ABERDEEN, Scotland--(BUSINESS WIRE)--
KNOT Offshore Partners LP (the “Partnership”) (NYSE:KNOP) announced
today that it has entered into a Series A Preferred Unit Purchase
Agreement for the private placement of $50 million of new Series A
Convertible Preferred Units (the “Preferred Units”) at a price of $24.00
per unit (the “Issue Price”), resulting in approximately 2,083,333
Preferred Units, representing limited partner interests in the
Partnership, expected to be outstanding as of the closing date (the
“Closing Date”) of the private placement. The Preferred Units will be
perpetual and will pay cumulative, quarterly distributions in arrears at
an annual rate of 8.0% of the Issue Price, on or prior to the date of
payment of distributions on the Partnership’s common units (the “Common
Units”). The Partnership has the option to issue and sell on the Closing
Date up to an additional $49 million of Preferred Units to other
purchasers at the Issue Price. The transaction is subject to customary
closing conditions and is expected to close in January 2017. Assuming
the Partnership issues $50 million of Preferred Units, the net proceeds,
after deducting estimated fees and expenses, are expected to be
approximately $48.5 million. The Partnership expects to use the net
proceeds for general partnership purposes, which may include
acquisitions, capital expenditures or the repayment of indebtedness.
The Preferred Units will be generally convertible, at the option of the
Preferred Unit holders, into Common Units after the second anniversary
of the Closing Date at the then applicable conversion rate. As of the
Closing Date, the conversion rate will be one-for-one and will be
subject to adjustment under certain circumstances. In addition, the
conversion rate will be redetermined on a quarterly basis, such that the
conversion rate will be equal to the Issue Price divided by the product
of (x) the book value per Common Unit at the end of the immediately
preceding quarter (pro-forma for per unit cash distributions payable
with respect to such quarter) multiplied by (y) the quotient of (i) the
Issue Price divided by (ii) the book value per Common Unit on the
Closing Date. In addition, the Partnership may redeem the Preferred
Units at any time between the second anniversary and the tenth
anniversary of the Closing Date at the redemption price applicable on
any such redemption date.
Upon a change of control of the Partnership, the holders of Preferred
Units will have the right to require cash redemption at 100% of the
Issue Price. In addition, the holders of Preferred Units will have the
right to cause the Partnership to redeem the Preferred Units on the
tenth anniversary of the Closing Date in, at the option of the
Partnership, (i) cash at a price equal to 70% of the Issue Price or (ii)
Common Units such that each Preferred Unit receives Common Units worth
80% of the Issue Price. In addition, at any time following the second
anniversary of the Closing Date and subject to certain conditions, the
Partnership will have the right to convert the Preferred Units into
Common Units at the then applicable conversion rate.
The Preferred Units will have voting rights that are identical to the
voting rights of the Common Units, except they will not have any right
to nominate, appoint or elect any of the directors of the Partnership’s
board (the “Board”), except whenever distributions payable on the
Preferred Units have not been declared and paid for four consecutive
quarters (a “Trigger Event”). Upon a Trigger Event, holders of Preferred
Units will have the right to replace one of the members of the Board
appointed by the general partner of the Partnership with a person
nominated by such holders, such nominee to serve until all accrued and
unpaid distributions on the Preferred Units have been paid. The
Preferred Units shall be entitled to vote with the Common Units as a
single class so that the Preferred Units shall be entitled to one vote
for each Common Unit into which the Preferred Units are then convertible.
The Partnership may issue junior securities in an unlimited amount and
parity securities, provided that the aggregate amount of the Preferred
Units and the parity securities pro-forma for such issuance, does not
exceed 33.33% of the book value of the sum of the Partnership’s then
outstanding aggregate amount of parity securities and junior securities
(including Common Units). The consent of the holders of Preferred Units
will be necessary for the Partnership to issue any parity securities or
senior securities in excess of such pro-forma book value. In addition,
the consent of the holders of Preferred Units will be necessary for the
Partnership to incur additional indebtedness that would result in the
Partnership exceeding 70% debt to total capitalization.
The Preferred Units will rank senior to all Common Units and any other
class or series of equity securities of the Partnership outstanding as
of the Closing Date with respect to distribution rights and liquidation
preference.
Pursuant to the Purchase Agreement, the Partnership has agreed to enter
into a Registration Rights Agreement on the Closing Date with the
holders of the Preferred Units. Pursuant to the Registration Rights
Agreement, the Partnership will agree to use commercially reasonable
efforts to file a traditional shelf registration statement registering
resales of the Common Units underlying the Preferred Units and to have
such registration statement declared effective by the Securities and
Exchange Commission by the second anniversary of the Closing Date. The
holders of the Preferred Units will also have certain demand and
piggyback rights with respect to the underlying Common Units.
The securities offered in the private placement have not been registered
under the Securities Act of 1933, as amended (the “Securities Act”), or
any state securities laws and may not be offered or sold in the United
States absent registration or an applicable exemption from registration
requirements of the Securities Act and applicable state laws.
This press release is neither an offer to sell nor a solicitation of an
offer to purchase the securities described herein.
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Source: Knot Offshore Partners LP