| Subsequent Events | 12. SUBSEQUENT EVENTS
Initial Public Offering
On June 26, 2015, the common units of the Partnership began trading under the symbol “GPP” on The NASDAQ Global Market. On July 1, 2015, the Partnership closed the initial public offering of 11,500,000 common units to the public at a price of $15.00 per common unit (the “Offering”).
In connection with the Offering, the Partnership issued (i) 4,389,642 common units and 15,889,642 subordinated units to Green Plains and its affiliates, representing an aggregate 62.5% limited partner interest in the Partnership; (ii) a 2% general partner interest in the Partnership and all of its incentive distribution rights to the general partner; and (iii) 11,500,000 common units to the public, representing a 35.5% limited partner interest in the Partnership. The general partner controls all of the business and affairs of the Partnership and its subsidiaries. Green Plains contributed certain assets to the Partnership, including its ethanol storage facilities, fuel terminal facilities, and transportation assets, including its leased railcar fleet.
The Partnership received net proceeds of $157.9 million from the sale of 11,500,000 common units, after deducting underwriting discounts of $10.6 million, structuring fees of $0.9 million and other offering expenses of approximately $3.1 million. The Partnership used the net proceeds to make a cash distribution of $155.3 million to Green Plains, in part, as a reimbursement for certain capital expenditures incurred with respect to its assets, to pay $0.9 million in origination fees under its new revolving credit facility and retained the remaining $1.7 million of these net proceeds for general Partne rship purposes.
The following descriptions relate to agreements entered into in connection with the Offering on July 1, 2015. For additional information and the agreements in their entirety, please refer to the Prospectus and the current report on Form 8-K filed with the SEC on July 6, 2015.
Omnibus Agreement
In connection with the Offering, the Partnership entered into an omnibus agreement with Green Plains and certain of its affiliates that addresses the following matters:
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the Partnership’s obligation to reimburse Green Plains for certain direct or allocated costs and expenses incurred by Green Plains in providing general and administrative services (reimbursement is in addition to certain expenses of the general partner and its affiliates that are reimbursed under the First Amended and Restated Agreement of Limited Partnership of the Green Plains Partners LP (the “Partnership Agreement”));
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the prohibition of Green Plains, and its subsidiaries, from owning, operating or investing in any business that owns or operates ethanol or fuel terminals or ethanol or fuel transportation assets in the United States, subject to certain exceptions;
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the Partnership’s right of first offer to acquire certain assets if Green Plains decides to sell them for up to five years from the consummation of the Offering;
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a nontransferable, nonexclusive and royalty-free license to use the Green Plains trademark and name;
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the allocation of taxes among the parent, the Partnership and the Partnership’s affiliates and the parent’s preparation and filing of tax returns; and
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an indemnity by Green Plains for certain environmental and other liabilities and the Partnership’s obligation to indemnify Green Plains and its subsidiaries for events and conditions associated with the operation of Partnership assets that occur after the closing of the Offering and for environmental liabilities related to Partnership assets to the extent Green Plains is not required to indemnify the Partnership.
If Green Plains or its affiliates cease to control the general partner, then either Green Plains or the Partnership may terminate the omnibus agreement; provided, however, that (i) the indemnification obligations of the parties will survive in accordance with their respective terms; and (ii) Green Plains’ obligation to reimburse the Partnership for certain operational failures will survive in accordance with its terms.
Contribution, Conveyance and Assumption Agreement
On July 1, 2015, in connection with the Offering, the Partnership entered into a Contribution, Conveyance and Assumption Agreement (the “Contribution Agreement”) with the general partner, Green Plains, Green Plains Operating Company LLC (“OpCo”), Green Plains Obion LLC (“Obion”) and Green Plains Trucking LLC (“Trucking”), whereby, concurrently with the closing of the Offering, the following transactions, among others, occurred:
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Green Plains conveyed its 2.25% limited liability company interest in OpCo to the general partner, which the general partner then conveyed to the Partnership in exchange for a continuation of the general partner interest and all of the limited partner interests in the Partnership classified as “Incentive Distribution Rights” under the Partnership Agreement;
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Green Plains conveyed its remaining 97.75% limited liability company interest in OpCo to the Partnership in exchange for 3,629,982 common units and 13,139,822 subordinated units;
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Obion conveyed its 10.32% limited liability company interest in Green Plains Ethanol Storage LLC to the Partnership in exchange for 649,705 common units and 2,351,806 subordinated units; and
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Trucking conveyed its 100% interest in Green Plains Trucking II LLC to the Partnership in exchange for 109,955 common units and 398,014 subordinated units.
Operating Services and Secondment Agreement
In connection with the Offering, the general partner entered into an operational services and secondment agreement with Green Plains pursuant to which Green Plains seconds certain employees to the general partner to provide management, maintenance and operational functions with respect to Partnership operations. These functions will include regulatory matters, health, environment, safety and security programs, operational services, emergency response, training of employees, finance and administration, human resources and business operations and planning. During their period of secondment to the general partner, the seconded personnel will be under the direct management and supervision of the general partner.
The general partner will reimburse the parent for the cost of the seconded employees, including their wages and benefits. If a seconded employee does not devote 100% of his or her time to providing services to the general partner, the general partner will reimburse the parent for only a prorated portion of such employee’s overall wages and benefits, based on the percentage of the employee’s time spent working for the general partner. The parent will bill the general partner monthly in arrears for services provided during the prior month, and payment shall be due within 10 days of the general partner’s receipt of the invoice.
Credit Facility
In connection with the Offering, our primary operating subsidiary, OpCo, as borrower, entered into an agreement for a five -year, $100.0 million revolving credit facility (the “Revolver”) with Bank of America, N.A., as administrative agent, and certain other commercial lending institutions as lenders and letter of credit issuing banks. The Revolver, which matures July 2020, is available to fund working capital, acquisitions, distributions, capital expenditures and for other general Partnership purposes. The Revolver contains certain customary representations and warranties, affirmative covenants, negative covenants and events of default. The negative covenants include restrictions on the Company’s ability to incur additional indebtedness, acquire and sell assets, create liens, make investments, make distributions, and material amendments to the Company’s commercial agreements with Green Plains Trade.
Commercial Agreements
In connection with the Offering, the Partnership (1) entered into (i) a ten -year fee-based ethanol storage and throughput agreement; (ii) a six -year fee-based rail transportation services agreement; and (iii) a one -year fee-based trucking transportation agreement and (2) assumed (i) an approximately 2.5 -year fee-based terminaling agreement for the Company’s Birmingham, Alabama unit train terminal; and (ii) various other terminaling agreements for the Company’s other fuel terminal facilities, each with Green Plains Trade.
The storage and throughput agreement and certain of the terminaling agreements, including the terminaling agreement for the Birmingham facility, are supported by minimum volume commitments, and the rail transportation services agreement is supported by minimum take-or-pay capacity commitments. All of the commercial agreements with Green Plains Trade include provisions that permit Green Plains Trade to suspend, reduce or terminate its obligations under the applicable commercial agreement if certain events occur. Under all of the commercial agreements, these events include a material breach of the applicable commercial agreement by the Partnership, the occurrence of certain force majeure events that would prevent the Company or Green Plains Trade from performing the respective obligations under the applicable commercial agreement and the minimum commitment, if any, not being available to Green Plains Trade for any reason not resulting from or relating to an action or inaction by Green Plains Trade. If Green Plains Trade reduces its minimum commitment under the commercial agreements, Green Plains Trade will be required to pay fees only on the revised minimum commitments.
Distributions to Unitholders
The Partnership intends to pay a minimum quarterly distribution of $0.40 per unit per quarter, which equates to $13.0 million per quarter, or $51.9 million per year, based on the 2% general partner interest and the number of common and subordinated units outstanding immediately after closing of the Offering. However, the Partnership does not have a legal or contractual obligation to pay this distribution. |
