Ok, NGL has preferred stock outstanding, about $930m. These are in classes B, C and D.
NGL hasn't paid dividends on any of this preferred stock for a few years. They are accumulating obligations each year. I think the total unpaid amount was about $210m last March, and will be roughly $330m this March 2024. The B&C preferreds became floating rate, and accrue at (roughly) 3 month Libor + 7.4%, so about 13% per year (yikes!). Maybe the March 2024 total arrearage will be $340m.....
B and C are publicly traded. They are both around $29, so the market thinks the arrearage will get paid in the near term, or at least that it will get paid eventually.
The D preferred tranche ($551m) is privately held.
This says the D holders have the ability to restrict NGL's use of cash until the arrearage is paid off.
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In connection with the offering of the 2026 Senior Secured Notes, we were required to obtain a consent (the “Class D Preferred Consent”) from the holder of themajority of our Class D Preferred Units (the “Class D Preferred Majority”) to, among other things, enable us to consummate the transaction. The Class D Preferred Consentmodifies certain voting and approval rights granted to the Class D Preferred Majority under our Partnership Agreement. Specifically, the Class D Preferred Consent requiresus to obtain the approval of the Class D Preferred Majority for:
•incurrences of indebtedness, other than (i) under the ABL Facility, (ii) the issuance of the 2026 Senior Secured Notes and (iii) certain indebtedness outstandingas of the closing of the transaction;
•acquiring or disposing of any assets with an aggregate purchase price of greater than $50.0 million during any fiscal year; and
•making investment capital expenditures or expansion capital expenditures in excess of $75.0 million in the aggregate during any fiscal year.
These approval rights supplement the existing approval rights in our Partnership Agreement for the Class D Preferred Majority. They became effective upon the closing of the transaction and will remain in effect until we are no longer in arrears
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The class D preferred can become floating rate beginning with July 1st, 2024 -
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On or after July 1, 2024, the holders of our Class D Preferred Units can elect, from time totime, 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 thePartnership 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 forat least four quarters following such election.
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As of March 31, 2023, there were 600,000 preferred units (“Class D Preferred Units”) and warrants exercisable to purchase an aggregate of 25,500,000 commonunits outstanding.
The warrants appear to allow the Class D preferred holders to purchase NGL at prices between $13.50 and $17.50. The warrants expire if not exercised by 2029.
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At any time on or after the eighth anniversary of theClosing Date, each Class D Preferred Unitholder will have the right to require the Partnership to redeem on a date not prior to the 180th day after such anniversary all or aportion of the Class D Preferred Units then held by such preferred unitholder for the then-applicable redemption price, which may be paid in cash or, at the Partnership’selection, a combination of cash and a number of common units not to exceed one-half of the aggregate then- applicable redemption price, as more fully described in thePartnership Agreement.
I think that says in 2027 (8 years after issuance in 2019) the Class D preferred holders can force NGL to purchase the Class D preferred stock using either cash or equity. So......there's 4-5 years to figure out what to do about the Class D preferred stock. That seems fine.
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On July 1, 2022, the Class B Preferred Units distribution rate changed from a fixed rate of 9.00% to a floating rate of the three-month LIBOR interest rate (4.77%for the quarter ended March 31, 2023) plus a spread of 7.213%.
For our Class C Preferred Units, distributions on and after April 15, 2024 will accumulate at a percentage of the $25.00 liquidation preference equal to theapplicable three-month LIBOR interest rate (or alternative rate as determined in the Partnership Agreement) plus a spread of 7.384%.
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Interesting, so the Class B is already floating and earning about 13%, but the class C doesn't float until April 15th 2024.
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Ok, the preferred doesn't seem to contain anything super painful. Once the preferred begins to float, it makes sense (I think) to somehow refinance them. |