Related Party Transactions | 9 Months Ended |
Sep. 30, 2013 |
Related Party Transactions [Abstract] | |
Related Party Transactions | 11. Related Party Transactions |
Management Services Agreement with Macquarie Infrastructure Management (USA) Inc. (the Manager) |
At September 30, 2013 and December 31, 2012, the Manager held 3,738,873 LLC Interests and 5,480,929 LLC Interests, respectively, of the Company. Pursuant to the terms of the management services agreement, or Management Agreement, the Manager may sell these LLC interest at any time. As discussed in Note 9, "Members' Equity", as part of the Company's equity offering completed in May of 2013, the Manager sold 3,182,625 of its LLC Interests and received proceeds of $178.2 million, net of underwriting fees and expenses. Under the Management Agreement, the Manager, at its option, may reinvest performance fees and base management fees in LLC Interests of the Company. |
Since January 1, 2012, the Company paid the Manager cash dividends on LLC Interests held for the following periods: |
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Declared | | Period Covered | | $ per LLC Interest | | Record Date | | Payable Date | | Amount Paid to Manager (in thousands) |
25-Oct-13 | | | Third quarter 2013 | | | $ | 0.875 | | | | 11-Nov-13 | | | | 14-Nov-13 | | | $ | -1 | |
29-Jul-13 | | | Second quarter 2013 | | | $ | 0.875 | | | | 12-Aug-13 | | | | 15-Aug-13 | | | $ | 2,744 | |
26-Apr-13 | | | First quarter 2013 | | | $ | 0.6875 | | | | 13-May-13 | | | | 16-May-13 | | | $ | 1,872 | |
12-Dec-12 | | | Fourth quarter 2012 | | | $ | 0.6875 | | | | 24-Dec-12 | | | | 28-Dec-12 | | | $ | 3,768 | |
29-Oct-12 | | | Third quarter 2012 | | | $ | 0.6875 | | | | 12-Nov-12 | | | | 15-Nov-12 | | | $ | 3,290 | |
30-Jul-12 | | | Second quarter 2012 | | | $ | 0.625 | | | | 13-Aug-12 | | | | 16-Aug-12 | | | $ | 2,920 | |
30-Apr-12 | | | First quarter 2012 | | | $ | 0.2 | | | | 14-May-12 | | | | 17-May-12 | | | $ | 905 | |
1-Feb-12 | | | Fourth quarter 2011 | | | $ | 0.2 | | | | 5-Mar-12 | | | | 8-Mar-12 | | | $ | 878 | |
| -1 | The amount of dividend payable to the Manager for the third quarter of 2013 will be determined on November 11, 2013, the record date. | | | | | | | | | | | | | | | | | | |
Under the Management Agreement, the Manager manages the Company's day-to-day operations and oversees the management teams of the Company's operating businesses. In addition, the Manager has the right to appoint the Chairman of the Board of the Company and an alternate, subject to minimum equity ownership, and to assign, or second, to the Company, two of its employees to serve as chief executive officer and chief financial officer of the Company and seconds or makes other personnel available as required. |
In accordance with the Management Agreement, the Manager is entitled to a base management fee based primarily on the Company's market capitalization, and potentially a performance fee, based on the performance of the Company's stock relative to the applicable utilities index. For the quarter and nine months ended September 30, 2013, the Company incurred base management fees of $8.3 million and $23.5 million, respectively, and performance fees of $6.9 million and $53.4 million, respectively, payable to the Manager. The Manager elected to reinvest the base management and performance fees in additional LLC Interests. For the quarter and nine months ended September 30, 2012, the Company incurred base management fees of $5.8 million and $15.6 million, respectively, payable to the Manager. For the quarter and nine months ended September 30, 2012, the Company recorded a performance fee payable of $23.5 million to the Manager. |
The unpaid portion of the base management fees and performance fees at the end of each reporting period is included in due to manager-related party in the consolidated condensed balance sheets. The following table shows the Manager's election to reinvest its base management fees and performance fees, if any, in additional LLC Interests: |
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Period | | Base Management | | Performance | | LLC Interests Issued | | Issue Date | | | | |
Fee Amount | Fee Amount | | | | |
($ in thousands) | ($ in thousands) | | | | |
2013 Activities: | | | | | | | | | | | | | | | | | | | | |
Third quarter 2013 | | $ | 8,336 | | | $ | 6,906 | | | | -1 | | | | -1 | | | | | |
Second quarter 2013 | | | 8,053 | | | | 24,440 | | | | 603,936 | | | | 4-Sep-13 | | | | | |
First quarter 2013 | | | 7,135 | | | | 22,042 | | | | 522,638 | | | | 5-Jun-13 | | | | | |
2012 Activities: | | | | | | | | | | | | | | | | | | | | |
Fourth quarter 2012 | | $ | 6,299 | | | $ | 43,820 | | | | 980,384 | | | | 20-Mar-13 | | | | | |
Third quarter 2012 | | | 5,844 | | | | 23,509 | | | | 695,068 | | | | 5-Dec-12 | | | | | |
Second quarter 2012 | | | 4,760 | | | | - | | | | 113,847 | | | | 30-Aug-12 | | | | | |
First quarter 2012 | | | 4,995 | | | | - | | | | 147,682 | | | | 31-May-12 | | | | | |
| -1 | LLC interests for the third quarter of 2013 base management and performance fee will be issued to the Manager during the fourth quarter of 2013. | | | | | | | | | | | | | | | | | | |
The Manager is not entitled to any other compensation and all costs incurred by the Manager, including compensation of seconded staff, are paid by the Manager out of its base management fee. However, the Company is responsible for other direct costs including, but not limited to, expenses incurred in the administration or management of the Company and its subsidiaries and investments, income taxes, audit and legal fees, acquisitions and dispositions and its compliance with applicable laws and regulations. During the quarter and nine months ended September 30, 2013, the Manager charged the Company $137,000 and $426,000, respectively, for reimbursement of out-of-pocket expenses compared with $145,000 and $345,000, for the quarter and nine months ended September 30, 2012, respectively. The unpaid portion of the out-of-pocket expenses at the end of the reporting period is included in due to manager-related party in the consolidated condensed balance sheets. |
Second Amended and Restated Management Service Agreement |
On September 30, 2013, Macquarie Infrastructure Company LLC entered into a Second Amended and Restated Management Services Agreement (the "Amended Agreement"), among the Company, Macquarie Infrastructure Company Inc. and the Manager. The amendments to the agreement revise the payment mechanics related to the base management fee payable by the Company to the Manager, and align the share price used to calculate the base management fee with the share price at which the Manager may reinvest the base management fee in LLC Interests. Effective October 1, 2013, pursuant to the Amended Agreement, base management fees will be calculated and payable monthly rather than quarterly. Performance fees will continue to be calculated and, if generated, paid quarterly. No substantive changes to the formulas or methodology used to calculate the amount of the base management or performance fees that may be due to the Manager were made. The Amended Agreement also makes certain non-substantive changes to eliminate parties and provisions that are no longer relevant. |
Advisory and Other Services from the Macquarie Group |
The Macquarie Group, and wholly-owned subsidiaries within the Macquarie Group, including Macquarie Bank Limited, or MBL, and Macquarie Capital (USA) Inc., or MCUSA, have provided various advisory and other services and incurred expenses in connection with the Company's equity raising activities, acquisitions and debt structuring for the Company and its businesses. Underwriting fees are recorded in members' equity as a direct cost of equity offerings. Advisory fees and out-of-pocket expenses relating to acquisitions are expensed as incurred. Debt arranging fees are deferred and amortized over the term of the credit facility. |
During 2013, the Company engaged MCUSA as Joint Bookrunner in connection with the refinancing of the long-term debt facilities of Atlantic Aviation. Atlantic Aviation closed the refinancing on May 31, 2013. Atlantic Aviation paid $4.0 million to MCUSA for such services, of which $12,000 related to out-of-pocket expenses. |
As discussed in Note 9, "Members' Equity", the Company completed an underwritten public offering and sale of LLC interests in May 2013. MCUSA served as a joint book-running manager and an underwriter in this offering and received $2.4 million from the Company for such services. |
During the fourth quarter of 2012, MIC engaged MCUSA in connection with its ongoing initiative to bring Liquefied Natural Gas to the state of Hawaii. During the nine months ended September 30, 2013, the business incurred $132,000, of which $7,000 related to out-of-pocket expenses incurred in the first quarter of 2013, in fees to MCUSA for such services. |
During 2012, MIC engaged MCUSA as a Joint Bookrunner and Lead Placement Agent on the refinancing of a portion of Hawaii Gas's long-term debt facilities. MIC incurred and paid $100,000 in fees to MCUSA relating to the services provided. |
Long-Term Debt |
As discussed in Note 7, "Long-Term Debt", Atlantic Aviation entered into a credit agreement on May 31, 2013. The credit agreement provides for a seven-year, $465.0 million senior secured first lien term loan facility and a five-year, $70.0 million senior secured first lien revolving credit facility. The $70.0 million revolving credit facility is provided by various financial institutions, including MBL which provides $15.7 million. At September 30, 2013, the revolving credit facility remains undrawn. For the quarter and nine months ended September 30, 2013, Atlantic Aviation incurred $18,000 and $27,000, respectively, in commitment fees related to MBL's portion of the revolving credit facility. |
Derivative Instruments and Hedging Activities |
The Company had derivative instruments in place to fix the interest rate on certain outstanding variable rate term loan facilities. Prior to the refinancing of Hawaii Gas' debt in August of 2012, Hawaii Gas had $160.0 million of its term loans hedged, of which MBL was providing the interest rate swaps for a notional amount of $48.0 million. The remainder of the swaps were from an unrelated third party. During 2012, up to the date of refinancing, Hawaii Gas made payments to MBL of $1.0 million in relation to these swaps. |
On August 8, 2012, Hawaii Gas completed the refinancing of its long-term debt facilities. At the same time, Hawaii Gas paid off the outstanding balance on its interest rate swap totaling $8.7 million, of which $2.6 million was paid to MBL. |
Other Transactions |
Macquarie, through the Macquarie Insurance Facility (MIF), has an aggregated insurance buying program. By combining the insurance premiums of Macquarie owned and managed funds, MIF has been able to deliver very competitive terms to businesses that participate in the facility. MIF earns a commission from the insurers. No payments were made to MIF by the Company during the nine months ended September 30, 2013 and 2012. In February of 2013, the Company renewed its Directors and Officers liability insurance utilizing several of the MIF insurers. |
Atlantic Aviation, Hawaii Gas, District Energy and MIC Solar purchase and renew property and casualty insurance coverage on an ongoing basis from insurance underwriters who then pay commissions to MIF. For the nine months ended September 30, 2013 and 2012, no payments were made directly to MIF for property and casualty insurance. |
Atlantic Aviation entered into a copiers lease agreement with Macquarie Equipment Finance, or MEF, an indirect subsidiary of Macquarie Group Limited. For the quarter and nine months ended September 30, 2013 and 2012, Atlantic Aviation incurred $6,000 and $17,000, respectively, in lease expense on these copiers. As of September 30, 2013 and 2012, Atlantic Aviation had prepaid the October monthly payment to MEF for $2,000, which is included in prepaid expenses in the consolidated condensed balance sheet for respective periods. |
Hawaii Gas entered into licensing agreements with Utility Service Partners, Inc. and America's Water Heater Rentals, LLC, both indirect subsidiaries of Macquarie Group Limited, to enable these entities to offer products and services to Hawaii Gas's customer base. No payments were made under these arrangements during the nine months ended September 30, 2013 and 2012. |
Macquarie Energy North America Trading Inc., or MENAT, an indirect subsidiary of Macquarie Group Limited, entered into an agreement with IMTT to rent a 147,000 barrel tank for one month during the quarter ended September 30, 2012. IMTT recorded revenue from MENAT of $151,000 for this transaction. As of September 30, 2012, IMTT had a receivable balance of $122,000, which was subsequently collected. |
In 2008, Macquarie Global Opportunities Partners, or MGOP, a private equity fund managed by the Macquarie Group, acquired Sentient Flight Group ("Sentient"), a jet membership, retail charter and fuel management business. Sentient was an existing customer of Atlantic Aviation. On May 31, 2012, MGOP sold its interest in Sentient to a third party. For the five months ended May 31, 2012, Atlantic Aviation recorded $9.3 million in revenue from Sentient. As of September 30, 2012, Atlantic Aviation had no receivables from Sentient. |
In addition, the Company and several of its subsidiaries have entered into a licensing agreement with the Macquarie Group related to the use of the Macquarie name and trademark. The Macquarie Group does not charge the Company any fees for this license. |