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Partners' Capital, Mezzanine Capital and Distributions | 9 Months Ended
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Sep. 30, 2019
Equity [Abstract] |
Partners' Capital, Mezzanine Capital and Distributions | Partners’ Capital, Mezzanine Capital and Distributions At September 30, 2019, our outstanding common units consisted of 122,539,221 Class A units and 39,997 Class B units. Distributions We paid or will pay the following distributions to our common unitholders in 2018 and 2019:
Distribution For |  | Date Paid |  | Per Unit Amount |  | Total Amount |
2018 |  |  |  |  |  |  |
1 st Quarter |  | May 15, 2018 |  | $ | 0.5200 |  |  | $ | 63,741 |  |
2 nd Quarter |  | August 14, 2018 |  | $ | 0.5300 |  |  | $ | 64,967 |  |
3 rd Quarter |  | November 14, 2018 |  | $ | 0.5400 |  |  | $ | 66,193 |  |
4 th Quarter |  | February 14, 2019 |  | $ | 0.5500 |  |  | $ | 67,419 |  |
2019 |  |  |  |  |  |  |
1 st Quarter |  | May 15, 2019 |  | $ | 0.5500 |  |  | $ | 67,419 |  |
2 nd Quarter |  | August 14, 2019 |  | $ | 0.5500 |  |  | $ | 67,419 |  |
3 rd Quarter |  | November 14, 2019 | (1) | $ | 0.5500 |  |  | $ | 67,419 |  |
(1) This distribution was declared on October 8, 2019 and will be paid to unitholders of record as of October 31, 2019. Class A Convertible Preferred Units On September 1, 2017, we sold $750 million of our Class A Convertible Preferred units (our "preferred units") in a private placement, comprised of 22,249,494 units for a cash purchase price per unit of $33.71 (subject to certain adjustments, the “Issue Price”) to two initial purchasers. Our general partner executed an amendment to our partnership agreement in connection therewith, which, among other things, authorized and established the rights and preferences of our preferred units. Our preferred units are a new class of security that ranks senior to all of our currently outstanding classes or series of limited partner interests with respect to distribution and/or liquidation rights. Holders of our preferred units vote on an as-converted basis with holders of our common units and have certain class voting rights, including with respect to any amendment to the partnership agreement that would adversely affect the rights, preferences or privileges, or otherwise modify the terms, of those preferred units. Accounting for the Class A Convertible Preferred Units Our preferred units are considered redeemable securities under GAAP due to the existence of redemption provisions upon a deemed liquidation event that is outside our control. Therefore, we present them as temporary equity in the mezzanine section of the Consolidated Balance Sheet. Because our preferred units are not currently redeemable and we do not have plans or expect any events that constitute a change of control in our partnership agreement, we present our preferred units at their initial carrying amount. However, we would be required to adjust that carrying amount if it becomes probable that we would be required to redeem our preferred units. Initial and Subsequent Measurement We initially recognized our preferred units at their issuance date fair value, net of issuance costs. We will not be required to adjust the carrying amount of our preferred units until it becomes probable that they would become redeemable. Once redemption becomes probable, we would adjust the carrying amount of our preferred units to the redemption value over a period of time comprising the date the feature first becomes probable and the date the units can first be redeemed. Preferred unit distributions are recognized on the date in which they are declared. Paid-in-kind ("PIK") distributions were declared and issued as follows:
Distribution For | Date Issued |  | Number of Units |  | Total Amount
2018 |  |  |  |  |
1 st Quarter | May 15, 2018 |  | 500,976 |  |  | $ | 16,888 |
2 nd Quarter | August 14, 2018 |  | 511,934 |  |  | $ | 17,527 |
3 rd Quarter | November 14, 2018 |  | 523,132 |  |  | $ | 17,635 |
4 th Quarter | February 14, 2019 |  | 534,576 |  |  | $ | 18,021 |
2019 |  |  |  |  |
1 st Quarter | May 15, 2019 |  | 364,180 |  |  | $ | 12,277 |
Net Income Attributable to Genesis Energy, L.P. is reduced by preferred unit distributions in the form of PIK and cash that accumulated during the period. For the three and nine months ended September 30, 2019, net income attributable to Genesis Energy, L.P. was reduced by $18.7 million and $55.8 million, respectively. In the first quarter of 2019, we declared a PIK for a portion of the quarterly distribution attributable to the first two months of the first quarter of 2019 (as defined below), resulting in the issuance of 364,180 preferred units. For the portion of the quarterly distribution attributable to the final month of the first quarter of 2019, we paid a cash distribution of $0.2458 for each preferred unit. This total quarterly distribution to the preferred unitholders equates to a quarterly distribution of $0.7374 per preferred unit (or $2.9496 on an annualized basis). All quarterly distributions to our preferred unitholders subsequent to the first quarter of 2019 are payable in cash. We paid or will pay the following cash distributions to our preferred unitholders in 2019:
Distribution For |  | Date Paid |  | Per Unit Amount |  | Total Amount
2019 |  |  |  |  |  |
1 st Quarter |  | May 15, 2019 |  | $ | 0.2458 |  |  | $ | 6,138 |
2 nd Quarter |  | August 14, 2019 |  | $ | 0.7374 |  |  | $ | 18,684 |
3 rd Quarter |  | November 14, 2019 | (1) | $ | 0.7374 |  |  | $ | 18,684 |
(1) This distribution was declared on October 8, 2019 and will be paid to unitholders of record as of October 31, 2019. The following table shows the change in our mezzanine and preferred units balances from December 31, 2018 to September 30, 2019:
| Class A Convertible Preferred Units
| Units | $
Balance as of December 31, 2018 | 24,438,022 |  | $ | 761,466 |
Distributions paid-in-kind | 898,756 |  | 30,298 |
Allocation of Distributions paid in-kind to Preferred Distribution Rate Reset Election (Note 16) | — |  | (1,649 | )
Balance as of September 30, 2019 | 25,336,778 |  | $ | 790,115 |
Redeemable Noncontrolling Interests On September 23, 2019, we, through a subsidiary, Genesis Alkali Holdings Company, LLC (“Alkali Holdings”), entered into an amended and restated Limited Liability Company Agreement of Alkali Holdings (the "LLC Agreement") and a Securities Purchase Agreement (the "Securities Purchase Agreement") whereby certain investment fund entities affiliated with GSO Capital Partners LP (collectively, the “Sponsor”) purchased $55,000,000 and committed to purchase, during a three-year commitment period, up to a total of $350,000,000 (the “Preferred Commitment”) of preferred units in Alkali Holdings, the entity that holds our trona and trona-based exploring, mining, processing, producing, marketing and selling business, including its Granger facility near Green River, Wyoming. Alkali Holdings will use the net proceeds from the preferred units to fund up to 100% of the anticipated cost of expansion of the Granger facility. As of September 30, 2019, we received cash of $49.4 million for the $55 million of preferred units issued to date net of issuance costs, which was inclusive of our transaction related expenses and one-time commitment fee. The Sponsor has the right to a quarterly distribution equal to 10% per annum on the liquidation preference of each preferred unit. The liquidation preference is defined as one thousand dollars per preferred unit, plus any accrued and unpaid distributions (including as a result of any distributions paid in kind). Distributions are payable quarterly within 45 days after the end of the fiscal quarter. Distributions may be paid in-kind in lieu of cash distributions during the first 36 months following the September 23, 2019 initial closing date. Subsequent to the payment-in-kind period, all distributions must be paid in cash. In addition to the quarterly distributions paid to the Sponsor, Alkali Holdings will distribute all of its distributable cash to the Partnership each quarter, which is equal to all cash and cash equivalents in the operating accounts of Alkali Holdings less cash reserves and a minimum $5 million cash balance to be maintained for working capital needs. From time to time after we have drawn at least $250 million of our Preferred Commitment, we have the option to redeem the outstanding preferred units in whole for cash at a price equal to the initial $1,000 per preferred unit purchase price, plus no less than the greater of a predetermined fixed internal rate of return amount or a multiple of invested capital metric, net of cash distributions paid to date ("Base Preferred Return"). Additionally, if all outstanding preferred units are being redeemed, we have not drawn at least $250 million of our Preferred Commitment, and the Sponsor is not a "defaulting member" under the LLC Agreement, the Sponsor has the right to a make-whole amount on the number of undrawn preferred units. The Sponsor is obligated to purchase a minimum of $250 million of preferred units unless certain customary closing conditions are not satisfied, including the existence of a triggering event or a material uncured breach of the Securities Purchase Agreement by Alkali Holdings. A triggering event would occur if Alkali Holdings fails to pay cash distributions subsequent to the paid-in-kind period, fails to redeem preferred units when required to by a change of control event, or if any preferred units remain outstanding on the six year anniversary date, amongst other events. The preferred units must be redeemed, in whole or in part, following certain change of control events, fundamental changes, or the liquidation, winding up, or dissolution of Alkali Holdings and, as applicable, the Partnership. If such an event were to occur, the preferred units would rank senior to Alkali Holdings common units and any class or series of equity of Alkali Holdings established after the issuance of the preferred units. At any time following the sixth anniversary of the Securities Purchase Agreement, or following the occurrence of certain triggering events, if the preferred units issued and outstanding have not been redeemed in full for cash, the Sponsor has the right to gain control of the board of Alkali Holdings and effectuate a monetization event using its reasonable good faith efforts to maximize the consideration received to the holders of our common units, including the sale of Alkali Holdings (including all of its equity or assets and all of its equity in its subsidiaries), the proceeds of which would first be used to redeem the preferred units at the Base Preferred Return prior to any distribution to us. Pursuant to the LLC Agreement, the Board of Managers (the "Board") for Alkali Holdings will consist of 5 managers, including 3 designated by the Partnership, 1 designated by the Sponsor, and 1 independent manager. The independent manager is entitled to only attend Board meetings if the Board is required to vote on matters related to a bankruptcy of Alkali Holdings, and is permitted to only vote on such matters. See Note 18 for additional information regarding our non-guarantor subsidiaries. Accounting for Redeemable Noncontrolling Interests Classification The preferred units issued and outstanding are accounted for as a redeemable noncontrolling interest in the mezzanine section on our Consolidated Balance Sheet due to the redemption features for a change of control. Initial and Subsequent Measurement We recorded the preferred units at their issuance date fair value, net of issuance costs. The fair value as of September 30, 2019 represents the carrying amount based on the issued and outstanding preferred units most probable redemption event on the six year anniversary of the closing, which is the predetermined internal rate of return measure accreted using the effective interest method to the redemption value. We recorded $0.2 million of redemption accretion from the closing date to September 30, 2019. As of the reporting date, there are no triggering, change of control, early redemption or monetization events that are probable that would require us to revalue the preferred units. If the preferred units were redeemed on the reporting date of September 30, 2019, the redemption amount would be equal to $117.5 million, which would be the multiple of invested capital metric applied to the preferred units outstanding plus the make-whole amount on the undrawn minimum preferred units. Net Income Attributable to Genesis Energy, L.P. includes adjustments to the carrying value of our redeemable noncontrolling interest, which includes preferred unit distributions in the form of PIK that accumulated during the period and accretion on the redemption feature. For the period ended September 30, 2019, Net Income Attributable to Genesis Energy, L.P. includes a reduction of $0.3 million. The following table shows the change in our redeemable noncontrolling interests from initial measurement at September 23, 2019 to September 30, 2019:
|  | Nine Months Ended September 30,
|  | 2019
Issuance of Preferred Units |  | $ | 55,000 |
Issuance costs |  | (5,600 | )
Balance as of September 23, 2019 |  | 49,400 |
Distribution paid-in-kind |  | 121 |
Redemption accretion |  | 151 |
Balance as of September 30, 2019 |  | $ | 49,672 |

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- Definition The entire disclosure for the formation, structure, control and ownership of the partnership. Disclosures related to accounts comprising partners' capital. Includes balances of general partners' capital account, limited partners' capital account, preferred partners' capital account and total partners' capital account and units outstanding; accumulated other comprehensive income; amount and nature of changes to amount of partner's capital and units outstanding by class, rights and privileges for each class of units; distribution policies and distributions paid by unit class; impact of and correction of an error in previously issued financial statements; limitations of partners' liability; redemption, conversion and distribution policies; and deferred compensation related to the issuance of units. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 + Details
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