over the requisite period for the entire award (that is, over the requisite service period of the last separately vesting portion of the award), ensuring that the amount of compensation cost recognized at any date at least equals the portion of the grant date value of the award that is vested at that date.

During the three months ended December 31, 2023 and 2022, we recorded compensation expense related to Service Awards of $0.2 million and $0.9 million, respectively. During the nine months ended December 31, 2023 and 2022, we recorded compensation expense related to Service Award units of $1.1 million and $1.9 million, respectively.