Mail Stop 0308
April 26, 2005
VIA U.S. MAIL AND FACSIMILE
Mr. John J. Sherman
President, Chief Executive Officer
Inergy Holdings, LLC
Two Brush Creek Boulevard, Suite 200
Kansas City, MO 64112
Re: Inergy Holdings, LLC
Amendment No. 2 to Registration Statement on Form
S-1
File No. 333-122466
Filed April 11, 2005
Inergy, L.P.
Registration Statement on Form S-4
File No. 333-123399
Filed March 17, 2005
Inergy, L.P.
Registration Statement on Form S-3
File No. 333-124098
Filed April 15, 2005
Inergy, L.P.
Form 10-K for the fiscal year ended September 30, 2004
File No. 000-32453
Filed December 7, 2004
Dear Mr. Sherman:
We have reviewed your filings and have the following
comments. Please be aware that we performed only a limited review
of
Inergy, L.P.`s Form S-4, Form S-3 and Form 10-K to ensure
compliance
with applicable comments with respect to Inergy Holdings, LLC`s
registration statement.
Where indicated, we think you should revise your documents
in
response to these comments. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
* * * * * * * * * * *
Inergy Holdings, LLC
Amendment No. 2 to Registration Statement on Form S-1
General
1. We reviewed your response to prior comment 11. We continue to
believe that the Form 10-K of Inergy L.P. for the fiscal year
ended
September 30, 2004 should include disclosures that are consistent
with Inergy Holdings, LLC`s amended Form S-4. Please amend your
Form
10-K of Inergy L.P. for the fiscal year ended September 30, 2004
to
reflect your revisions made in response to our comments. To the
extent that you make further substantive revisions your Form S-1
of
Inergy Holdings, LLC, please make similar revisions to your Form
10-K
of Inergy L.P. for consistency.
Cash Distribution Policy, page 37
2. We note your response to prior comment 1 and have the following
additional comments.
3. Please revise this section title so that it is entitled
"Distribution Policy and Restrictions" or something similar.
4. Generally, when describing your distribution policy, please
revise
to state it will be and what you will pay, rather than what you
"intend" or "expect" to declare and pay.
5. Please revise the first three paragraphs to create following
new
paragraphs at the beginning of this section:
* The first paragraph should summarize your distribution policy.
It
should commence by explaining why you and your operating
subsidiary,
Inergy, have adopted a cash distribution policy. For example, if
the
reason solely is to satisfy tax or partnership law requirements,
then
so state. Alternatively, clarify whether the reason reflects your
judgment that unit holders are better served by distributing to
them
all of your available cash generated by your business, rather than
retaining it for other purposes such as significant acquisitions
or
pursing growth opportunities requiring capital expenditures or
other
investments significantly beyond your current expectations. That
first paragraph then should reflect the existing first paragraph,
but
also take into account your consolidated subsidiaries`
distribution
policies, with respect to factors such as operating needs,
reserves
for contingencies, interest and principal payments on
indebtedness.
* The new second paragraph should list factors that may adversely
impact your distribution policy. It should clarify that that
there
is no guaranty that unit holders will receive distributions and
then
list applicable material factors relating to you, including your
consolidated subsidiaries, such as the following:
o you are not obligated to pay distributions;
o while your current distribution policy contemplates the
distribution of available cash, this policy could be modified or
revoked at any time;
o even if your distribution policy is not modified or revoked, the
actual amount of distributions under the policy and the decision
to
make any distribution is entirely at the discretion of your
general
partner, which could decide to reduce or not pay distributions at
all, at any time and for any reason;
o if accurate, the amount of distributions is subject to covenant
restrictions under your anticipated new credit facility,
anticipated
new term loan, or other indebtedness due by you or your
consolidated
subsidiaries;
o if accurate, applicable state law restrictions on your
distribution
payments;
o unit holders have no contractual or other legal right to
distributions; and
o you may lack sufficient cash to pay distributions due to changes
in
operating earnings, working capital requirements and anticipated
cash
needs.
Please consider any other material factors that may limit your or
your consolidated subsidiaries, particularly Inergy`s, ability to
pay
distributions.
* The third paragraph should discuss the possible impact on your
future growth as a result of the distribution policy. The
paragraph
should state your belief as to whether the distribution will limit
or
preclude your ability to pursue growth. It also should state
whether
you expect to require additional financing to fund significant
acquisitions or pursue growth opportunities requiring capital
expenditures or other investments significantly beyond your
current
expectations. This paragraph further should state, if accurate,
your
intention to allocate sufficient cash to pursue growth
opportunities
that do not require material investment beyond your current
expectations.
6. Please revise the existing Incentive Distribution Rights
subsection to more clearly describe your sources of income. In
other
words, please also discuss in a clear and concise manner your
ownership interests in the non-managing general partner of Inergy
and
your direct limited partnership interest in Inergy. Further,
please
revise the subsection title so that it is more descriptive of the
revised subsection.
7. Please be aware that because your income is entirely dependant
on
that of your operating subsidiary, Inergy and because your general
partner also controls Inergy, we believe that relevant disclosure
about your available cash for distribution should include your
consolidated subsidiaries, particularly Inergy`s, cash from
operating
activities. In other words, your presentation should not start at
the holding level, but reflect the actual operations that will
generate the cash to satisfy the distributions you will pay.
8. While we are aware of your operating subsidiary`s distribution
history, given that you are a new registrant and this offering
discloses an initial distribution of $0.225 per unit per quarter,
which represents your substantially all your available cash, we
believe that you should disclose whether you and your consolidated
subsidiaries had over the past four quarters and will have over
the
next four quarters sufficient cash to support that amount. The
existing disclosure in the Cash Available for Distribution section
and Appendix B is not adequate in this regard. Please delete that
subsection and appendix in light of these comments in response to
your revisions. Instead, please add to this new Distribution
Policy
and Restrictions section a new subsection entitled "Our Initial
Distribution Rate" or something similar. This new subsection
should
contain a general discussion followed by two supporting
discussions.
9. The general discussion of the Our Initial Distribution Rate
subsection should reflect the following:
* Please disclose the initial distribution rate per unit for the
initial quarter and for the next four quarters annualized. Use
the
disclosure in the existing second paragraph on page 37 as a
starting
point. Disclose also the aggregate equivalent distribution rate
per
quarter and annually.
* Please disclose whether the distributions will be cumulative,
and
explain what that means. If currently known, please further
disclose
on which day you will pay distributions each quarter and to
holders
of record on which day; for example, the 15th day of each March,
June, September and December to holders of record on the 5th day
of
each month, and discuss any applicable adjustments if those days
fall
on non-business days.
* Please disclose whether you have paid distributions in the past.
Please also disclose that your operating subsidiary Inergy has
made
distributions in the past, but the current $0.50 per unit
distribution represents an increase over prior distribution
policy.
Please further disclose whether you and your consolidated
subsidiaries would have generated sufficient EBITDA both to fund
distributions and the current level contemplated by your
distribution
policy and to satisfy the financial covenants of your or your
consolidated subsidiaries` credit facilities, term notes, or other
indebtedness.
10. The first supporting discussion should be separately titled
"Basis for Initial Distribution Rate" or something similar, and
convey the following:
* Disclose the factors you reviewed, analyzed, and considered in
determining the initial distribution level, such as:
o operating and financial performance;
o anticipated cash requirements, including for expected debt
payments
under your new credit facility or term loan;
o anticipated cash expenditure requirements;
o expected other cash needs;
o the covenants, limitations, or restrictions on ability to pay
distributions in your anticipated new credit facility, new term
loan,
or other indebtedness of yours or your consolidated subsidiaries;
and
o other potential sources of liquidity.
Please add any additional material factors you reviewed, analyzed,
and considered. To the extent applicable, provide specific detail
for each factor such as the amount and due date of any material
expect debt payment.
* Provide a table illustrating the estimated minimum EBITDA you
and
your consolidated subsidiaries must generate to pay the aggregate
distribution on your units through the end of the next four
quarters.
The table should be entitled "Estimated Cash Available to Pay
Distributions Based on Estimated Minimum EBITDA" or something
similar. The table should include an introduction explaining its
purpose. As part of the introduction, state whether you believe
your, including your consolidated subsidiaries`, minimum EBITDA
for
the four fiscal quarters ended June 30, 2006 will be at least the
amount - specifying that amount - you will require to pay
distributions during those periods. The table should start with
that
amount of your consolidated estimated minimum EBITDA. It then
should
subtract estimated capital expenditures, interest expense,
principal
payments, income taxes and other relevant material adjustments,
including your additional operating and administrative expenses
and
any effects of your reorganization relating to this offering, such
as
your anticipated new credit facility and term note.. The
resulting
figures should be estimated cash available to pay distributions on
your units.
* Also provide a table illustrating the historical cash available
to
pay distributions for the most recent fiscal year and interim
period.
The table should commence with a GAAP measure of your consolidated
net cash provided by operating activities. Then, the table should
add entries for necessary adjustments to reach an EBITDA figure.
Then, the table should add entries for necessary adjustments to
reach
a figure of excess cash available to pay distributions. To the
extent your historical excess cash available to pay distributions
would have been insufficient to pay your intended aggregate
distribution, then indicate from where you would have obtained the
additional cash, such as through borrowings. As part of the
table`s
entries, please include relevant footnotes to clarify the source
and
relevance of the figures for any entry that is not self-
explanatory.
11. The second supporting discussion should be separately titled
"Assumptions and Considerations" or something similar. In this
discussion, please address any factors you have assumed or
considered
in presenting the tables in the Basis for Initial Distribution
Rate
discussion. In particular, state the key assumptions and
considerations supporting the estimated minimum EBITDA you must
generate to pay the aggregate distribution on your units through
the
end of the next four quarters. For example, what revenue or
expenses
do you anticipate over the next four quarters that you did not
generate or incur in the prior fiscal year end and interim period?
As another example, how does your anticipated new credit facility
and
term note factor into your tables? As a further example, do you
make
any material assumptions regarding the general business climate or
extraordinary transactions? In addition, in this discussion,
please
fully discuss any limitations on your ability to pay distributions
under your anticipated new credit facility, term note, or other
indebtedness of yours or your consolidated subsidiaries.
Item 15. Recent Sales of Unregistered Securities, page II-1
12. In response to our prior comment 9, you state that your value
increased significantly from November 30, 2004 through the first
filing of your Form S-1. This increase was the result of three
significant intervening transactions, most significantly the
acquisition of Star Gas Propane, L.P. Please tell us the
consideration, if any, given to the probability of these
significant
intervening transactions occurring when you determined the fair
value
of the November 23, 2004 issuance of the 0.75% LLC Membership
Interest. In this regard, we noted that Inergy, L.P. filed a Form
8-
K dated November 18, 2004 which stated that on November 18, 2004,
Inergy, L.P. and Inergy Propane, LLC entered into an Interest
Purchase Agreement with Star Gas Partners, L.P. and Star Gas LLC
whereby Inergy Propane, LLC would acquire all of the propane
distribution and services segment of Star Gas Partners, L.P. In
exchange, Inergy Propane, LLC would pay $475 million to Star Gas
LLC,
subject to a working capital adjustment. We further note that the
November 23, 2004 issuance occurred just 24 days before the Star
Gas
Propane, L.P. acquisition was completed. It would appear, based on
the timing of these events, that the fair value of the membership
interests should not have ignored the acquisitions occurring
during
that time frame. We assume that any valuation contemplating the
impact of the acquisitions occurring during this time frame would
necessarily require a discount for the possibility of each of the
acquisitions not being completed. We may have further comments
after
reviewing your response.
Inergy, L.P.
Registration Statement on Form S-4
General
13. As applicable, please revise your Form S-4 to address the
comments above as well.
Registration Statement on Form S-3
14. As applicable, please revise your Form S-3 to address the
comments above as well.
Form 10-K for the fiscal year ended September 30, 2004
15. As applicable, please revise your Form 10-K to address the
comments above as well.
* * * * * * * * * * *
As appropriate, please amend your registration statements in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert staff comments and the declaration of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Adam Phippen, Accountant at (202) 824-5549 or
in
his absence, George Ohsiek, Accounting Branch Chief at (202) 942-
2905
if you have questions regarding comments on the financial
statements
and related matters. Please contact Scott Anderegg, Attorney at
(202) 942-2868, David Mittelman, Legal Branch Chief at (202) 942-
1921
or me at (202) 942-1900 with any other questions.
Sincerely,
H. Christopher Owings
Assistant Director
cc: David P. Oelman
Vinson & Elkins, LLP
VIA FAX
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Mr. John J. Sherman
Inergy Holdings, LLC
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