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Note 4 - Class A Convertible Preferred Units and Warrants

12 Months Ended

Dec. 31, 2024

4. Class A Convertible Preferred Units and Warrants

On March 2, 2017, NRP issued $250 million of Class A Convertible Preferred Units representing limited partner interests in NRP (the "preferred units") to certain entities controlled by funds affiliated with The Blackstone Group Inc. (collectively referred to as "Blackstone") and certain affiliates of GoldenTree Asset Management LP (collectively referred to as "GoldenTree") (together the "preferred purchasers") pursuant to a Preferred Unit and Warrant Purchase Agreement. NRP issued 250,000 preferred units to the preferred purchasers at a price of $1,000 per preferred unit (the "per unit purchase price"), less a 2.5% structuring and origination fee. The preferred units entitled the preferred purchasers to receive cumulative distributions at a rate of 12% of the purchase price per year, up to one half of which NRP may have paid in additional preferred units (such additional preferred units, the "PIK units"). The preferred units had a perpetual term, unless converted or redeemed. However, in 2024 all remaining preferred units were redeemed and none of the Partnership's preferred units remain outstanding.

NRP also issued two tranches of warrants (the "warrants") to purchase common units to the preferred purchasers (warrants to purchase 1.75 million common units with a strike price of $22.81 and warrants to purchase 2.25 million common units with a strike price of $34.00). The warrants were exercisable by the holders thereof at any time before the eighth anniversary of the closing date. Upon exercise of the warrants, NRP may have, at its option, elected to settle the warrants in common units or cash, each on a net basis. However, in 2024 all remaining warrants were settled and none of the Partnership's warrants remain outstanding.

Accounting for the Preferred Units and Warrants

Classification

The preferred units were accounted for as temporary equity on NRP's Consolidated Balance Sheets due to certain contingent redemption rights that may have been exercised at the election of preferred purchasers. The warrants were accounted for as equity on NRP's Consolidated Balance Sheets.

Initial Measurement

The net transaction price was allocated to the preferred units and warrants based on their relative fair values at inception date. NRP allocated the transaction issuance costs to the preferred units and warrants primarily on a pro-rata basis based on their relative inception date allocated values.

Subsequent Measurement

Preferred Units

During the year ended December 31, 2024, the Partnership redeemed a total of 71,666 preferred units for $71.7 million in cash. During the year ended December 31, 2023, the Partnership redeemed a total of 178,334 preferred unit for $178.3 million in cash. Of the originally issued 250,000 preferred units, no preferred units remained outstanding as of December 31, 2024. and 71,666 preferred units remained outstanding as of December 31, 2023. The preferred units had a $47.2 million carrying value included in class A convertible preferred units on the Partnership's Consolidated Balance Sheets at December 31, 2023.

Activity related to the preferred units is as follows:

	*Units*			*Financial*
(In thousands, except unit data)	*Outstanding*			*Position*
Balance at December 31, 2021		269,321		$	183,908
Redemption of preferred units paid-in-kind		(19,321	)		(19,321	)
Balance at December 31, 2022		250,000		$	164,587
Redemption of preferred units		(178,334	)		(117,406	)
Balance at December 31, 2023		71,666		$	47,181
Redemption of preferred units		(71,666	)		(47,181	)
Balance at December 31, 2024		—		$	—

Warrants

During the year ended December 31, 2024, the Partnership settled a total of 1,540,000 warrants to purchase common units with a strike price of $34.00. On January 29, 2024 (the "January 2024 exercise date"), holders of the Partnership's warrants exercised 462,165 warrants at a strike price of $34.00. The Partnership settled the warrants on a net basis with $10.0 million in cash and 198,767 common units. The 15-day VWAP ending on the business day prior to the January 2024 exercise date was $97.62. On February 7, 2024 (the "February 7, 2024 exercise date"), holders of the Partnership's warrants exercised 128,750 warrants at a strike price of $34.00. The Partnership settled the warrants on a net basis with $8.0 million in cash. The 15-day VWAP ending on the business day prior to the February 7, 2024 exercise date was $96.29. On February 8, 2024 (the "February 8, 2024 exercise date"), holders of the Partnership's warrants exercised 128,750 warrants at a strike price of $34.00. The 15-day VWAP ending on the business day prior to the February 8, 2024 exercise date was $95.63. The Partnership settled these warrants on a net basis with $7.9 million in cash. On February 14, 2024 (the "February 14, 2024 exercise date"), holders of the Partnership's warrants exercised 500,000 warrants at a strike price of $34.00. The 15-day VWAP ending on the business day prior to the February 14, 2024 exercise date was $93.47. The Partnership settled these warrants on a net basis with $29.7 million in cash. In April 2024 (the "April 2024 exercise date"), holders of the Partnership's warrants exercised 320,335 warrants at a strike price of $34.00. The Partnership settled the warrants on a net basis with $10.0 million in cash and 89,059 common units. The 15-day VWAP ending on the business day prior to the April 2024 exercise date was $90.33.

In 2023, the Partnership negotiated transactions with holders of the Partnership's warrants pursuant to which the Partnership repurchased and retired an aggregate of 752,500 warrants with a strike price of $22.81 and 710,000 warrants with a strike price of $34.00 for approximately $56.1 million in cash. As of December 31, 2024, zero warrants remained outstanding.

Of the originally issued 4,000,000 warrants, no warrants remain outstanding as of December 31, 2024 and 1,540,000 warrants to purchase common units with a strike price of $34.00 were outstanding as of December 31, 2023. These warrants had a carrying value of $23.1 million included in warrant holders' interest within partners' capital on the Partnership's Consolidated Balance Sheets at December 31, 2023.

Activity related to the warrants is as follows:

	*Warrants*			*Financial*
(In thousands, except warrant data)	*Outstanding*			*Position*
Balance at December 31, 2021 and 2022		3,002,500		$	47,964
Warrant settlement		(1,462,500	)		(24,869	)
Balance at December 31, 2023		1,540,000		$	23,095
Warrant settlements		(1,540,000	)		(23,095	)
Balance at December 31, 2024		—		$	—

Embedded Features

Certain embedded features within the preferred unit and warrant purchase agreement were accounted for at fair value and were remeasured each quarter. See Note 12. Fair Value Measurements for further information regarding valuation of these embedded derivatives.