8-KSecurities & ListingShareholder MattersCorporate Changes+1

Targa Resources Corp. 8-K Report, Unregistered Securities Sale (Oct 21, 2016)

Filed October 21, 2016For Securities:TRGP

Summary

Targa Resources Corp. (TRGP) filed an 8-K on October 21, 2016, detailing significant changes to its partnership agreement and the issuance of equity. Specifically, Targa Resources Partners LP, a subsidiary, executed a Third Amended and Restated Agreement of Limited Partnership, effective December 1, 2016. This amendment involved the elimination of Incentive Distribution Rights (IDRs) and the Special General Partner Interest held by the General Partner in exchange for the issuance of common units and general partner units. This strategic move is expected to simplify the partnership's capital structure and alter its distribution mechanics. Investors should note that the issuance of these units was conducted under an exemption from registration, as it involved internal restructuring rather than a public offering. The filing also indicates modifications to distribution declaration procedures, allowing for monthly distributions in addition to quarterly ones, which could impact cash flow predictability for unitholders.

Key Highlights

  • 1Targa Resources Partners LP executed a Third Amended and Restated Agreement of Limited Partnership, effective December 1, 2016.
  • 2The General Partner (Targa Resources GP LLC) will receive over 20.3 million common units and 424,000 general partner units in exchange for canceling Incentive Distribution Rights (IDRs).
  • 3The General Partner will also receive an additional 11.2 million common units and 234,000 general partner units for canceling its Special General Partner Interest.
  • 4These unit issuances are being made pursuant to Section 4(a)(2) of the Securities Exchange Act of 1934, indicating a private placement exemption.
  • 5The amendment eliminates the IDRs and Special GP Interest, simplifying the partnership's structure.
  • 6The new agreement allows for the declaration of monthly distributions in addition to quarterly distributions.
  • 7Certain provisions related to distributions from available cash and Class B Unit provisions have been modified or eliminated.

Frequently Asked Questions

The primary purpose of this agreement is to eliminate the Incentive Distribution Rights (IDRs) and the Special General Partner Interest held by the General Partner. This simplifies the partnership's capital structure and modifies its distribution and allocation provisions.

By eliminating the IDRs, the partnership's structure is simplified, and the variable distribution rights tied to certain thresholds are removed. This is achieved through an exchange of these rights for common and general partner units, which are then issued to the General Partner.

No, these units are not being offered to the public. They are being issued to the General Partner in exchange for the cancellation of existing rights (IDRs and Special GP Interest) and are being issued under an exemption from registration pursuant to Section 4(a)(2) of the Securities Exchange Act of 1934.

The ability to declare monthly distributions, in addition to quarterly distributions, provides more flexibility in returning cash to unitholders. This could lead to more frequent cash distributions, although the total amount distributed will depend on available cash and board decisions.