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Partners' Capital, Mezzanine Equity and Distributions | 12 Months Ended
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Dec. 31, 2019
Equity [Abstract] |
Partners' Capital, Mezzanine Equity and Distributions | Partners’ Capital, Mezzanine Equity and Distributions At December 31, 2019, our outstanding equity consisted of 122,539,221 Class A common units and 39,997 Class B common units. The Class A units are traditional common units in us. The Class B units are identical to the Class A units and, accordingly, have voting and distribution rights equivalent to those of the Class A units, and, in addition, the Class B units have the right to elect all of our board of directors and are convertible into Class A units under certain circumstances, subject to certain exceptions. At December 31, 2019, we had 25,336,778 Class A Convertible Preferred Units outstanding, which are discussed below in further detail. Distributions Generally, we will distribute 100% of our available cash (as defined by our partnership agreement) within 45 days after the end of each quarter to unitholders of record. Available cash generally means, for each fiscal quarter, all cash on hand at the end of the quarter:
• | less the amount of cash reserves that our general partner determines in its reasonable discretion is necessary or appropriate to:
• | provide for the proper conduct of our business;
• | comply with applicable law, any of our debt instruments, or other agreements; or
• | provide funds for distributions to our common and preferred unitholders for any one or more of the next four quarters;
• | plus all cash on hand on the date of determination of available cash for the quarter resulting from working capital borrowings. Working capital borrowings are generally borrowings that are made under our credit facility and in all cases are used solely for working capital purposes or to pay distributions to partners.
We paid common unitholders distributions in 2020, 2019 and 2018 as follows:
Distribution For | Date Paid |  | Per Unit Amount |  | Total Amount
2017 |  |  |  |  |
4th Quarter | February 14, 2018 |  | $ | 0.5100 |  |  | $ | 62,515 |
2018 |  |  |  |  |
1st Quarter | May 15, 2018 |  | $ | 0.5200 |  |  | $ | 63,741 |
2nd Quarter | August 14, 2018 |  | $ | 0.5300 |  |  | $ | 64,967 |
3rd Quarter | November 14, 2018 |  | $ | 0.5400 |  |  | $ | 66,193 |
4th Quarter | February 14, 2019 |  | $ | 0.5500 |  |  | $ | 67,419 |
2019 |  |  |  |  |
1st Quarter | May 15, 2019 |  | $ | 0.5500 |  |  | $ | 67,419 |
2nd Quarter | August 14, 2019 |  | $ | 0.5500 |  |  | $ | 67,419 |
3rd Quarter | November 14, 2019 |  | $ | 0.5500 |  |  | $ | 67,419 |
4th Quarter | February 14, 2020 |  | $ | 0.5500 |  |  | $ | 67,419 |
Equity Issuances and Contributions Our partnership agreement authorizes our general partner to cause us to issue additional limited partner interests and other equity securities, the proceeds from which could be used to provide additional funds for acquisitions or other needs. On March 24, 2017, we issued 4,600,000 Class A common units in a public offering at a price of $30.65 per unit, which included the exercise by the underwriters of an option to purchase up to 600,000 additional common units from us. We received proceeds, net of offering costs, of approximately $140.5 million from that offering. The new common units issued in 2017 to the public for cash were as follows:
Period | Purchaser of Common Units | Units |  | Gross Unit Price |  | Issuance Value |  | Costs |  | Net Proceeds
March 2017 | Public | 4,600 |  |  | $ | 30.65 |  |  | $ | 140,990 |  |  | $ | (477 | ) |  | $ | 140,513 |
Class A Convertible Preferred Units On September 1, 2017, we sold $750 million of Class A convertible preferred units ("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. Each of our preferred units accumulate quarterly distribution amounts in arrears at an annual rate of 8.75% (or $2.9496), yielding a quarterly rate of 2.1875% (or $0.7374), subject to certain adjustments. With respect to any quarter ending on or prior to March 1, 2019, we had the option to pay to the holders of our preferred units the applicable distribution amount in cash, preferred units, or any combination thereof. If we elected to pay all or any portion of a quarterly distribution amount in preferred units, the number of such preferred units would equal the product of (i) the number of then outstanding preferred units and (ii) the quarterly rate. We elected to pay all distributions from inception through March 1, 2019 with additional preferred units. For the quarter ended March 31, 2019, we paid a portion of our distribution in cash, and a portion in preferred units. For each quarter ending after March 1, 2019, we paid all distribution amounts in respect of our preferred units in cash. From time to time after September 1, 2020, we will have the right to cause the conversion of all or a portion of outstanding preferred units into our common units, subject to certain conditions; provided, however, that we will not be permitted to convert more than 7,416,498 of our preferred units in any consecutive twelve-month period. At any time after September 1, 2020, if we have fewer than 592,768 of our preferred units outstanding, we will have the right to convert each outstanding preferred unit into our common units at a conversion rate equal to the greater of (i) the then-applicable conversion rate and (ii) the quotient of (a) the Issue Price and (b) 95% of the volume-weighted average price of our common units for the 30-trading day period ending prior to the date that we notify the holders of our outstanding preferred units of such conversion. Upon certain events involving certain changes of control in which more than 90% of the consideration payable to the holders of our common units is payable in cash, our preferred units will automatically convert into common units at a conversion ratio equal to the greater of (a) the then applicable conversion rate and (b) the quotient of (i) the product of (A) the sum of (1) the Issue Price and (2) any accrued and accumulated but unpaid distributions on our preferred units, and (B) a premium factor (ranging from 115% to 101% depending on when such transaction occurs) plus a prorated portion of unpaid partial distributions, and (ii) the volume weighted average price of the common units for the 30 trading days prior to the execution of definitive documentation relating to such change of control. In connection with other change of control events that do not meet the 90% cash consideration threshold described above, each holder of our preferred units may elect to (a) convert all of its preferred units into our common units at the then applicable conversion rate, (b) if we are not the surviving entity (or if we are the surviving entity, but our common units will cease to be listed), require us to use commercially reasonable efforts to cause the surviving entity in any such transaction to issue a substantially equivalent security (or if we are unable to cause such substantially equivalent securities to be issued, to convert its preferred units into common units in accordance with clause (a) above or exchanged in accordance with clause (d) below or convert at a specified conversion rate), (c) if we are the surviving entity, continue to hold our preferred units or (d) require us to exchange our preferred units for cash or, if we so elect, our common units valued at 95% of the volume-weighted average price of our common units for the 30 consecutive trading days ending on the fifth trading day immediately preceding the closing date of such change of control, at a price per unit equal to the sum of (i) the product of (x) 101% and (y) the Issue Price plus (ii) accrued and accumulated but unpaid distributions and (iii) a prorated portion of unpaid partial distributions. For a period of 30 days following (i) September 1, 2022 and (ii) each subsequent anniversary thereof, the holders of our preferred units may make a one-time election to reset the quarterly distribution amount (a “Rate Reset Election”) to a cash amount per preferred unit equal to the amount that would be payable per quarter if a preferred unit accrued interest on the Issue Price at an annualized rate equal to three-month LIBOR plus 750 basis points; provided, however, that such reset rate shall be equal to 10.75% if (i) such alternative rate is higher than the LIBOR-based rate and (ii) the then market price for our common units is then less than 110% of the Issue Price. To become effective, the Rate Reset Election requires approval of holders of at least a majority of our then outstanding preferred units and such majority must include each of our initial purchasers (or any affiliate to whom they have transferred their preferred units) if such initial purchaser (including its affiliates) holds at least 25% of the then outstanding preferred units. Upon the occurrence of a Rate Reset Election, we may redeem our preferred units for cash, in whole or in part (subject to certain minimum value limitations) for an amount per preferred unit equal to such preferred unit’s liquidation value (equal to the Issue Price plus any accrued and accumulated but unpaid distributions, plus a prorated portion of certain unpaid partial distributions in respect of the immediately preceding quarter and the current quarter) multiplied by (i) 110%, prior to September 1, 2024, and (ii) 105% thereafter. Each holder of our preferred units may elect to convert all or any portion of its preferred units into common units initially on a one-for-one basis (subject to customary adjustments and an adjustment for accrued and accumulated but unpaid distributions and limitations) at any time after September 1, 2019 (or earlier upon a change of control, liquidation, dissolution or winding up), provided that any conversion is for at least $50 million or such lesser amount if such conversion relates to all of a holder’s remaining preferred units or has otherwise been approved by us. If we fail to pay in full any preferred unit distribution amount after March 1, 2019 in respect of any two quarters, whether or not consecutive, then until we pay such distributions in full, we will not be permitted to (a) declare or make any distributions (subject to a limited exceptions for pro rata distributions on our preferred units and parity securities), redemptions or repurchases of any of our limited partner interests that rank junior to or pari passu with our preferred units with respect to rights upon distribution and/or liquidation (including our common units), or (b) issue any such junior or parity securities. If we fail to pay in full any preferred unit distribution after March 1, 2019 in respect of any two quarters, whether or not consecutive, then the preferred unit distribution amount will be reset to a cash amount per preferred unit equal to the amount that would be payable per quarter if a preferred unit accrued interest on the Issue Price at an annualized rate equal to the then-current annualized distribution rate plus 200 basis points until such default is cured. In addition to their right to veto a Rate Reset Election under certain circumstances, we have granted each initial purchaser (including its applicable affiliate transferees) certain rights, including (i) the right to appoint an observer, who shall have the right to attend our board meetings for so long as an initial purchaser (including its affiliates) owns at least $200 million of our preferred units; (ii) the right to purchase up to 50% of any parity securities on substantially the same terms offered to other purchasers for so long as an initial purchaser (including its affiliates) owns at least 11,124,747 of our preferred units, and (iii) the right to appoint two directors to our general partner’s board of directors if (and so long as) we fail to pay in full any three quarterly distribution amounts, whether or not consecutive, attributable to any quarter ending after March 1, 2019. The Rate Reset Election of these preferred units represents an embedded derivative that must be bifurcated from the related host contract and recorded at fair value on our Consolidated Balance Sheet. See further information in Note 19. The preferred units themselves are classified as mezzanine capital on our Consolidated Balance Sheet. 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 which is outside of our control. Therefore, we present them as temporary equity in the mezzanine section of the Consolidated Balance Sheet. The preferred units have been recorded at their issuance date fair value, net of issuance costs. Because our preferred units are not currently redeemable and we do not have plans or expect any events which 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 redemption first becomes probable and the date the units can first be redeemed. As discussed above, a portion of the net proceeds were allocated to the Preferred Distribution Rate Reset Election and recorded in Other long term liabilities on the Consolidated Balance Sheet as described below (as of the inception date):
|  | September 1, 2017
Transaction price, gross |  | $ | 750,000 |
Transaction cost to other third parties |  | (23,581 | )
Transaction price, net |  | 726,419 |
Allocation of Net Transaction Price |  |
Preferred Units, net |  | 691,969 |
Preferred Distribution Rate Reset Election (Note 19) |  | 34,450 |
|  | $ | 726,419 |
Preferred unit distributions are recognized on the date in which they are declared. Paid in kind distributions were declared and issued as follows:
Distribution Declared | Date Issued |  | Number of Units |  | Total Amount
2017 |  |  |  |  |
November 2017 | November 14, 2018 |  | 162,234 |  |  | $ | 5,469 |
2018 |  |  |  |  |
January 2018 | February 14, 2018 |  | 490,252 |  |  | $ | 16,526 |
April 2018 | May 15, 2018 |  | 500,967 |  |  | $ | 16,888 |
July 2018 | August 14, 2018 |  | 511,934 |  |  | $ | 17,257 |
October 2018 | November 14, 2018 |  | 523,132 |  |  | $ | 17,635 |
2019 |  |  |  |  |
January 2019 | February 14, 2019 |  | 534,576 |  |  | $ | 18,021 |
April 2019 | May 15, 2019 |  | 364,180 |  |  | $ | 12,277 |
We paid the following cash distributions to our preferred unitholders:
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 |  | $ | 0.7374 |  |  | $ | 18,684 |
4 th Quarter |  | February 14, 2020 |  | $ | 0.7374 |  |  | $ | 18,684 |
The following table shows the change in our Class A Convertible Preferred Units from initial measurement at September 1, 2017 to December 31, 2019:
| Class A Convertible Preferred Units
| Units |  | $
December 31, 2016 | — |  |  | $ | — |
Issuance of Preferred Units, net | 22,249,494 |  |  | 726,419 |
Allocation to Preferred Distribution Rate Reset Election (Note 19) | — |  |  | (34,450 | )
Distributions paid-in-kind | 162,234 |  |  | 5,469 |
Allocation of Distributions paid-kind to Preferred Distribution Rate Reset Election (Note 19) | — |  |  | (287 | )
Balance as of December 31, 2017 | 22,411,728 |  |  | $ | 697,151 |
Distributions paid-in-kind | 2,026,294 |  |  | 68,306 |
Allocation of Distributions paid-kind to Preferred Distribution Rate Reset Election (Note 19) | — |  |  | (3,991 | )
Balance as of December 31, 2018 | 24,438,022 |  |  | $ | 761,466 |
Distributions paid-in-kind | 898,756 |  |  | 30,298 |
Allocation of Distributions paid-kind to Preferred Distribution Rate Reset Election (Note 19) | — |  |  | (1,649 | )
Balance as of December 31, 2019 | 25,336,778 |  |  | $ | 790,115 |
Net income (loss) attributable to common unitholders is reduced by Preferred Unit distributions that accumulated during the period. During 2019, net income attributable to common unitholders was reduced by $74.5 million as a result of distributions that accumulated during the period. 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 December 31, 2019, we received cash of $122.9 million for the $130 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 25 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 December 31, 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. Net Income Attributable to Genesis Energy, L.P. for the year ended December 31, 2019 includes $2.3 million of adjustments, of which $1.8 million was allocated to the distribution paid in-kind on the outstanding preferred units and $0.5 million was attributable to redemption accretion value adjustments from the closing date to December 31, 2019. We elected to pay distributions for the period ending September 30, 2019 and December 31, 2019 in-kind to our preferred unitholders. These in-kind distributions increase the unitholders liquidation preference on each preferred unit. 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 December 31, 2019, the redemption amount would be equal to $192.5 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. The following table shows the change in our redeemable noncontrolling interests from initial measurement at September 23, 2019 to December 31, 2019:
|  | Year Ended December 31
|  | 2019
Issuance of Preferred Units |  | $ | 55,000 |
Issuance costs |  | (5,600 | )
Balance as of September 23, 2019 |  | 49,400 |
Issuance of preferred units, net of issuance costs |  | 73,500 |
Distribution paid-in-kind |  | 1,778 |
Redemption accretion |  | 455 |
Balance as of December 31, 2019 |  | $ | 125,133 |

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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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