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Partners' Capital, Mezzanine Capital and Distributions | 9 Months Ended
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Sep. 30, 2022
Equity [Abstract] |
Partners' Capital, Mezzanine Capital and Distributions | Partners’ Capital, Mezzanine Capital and Distributions At September 30, 2022, our outstanding common units consisted of 122,539,221 Class A units and 39,997 Class B 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 September 30, 2022, we had 25,336,778 Class A Convertible Preferred Units outstanding, which are discussed below in further detail. Distributions We paid or will pay the following cash distributions to our common unitholders in 2021 and 2022:
Distribution For |  | Date Paid |  | Per Unit Amount |  | Total Amount |
2021 |  |  |  |  |  |  |
1 st Quarter |  | May 14, 2021 |  | $ | 0.15 |  |  | $ | 18,387 |  |
2 nd Quarter |  | August 13, 2021 |  | $ | 0.15 |  |  | $ | 18,387 |  |
3 rd Quarter |  | November 12, 2021 |  | $ | 0.15 |  |  | $ | 18,387 |  |
4 th Quarter |  | February 14, 2022 |  | $ | 0.15 |  |  | $ | 18,387 |  |
2022 |  |  |  |  |  |  |
1 st Quarter |  | May 13, 2022 |  | $ | 0.15 |  |  | $ | 18,387 |  |
2 nd Quarter |  | August 12, 2022 |  | $ | 0.15 |  |  | $ | 18,387 |  |
3 rd Quarter |  | November 14, 2022 | (1) | $ | 0.15 |  |  | $ | 18,387 |  |
(1)This distribution was declared on October 10, 2022 and will be paid to unitholders of record as of October 31, 2022. Class A Convertible Preferred Units Our Class A Convertible Preferred Units rank 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 Class A Convertible 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 Class A Convertible Preferred Units. Accounting for the Class A Convertible Preferred Units Our Class A Convertible Preferred Units are considered redeemable securities under GAAP due to the existence of redemption provisions upon a deemed liquidation event that is outside of our control. Therefore, we present them as temporary equity in the mezzanine section of the Unaudited Condensed Consolidated Balance Sheets. We initially recognized our Class A Convertible Preferred Units at their issuance date fair value, net of issuance costs, as they were not redeemable and we did not have plans or expect any events that constitute a change of control in our partnership agreement. Additionally, our Class A Convertible Preferred Units contains a distribution Rate Reset Election (as defined in N ote 1 5), which was elected by the holders of the Class A Convertible Preferred Units on September 29, 2022 (the “election date”). From the date of issuance through the election date, this distribution rate reset was bifurcated and accounted for separately as an embedded derivative and recorded at fair value at each reporting period in “Other long-term liabilities” in our Unaudited Condensed Consolidated Balance Sheets. As of the election date, the feature within the Class A Convertible Preferred Units that required bifurcation no longer existed and we have adjusted the carrying value of the Class A Convertible Preferred Units to include the fair value of the previously bifurcated amount at the election date. Refer to N ote 15 and Note 16 for additional discussion. As of September 30, 2022, we will not be required to further adjust the carrying amount of our Class A Convertible Preferred Units until it becomes probable that they would become redeemable. Once redemption becomes probable, we would adjust the carrying amount of our Class A Convertible 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. Net Income (Loss) Attributable to Genesis Energy, L.P. is reduced by Class A Convertible Preferred Unit distributions that accumulated during the period and was reduced by $18.7 million and $56.1 million for the three and nine months ended September 30, 2022 and 2021, respectively. We paid or will pay the following cash distributions to our Class A Convertible Preferred unitholders in 2021 and 2022:
Distribution For |  | Date Paid |  | Per Unit Amount |  | Total Amount
2021 |  |  |  |  |  |
1 st Quarter |  | May 14, 2021 |  | $ | 0.7374 |  |  | $ | 18,684 |
2 nd Quarter |  | August 13, 2021 |  | $ | 0.7374 |  |  | $ | 18,684 |
3 rd Quarter |  | November 12, 2021 |  | $ | 0.7374 |  |  | $ | 18,684 |
4 th Quarter |  | February 14, 2022 |  | $ | 0.7374 |  |  | $ | 18,684 |
2022 |  |  |  |  |  |
1 st Quarter |  | May 13, 2022 |  | $ | 0.7374 |  |  | $ | 18,684 |
2 nd Quarter |  | August 12, 2022 |  | $ | 0.7374 |  |  | $ | 18,684 |
3 rd Quarter |  | November 14, 2022 | (1) | $ | 0.7374 |  |  | $ | 18,684 |
(1)This distribution was declared on October 10, 2022 and will be paid to unitholders of record as of October 31, 2022. As a result of the one-time Rate Reset Election made by the holders of the Class A Convertible Preferred Units on the election date, the annual distribution rate for the Class A Convertible Preferred Units increased from 8.75% to 11.24%, applicable for future quarterly distributions declared and payable, beginning with the quarter ended December 31, 2022. Redeemable Noncontrolling Interests On September 23, 2019, we, through a subsidiary, 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 Blackstone Alternative Credit Advisors LP, formerly known as “GSO Capital Partners LP” (collectively “BXC”) purchased $55.0 million (or 55,000 Alkali Holdings preferred units) and committed to purchase up to $350.0 million of Alkali Holdings preferred units, 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 utilized the net proceeds received from the preferred units to fund a portion of the anticipated cost of expansion of the Granger facility (the “Granger Optimization Project” or “GOP”). On April 14, 2020, we entered into an amendment to our agreements with BXC to, among other things, extend the construction timeline of the GOP by one year, which we currently anticipate completing in the third quarter of 2023. In consideration for the amendment, we issued 1,750 Alkali Holdings preferred units to BXC, which was accounted for as issuance costs. As part of the amendment, the commitment period was increased to four years, and the total commitment of BXC was increased to, subject to compliance with the covenants contained in the agreements with BXC, up to $351.8 million preferred units (or 351,750 preferred units) in Alkali Holdings. From time to time after we had drawn at least $251.8 million, we had 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 (“IRR”) or a multiple of invested capital metric (“MOIC”), net of cash distributions paid to date (“Base Preferred Return Amount”). Additionally, if all outstanding preferred units were redeemed, we had not drawn at least $251.8 million, and BXC was not a “defaulting member” under the LLC Agreement, BXC had the right to a make-whole amount on the number of undrawn preferred units. On May 17, 2022 (the “Redemption Date”), we fully redeemed the 251,750 outstanding Alkali Holdings preferred units at a Base Preferred Return Amount of $288.6 million utilizing a portion of the proceeds we received from the issuance of our Alkali senior secured notes. As of September 30, 2022, there were no Alkali Holdings preferred units outstanding. Accounting for Redeemable Noncontrolling Interests Classification Prior to the Redemption Date, the Alkali Holdings preferred units issued and outstanding were accounted for as a redeemable noncontrolling interest in the mezzanine section on our Unaudited Condensed Consolidated Balance Sheets due to the redemption features for a change of control. Initial and Subsequent Measurement We recorded the Alkali Holdings preferred units at their issuance date fair value, net of issuance costs. The fair value of the Alkali Holdings preferred units was approximately $270.1 million as of May 16, 2022, which represented the carrying amount based on the issued and outstanding Alkali Holdings preferred units most probable redemption event on the six and a half year anniversary of the closing, which was the IRR measure accreted using the effective interest method to the redemption value as of each reporting date. On May 16, 2022, certain events occurred that made it probable that an early redemption event on the Alkali Holdings preferred units would occur and the outstanding preferred units would be redeemed at the MOIC, as it was greater than the IRR at the time of the redemption. This required the Company to revalue the Alkali Holdings preferred units to the redemption amount of $288.6 million, which represents the MOIC, net of cash distributions (including tax distributions) paid to date. Net Income Attributable to Genesis Energy, L.P. for the nine months ended September 30, 2022 includes $30.4 million of adjustments, of which $10.0 million was allocated to the paid-in-kind (“PIK”) distributions on the outstanding Alkali Holdings preferred units,$1.9 million, was attributable to redemption accretion value adjustments, and $18.5 million was attributable to a change in the Base Preferred Return Amount of the Alkali Holdings preferred units. Net Loss Attributable to Genesis Energy, L.P. for the three and nine months ended September 30, 2021 includes $7.1 million and $17.7 million of adjustments, respectively, of which $5.9 million and $14.9 million, respectively, was allocated to the PIK distributions and $1.2 million and $2.8 million, respectively, was attributable to redemption accretion value adjustments. We elected to pay distributions for the period ended September 30, 2022 in-kind to our Alkali Holdings preferred unitholders. The following table shows the change in our redeemable noncontrolling interest balance from December 31, 2021 to September 30, 2022:
Balance as of December 31, 2021 |  | $ | 259,568 |
Issuance of preferred units, net of issuance costs(1) |  | 5,249 |
PIK distribution |  | 9,993 |
Redemption accretion |  | 1,908 |
Tax distributions(1) |  | (6,631) |
Adjustment to Base Preferred Return Amount |  | 18,542 |
Redemption of preferred units on May 17, 2022 |  | (288,629) |
Balance as of September 30, 2022 |  | $ | — |
(1)During the nine months ended September 30, 2022, we issued 5,356 Alkali Holdings preferred units to BXC to satisfy the Company’s obligation to pay tax distributions. Noncontrolling Interests On November 17, 2021, we, through a subsidiary, sold 36% of the membership interests in CHOPS for proceeds of approximately $418 million. We retained 64% of the membership interests in CHOPS and remain the operator of the CHOPS pipeline and its associated assets. We also own an 80% membership interest in Independence Hub, LLC. On April 29, 2022, we entered into an agreement to sell the Independence Hub platform to a producer group in the Gulf of Mexico for gross proceeds of $40.0 million, of which $8.0 million, or 20%, was attributable and was paid to our noncontrolling interest holders. For the nine months ended September 30, 2022, we recognized a gain of $40.0 million recorded in “Gain on sale of asset” on the Unaudited Condensed Consolidated Statement of Operations, of which $8.0 million, or 20%, is attributable to our noncontrolling interest holders, as the platform asset sold had no book value at the time of the sale. For financial reporting purposes, the assets and liabilities of these entities are consolidated with those of our own, with any third party or affiliate interest in our Unaudited Condensed Consolidated Balance Sheets amounts shown as noncontrolling interests in equity.

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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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