On October 24, 2016, we entered into a share purchase agreement (the "SPA") with VIP Terminals Finance B.V. (the "Seller") to
acquire 50% of the outstanding share capital of VIP Terminals Holding B.V. ("VIP Holdings"), which owns all of the outstanding share capital of VTTI B.V. ("VTTI"), for approximately
$1.15 billion (the "VTTI Acquisition"). VTTI will be indirectly jointly owned with Vitol B.V. ("Vitol") and Vitol Investment Partnership Limited. In connection with the closing of the
VTTI Acquisition, we will also enter into a shareholders' agreement with the Seller which will govern the parties' respective rights with respect to the governance and operation of VTTI and its
subsidiaries.
VTTI
is based in the Netherlands and is an independent provider of storage and terminalling services for refined products, liquid petroleum gas and crude oil. VTTI has investments in
joint ventures and wholly owned subsidiaries throughout the world and indirectly holds an approximate 46% limited partner interest, a 2% general partner interest and incentive distribution rights in
VTTI Energy Partners LP, a publicly traded master limited partnership.
The
purchase price for the VTTI Acquisition is subject to customary adjustments at closing, including for certain distributions and other payments made by VTTI and its subsidiaries to
the Seller and its affiliates from December 31, 2015 through the closing of the VTTI Acquisition. The VTTI Acquisition is expected to close in early January 2017, subject to the receipt of
certain regulatory approvals, including the expiration of any waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR"). We expect to use the net proceeds from
this offering to fund a portion of the purchase price for the VTTI Acquisition. Please read "Use of Proceeds" in this prospectus supplement. If the VTTI Acquisition is not consummated, or the
SPA is terminated, in each case, prior to July 1, 2017, we will be required to redeem all of the Notes then outstanding at 101% of the principal amount of the Notes, plus accrued and unpaid
interest to, but excluding, the date of redemption. See "Description of NotesSpecial Mandatory Redemption" in this prospectus supplement.
On
October 28, 2016, we expect to complete a public offering of 7,750,000 LP units pursuant to an effective shelf registration statement, which priced at $66.05 per unit
(the "October Equity Offering"). The underwriters have exercised their full option to purchase an additional 1,162,500 LP units, which is also expected to close on October 28, 2016. We estimate
that the October Equity Offering, including the underwriters' exercise of their option to purchase additional LP units, will result in total gross proceeds of approximately $588.7 million
(before deducting underwriting discounts and commissions and estimated offering expenses).
We
expect to use the net proceeds from the October Equity Offering to fund a portion of the purchase price for the VTTI Acquisition. Pending such use, the net proceeds of the October
Equity Offering will be used to reduce the indebtedness outstanding under our revolving credit facility and for general partnership purposes. We expect to use the net proceeds from the exercise of the
underwriters' option to purchase additional LP units to reduce indebtedness outstanding under our revolving credit facility and for general partnership purposes. If the VTTI Acquisition is not
consummated, we intend to use the net proceeds to repay borrowings outstanding under our revolving credit facility and for general partnership purposes.
Business Strategy
Our primary business objective is to provide stable and sustainable cash distributions to our unitholders, while maintaining a relatively low
investment risk profile. The key elements of our strategy are to:
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Operate in a safe and environmentally responsible manner;
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Maximize utilization of our assets at the lowest cost per unit;
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Maintain stable long-term customer relationships;
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Optimize, expand and diversify our portfolio of energy assets through accretive acquisitions and organic growth projects; and
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Maintain a solid, conservative financial position and an investment-grade credit rating.
We
intend to achieve our strategy by:
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Acquiring, building and operating high quality, strategically-located assets;
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Maintaining and enhancing the integrity of our pipelines, terminals and storage assets;
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Pursuing strategic cash flow-accretive acquisitions that:
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Complement our existing footprint;
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Provide geographic, product and/or asset class diversity; and
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Leverage existing management capabilities and infrastructure;
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Seeking to acquire or develop other energy-related assets that enable us to leverage our asset base, knowledge base and skill sets;
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Valuing the effort, teamwork and innovation of our employees; and
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Providing superior customer service.
Executive Offices
Our principal executive offices are located at One Greenway Plaza, Suite 600, Houston, Texas 77046, and our telephone number is
(832) 615-8600.
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THE OFFERING
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Issuer
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Buckeye Partners, L.P.
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Securities offered
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We are offering $600.0 million of our 3.950% notes due 2026.
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Interest payment dates
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Interest will be payable semi-annually in arrears on June 1 and December 1 of each year, beginning on June 1,
2017.
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Maturity date
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Unless redeemed prior to maturity, the Notes will mature on December 1, 2026.
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Ranking
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The Notes will be:
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our senior unsecured
obligations, ranking equally in right of payment with all of our existing and future unsubordinated debt;
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non-recourse to our
general partner;
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senior in right of
payment to all of our existing and future subordinated debt;
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effectively junior to
any of our existing and future secured debt to the extent of the collateral securing such debt; and
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structurally junior to
all existing and future debt and other liabilities of our subsidiaries, including our operating subsidiaries.
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Covenants
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The Notes will be issued under an indenture with U.S. Bank National Association (successor to SunTrust Bank), as trustee,
which contains covenants for your benefit. These covenants restrict our ability, with certain exceptions, to:
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incur debt secured by
liens;
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engage in sale/leaseback
transactions; or
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merge or consolidate with
another entity or sell substantially all of our assets to another entity.
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Use of proceeds
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We estimate that we will receive net proceeds from this offering of approximately $592.6 million (after deducting the
underwriting discount and estimated offering expenses payable by us). We expect to use the net proceeds from this offering to fund a portion of the purchase price for the VTTI Acquisition. Please read "Use of Proceeds" in this prospectus
supplement.
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Optional redemption
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At our option, the Notes may be redeemed, in whole or in part at any time and from time to time, at our option at the
applicable redemption price set forth under the heading "Description of NotesOptional Redemption" in this prospectus supplement.
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Special mandatory redemption
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If the VTTI Acquisition is not consummated, or the SPA is terminated, in each case, prior to July 1, 2017, we will be required to
redeem all of the Notes then outstanding at 101% of the principal amount of the Notes, plus accrued and unpaid interest to, but excluding, the date of redemption. See "Description of NotesSpecial Mandatory Redemption" in this prospectus
supplement.
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Further issuances
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We may create and issue additional notes ranking equally and ratably with the Notes offered by this prospectus supplement in
all respects, so that such additional notes will be consolidated and form a single series with the Notes offered by this prospectus supplement and will have the same terms as to status, redemption or otherwise (except for the issue date, public
offering price, the first interest payment date, if applicable, and under certain circumstances, the date from which interest thereon will begin to accrue).
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Ratio of Earnings to Fixed Charges
The ratio of earnings to fixed charges for each of the periods indicated below is as follows:
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Six
months
ended
June 30,
2016
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Years ended December 31,
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2011
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2012
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2013
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2014
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2015
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Ratio of earnings to fixed charges
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3.04x
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2.65x
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3.31x
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2.65x
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3.06x
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3.58x
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These
computations include us and our operating subsidiaries and are based on the historical results of Buckeye Partners, L.P. For these ratios, "earnings" means the sum of the
following:
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income from continuing operations before taxes (excluding income attributable to noncontrolling interests);
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plus
equity income less than distributions, or less equity income greater than distributions,
as applicable; and
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less
capitalized interest, excluding amortization of capitalized interest.
The
term "fixed charges" means the sum of the following:
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interest and debt expense;
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plus
equity income less than distributions, or less equity income greater than distributions,
as applicable;
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plus
capitalized interest; and
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plus
a portion of rentals representing an interest factor.
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RISK FACTORS
You should carefully consider the risk factors described below, the risk factors beginning on page 17 of our
Annual Report on Form 10-K for the year ended December 31, 2015 and the risk factors relating to our business under the caption "Risk Factors" beginning on page 3 of the
accompanying base prospectus before making an investment decision. These risks are not the only ones we face. Additional risks not presently known to us or that we currently deem immaterial may also
impair our business operations. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. You should consider carefully these risk
factors together with all of the other information included in this prospectus supplement, the accompanying base prospectus and the documents incorporated by reference herein and therein before
investing in the Notes.
Risks Related to the VTTI Acquisition
The VTTI Acquisition may not be consummated.
The VTTI Acquisition is expected to close in early January 2017 and is subject to the receipt of certain regulatory approvals, including the
expiration of any waiting periods under HSR. Subject to the terms of the SPA, from and after the date of execution of the SPA, we have agreed to use our best endeavors to take all steps necessary to
obtain the necessary regulatory consents, approvals or authorizations as soon as possible. If we do not obtain the required regulatory approvals on or prior to January 24, 2017 (as such date
may be extended for up to three months by the Seller), the SPA will terminate. If any other closing conditions are not satisfied or waived, or if the SPA is otherwise terminated in accordance with its
terms, then the VTTI Acquisition will not be consummated. If the closing of the VTTI Acquisition is substantially delayed or does not occur at all, or if the terms of the VTTI Acquisition are required
to be modified substantially due to regulatory concerns, we may not realize the anticipated benefits of the VTTI Acquisition fully or at all.
If
the VTTI Acquisition is not consummated, or the SPA is terminated, in each case, prior to July 1, 2017, we will be required to redeem all of the Notes then outstanding at 101%
of the principal amount of the Notes, plus accrued and unpaid interest to, but excluding, the date of redemption. See "Description of NotesSpecial Mandatory Redemption" in this prospectus
supplement.
If the closing of the VTTI Acquisition does not occur prior to July 1, 2017, we will be required to redeem the Notes. If we are required to redeem the Notes, you may not
obtain your expected return on the Notes.
If the VTTI Acquisition is not consummated, or the SPA is terminated, in each case, prior to July 1, 2017, we will be required to redeem
all of the Notes at a redemption price equal to 101% of the principal amount of the Notes, plus accrued and unpaid interest to, but excluding, the date of redemption. If your Notes are redeemed, you
may not obtain your expected return on the Notes and may not be able to reinvest the proceeds from a special mandatory redemption in an investment that results in a comparable return. Your decision to
invest in the Notes is made at the time of the offering of the Notes. Changes in our business or financial condition, or certain of the terms of
the SPA between the closing of this offering and the closing of the VTTI Acquisition, will have no effect on your rights as a purchaser of the Notes.
We are not obligated to place the net proceeds of the offering of the Notes in escrow prior to the closing of the VTTI Acquisition and, as a result, we may not be able to repurchase
the Notes upon a special mandatory redemption.
We are not obligated to place the net proceeds of the offering of the Notes in escrow prior to the closing of the VTTI Acquisition or to provide
a security interest in those proceeds, and the indenture governing the Notes imposes no other restrictions on our use of these proceeds during that time.
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Accordingly,
the source of funds for any redemption of Notes upon a special mandatory redemption would be the proceeds that we have voluntarily retained or other sources of liquidity, including
available cash, borrowings, sales of assets or sales of equity. We may not be able to satisfy our obligation to redeem the Notes because we may not have sufficient financial resources to pay the
aggregate redemption price on the Notes. Our failure to redeem the Notes as required under the indenture governing the Notes would result in a default under the indenture, which could result in
defaults under our and our subsidiaries' other debt agreements and have material adverse consequences for us and the holders of the Notes. In addition, our ability to redeem the Notes for cash may be
limited by law or the terms of other agreements relating to our indebtedness outstanding at the time.
Following the closing of the VTTI Acquisition, we will indirectly own a 50% interest in VTTI and will have
limited ability to influence significant business decisions affecting VTTI without also receiving the consent of the Seller.
Following the closing of the VTTI Acquisition, we will indirectly own a 50% interest in VTTI through our interest in VIP Holdings. The Seller
will own the remaining 50% interest in VIP Holdings, and accordingly neither we nor the Seller will control VTTI. We and the Seller will each be entitled to appoint two directors to the board of
directors of VTTI, and certain actions by VTTI and its subsidiaries (collectively, the "VTTI Entities") will be subject to approval by both the Seller and us, including the approval
of:
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VTTI's annual budget and business plan;
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any adoption or amendment of a VTTI Entity's distribution policy;
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capital calls by VIP Holdings;
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any merger, consolidation or equity issuance by a VTTI Entity; and
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asset acquisitions, sales or dropdowns, entry into new contracts and incurrence of unbudgeted debt or capital expenditures in excess of
specified amounts.
Differences
in views among the owners of VTTI could result in delayed decisions or in failures to agree on significant matters, potentially adversely affecting the business and results
of operations or prospects of VTTI and, in turn, the amount of cash from operations distributed to us.
In
addition, we will not control the day-to-day operations of VTTI. Our lack of control over VTTI's day-to-day operations and the associated costs of operations could result in our
receiving lower cash distributions than we anticipate which could reduce our cash flow available for distribution to our unitholders and payment on the Notes and our other debt obligations.
If the VTTI Acquisition is not successful or the VTTI Entities do not perform as expected, our future
financial performance may be negatively impacted.
If the VTTI Acquisition is consummated, we may be exposed to additional risks, including the risk that regulatory approval is obtained subject
to conditions that are not anticipated, risks associated with our ability to issue debt and equity to fund the purchase price and litigation risk. If such risks or other anticipated or unanticipated
liabilities were to materialize, any desired benefits of the VTTI Acquisition may not be fully realized, if at all, and our future financial performance may be negatively impacted.
In
addition, the VTTI Acquisition may result in other difficulties including, among other things:
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diversion of management's attention from other business concerns;
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integrating internal controls and managing regulatory compliance and corporate governance matters;
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maintaining an effective system of internal controls related to the VTTI Entities;
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an increase in our indebtedness; and
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potential environmental or other regulatory compliance matters or liabilities and/or title issues, including certain liabilities arising from
the operation of the VTTI Entities prior to the closing of the VTTI Acquisition.
Further,
unexpected costs and challenges may arise whenever businesses undergo a change in ownership and management, and we may experience unanticipated delays in realizing the benefits
of the VTTI Acquisition.
Financing the VTTI Acquisition will substantially increase our indebtedness.
We intend to finance the VTTI Acquisition with the proceeds of the issuance of debt and equity, including the issuance of Notes offered hereby,
and, to the extent necessary or desirable, with borrowings under our revolving credit facility. Our total outstanding indebtedness as of June 30, 2016 was approximately $3.9 billion.
After our purchase of a 50% interest in VTTI, we expect our total outstanding indebtedness to increase by up to $600 million. The increase in our indebtedness may reduce our flexibility to
respond to changing business and economic conditions or to fund capital expenditures or working capital needs.
VTTI depends on a limited number of customers, including Vitol, for a significant portion of its revenues and
the loss of any of them could adversely affect cash distributions from VTTI.
A significant percentage of VTTI's revenue is attributable to a relatively limited number of customers, including Vitol. Because of Vitol's
position as a major customer of VTTI's business, events which adversely affect Vitol could adversely affect the business and results of operations of VTTI and, in turn, the amounts and timing of cash
from operations distributed to us. We expect VTTI to continue to derive substantially all of its total revenue from a small number of customers in the future. VTTI may be unsuccessful in renewing its
storage and terminalling services contracts with its customers, including Vitol, and those customers may discontinue or reduce contracted storage from VTTI. If any of VTTI's customers, in particular
Vitol, significantly reduces its contracted storage with VTTI and if VTTI is unable to find other storage customers on terms substantially similar to the terms under VTTI's existing storage and
terminalling services contracts, our cash distributions from VTTI could be adversely affected which could reduce our cash flow available for distribution to our unitholders and payment on the Notes
and our other debt obligations.
VTTI may be adversely affected by economic, political and regulatory developments.
VTTI operates on a global scale. As a result, we will be exposed to the risks of international operations, including political, economic and
regulatory developments and changes in laws or policies affecting VTTI, as well as changes in the policies of the United States affecting trade, taxation and investment in other countries. Any such
developments or changes could have a material adverse effect on the business and results of operations of VTTI and, in turn, the amounts and timing of cash from operations distributed to us.
Compliance
with laws and regulations that apply to VTTI increases the cost of doing business. These numerous laws and regulations include the Foreign Corrupt Practices Act and local laws
prohibiting corrupt payments to government officials or agents. Although policies designed to ensure compliance with these laws are in place, employees, contractors or agents may violate the policies.
Any such violations could include prohibitions on VTTI's ability to offer its services and could have a material adverse effect on our cash distributions from VTTI which could reduce our cash flow
available for distribution to our unitholders and payment on the Notes and our other debt obligations.
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We may in the future cause all or a portion of our interest in the acquired VTTI business to be held in an
entity treated as a corporation for U.S. federal income tax purposes, which would reduce cash available for distribution from the acquired VTTI business.
Despite the fact that we are a limited partnership under Delaware law, it is possible in certain circumstances for a publicly traded partnership
such as ours to be treated as a corporation for U.S. federal income tax purposes. In order to maintain our status as a partnership for U.S. federal income tax purposes, 90% or more of our gross income
in each tax year must be qualifying income under Section 7704 of the Internal Revenue Code, as amended (the "Code").
If
the VTTI Acquisition is consummated, we expect to derive income from the transportation and storage of gas, oil, and products thereof in part through direct or indirect non-U.S.
subsidiaries of
VTTI, including VTTI Energy Partners LP, that are treated as corporations for U.S. federal income tax purposes. In specific circumstances we may be required to include certain amounts of this
corporate income in our own gross income whether or not these corporations make matching cash distributions. Vinson & Elkins L.L.P. is unable to opine as to the qualifying income nature
of portions of such income inclusions derived from the VTTI assets or operations. Consequently, we intend to actively monitor the amounts of any such income inclusions and to seek a ruling from the
Internal Revenue Service ("IRS") with respect to the qualifying income nature of these income inclusion amounts. If these income inclusion amounts exceed or are expected to exceed our currently
anticipated tolerance for gross income with respect to which Vinson & Elkins L.L.P. is unable to opine and we are unable to receive a favorable IRS ruling in a timely manner, it may be
necessary for us to hold some or all of our interests in the acquired VTTI business through a taxable U.S. corporate subsidiary. In such case, this corporate subsidiary would be subject to
corporate-level tax on its taxable income at the applicable U.S. federal corporate income tax rate of 35% as well as any applicable state income tax rates. Imposition of a corporate level federal
income tax would significantly reduce the anticipated cash available for distribution from the acquired VTTI business to us and, in turn, would reduce our cash available for payment on the Notes and
our other debt obligations. Moreover, if the IRS were to successfully assert that this corporation had more tax liability than we currently anticipate or legislation was enacted that increased the
corporate tax rate, our cash available for payment on the Notes and our other debt obligations would be significantly reduced.
Notwithstanding our treatment for U.S. federal income tax purposes, we may be subject to additional tax on
our non-U.S. income. If a taxing authority were to successfully assert that we have more tax liability than we anticipate or legislation were enacted that increased the taxes to which we are subject,
the cash available for payment on the Notes and our other debt obligations could be further reduced.
The VTTI business operations and subsidiaries will generally be subject to income, withholding and other taxes in the non-U.S. jurisdictions in
which they are organized or from which they receive income, reducing the amount of cash available for distribution. In computing our tax obligation in these non-U.S. jurisdictions, we are required to
take various tax accounting and reporting positions on matters that are not entirely free from doubt and for which we have not received rulings from the governing tax authorities, such as whether
withholding taxes will be reduced by the application of certain tax treaties. Upon review of these positions the applicable authorities may not agree with our positions. A successful challenge by a
tax authority could result in additional tax being imposed on us, reducing the cash available for payment on the Notes and our other debt obligations. In addition, changes in our operations or
ownership could result in higher than anticipated tax being imposed in jurisdictions in which we are organized or from which we receive income and further reduce the cash available for payment on the
Notes and our other debt obligations.
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Risks Related to the Notes
Your ability to transfer the Notes at a time or price you desire may be limited by the absence of an active
trading market, which may not develop.
The Notes are a new issue of securities with no established trading market. Although we have registered the offer and sale of the Notes under
the Securities Act of 1933, as amended, we do not intend to apply for listing of the Notes on any securities exchange or for quotation of the Notes in any automated dealer quotation system. In
addition, although the underwriters have informed us that they intend to make a market in the Notes, as permitted by applicable laws and regulations, they are not obliged to make a market in the
Notes, and they may discontinue their market making activities at any time without notice. An active market for the Notes may not develop or, if developed, may not continue. In the absence of an
active trading market, you may not be able to transfer the Notes within the time or at the price you desire.
You
should not purchase the Notes unless you understand and know you can bear all of the investment risks involving the Notes.
The Notes will be unsecured obligations. As such, the Notes will be effectively junior to any secured debt we
may have and to the existing and future secured debt of any subsidiaries that guarantee the Notes, and the Notes will be structurally junior to the existing and future debt and other liabilities of
our subsidiaries that do not guarantee the Notes.
The Notes will be our unsecured debt and will rank equally in right of payment with all of our other existing and future unsubordinated debt.
The Notes will be effectively junior to all our future secured debt and to the secured debt of any subsidiaries that guarantee the Notes, and the Notes will be structurally junior to the existing and
future debt and other liabilities of our subsidiaries that do not guarantee the Notes. Initially, there will be no subsidiary guarantors of our obligations under the Notes, and there may be none in
the future. Since our operating subsidiaries will not guarantee the Notes offered by us in this prospectus supplement, the Notes will be structurally subordinated to all debt of our operating
subsidiaries. For example, these Notes will be structurally
junior to borrowings under our revolving credit facility that are guaranteed by certain of our subsidiaries. Please read "Description of Other Indebtedness."
If
we are involved in any dissolution, liquidation or reorganization, our secured debt holders will be paid before you receive any amounts due under the Notes to the extent of the value
of the assets securing their debt, and creditors of our subsidiaries may also be paid before you receive any amounts due under the Notes. In that event, you may not be able to recover any principal or
interest you are due under the Notes.
We do not have the same flexibility as other types of organizations to accumulate cash, which may limit cash
available to service the Notes or to repay them at maturity.
On a quarterly basis, we generally distribute substantially all of our available cash to our unitholders of record, subject to reasonable
reserves as described below. As a result, we do not have the same flexibility as corporations or other entities that do not pay dividends or have complete flexibility regarding the amounts they will
distribute to their equity holders. Available cash is generally defined as consolidated cash receipts less consolidated cash expenditures and such retentions for working capital, anticipated cash
expenditures and contingencies as our general partner deems appropriate. The timing and amount of our distributions could significantly reduce the cash available to pay the principal, premium (if any)
and interest on the Notes. The board of directors of our general partner will determine the amount and timing of such distributions and has broad discretion to establish and make additions to our
reserves or the reserves of our operating subsidiaries as it determines are necessary or appropriate.
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Although
our payment obligations to our unitholders are subordinate to our payment obligations to you, the market value of our units may substantially decrease as a result of decreases
in the amount we distribute per unit. Accordingly, if we experience a liquidity problem in the future, we may not be able to issue equity in sufficient amounts to recapitalize our debt, including the
Notes.
We could enter into various transactions that could increase the amount of our outstanding debt, adversely
affect our capital structure or credit ratings or otherwise adversely affect holders of the Notes.
The terms of the Notes do not prevent us from entering into a variety of acquisition, change-of-control, refinancing, recapitalization, or other
highly leveraged transactions. As a result, we could enter into a variety of transactions that could increase the total amount of our outstanding indebtedness, adversely affect our capital structure
or credit ratings or otherwise adversely affect the holders of the Notes.
Because we have a holding company structure in which our subsidiaries conduct our operations and own our
operating assets, our ability to service our debt is largely dependent on our receipt of distributions or other payments from our subsidiaries.
We are a partnership holding company, and our subsidiaries conduct all of our operations and own all of our operating assets. We do not have
significant assets other than the ownership interests in our subsidiaries. As a result, our ability to make required payments on the Notes depends on the performance of our subsidiaries and their
ability to distribute funds to us. The ability of our subsidiaries to make distributions to us may be restricted by, among other things, credit instruments, applicable state business organization laws
and other laws and regulations. If we are unable to obtain the funds necessary to pay all the principal and interest on the Notes when due, we may be required to adopt one or more alternatives, such
as a refinancing of the Notes. We cannot assure you that we would be able to refinance the Notes on terms that are acceptable to us, or at all.
To service our indebtedness, we will use a significant amount of cash. Our ability to generate cash to
service our indebtedness depends on many factors beyond our control.
Our ability to make payments on our indebtedness, including the Notes, and to fund planned capital expenditures will depend on our ability to
generate cash in the future. This ability is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We cannot assure you that cash
flow generated from our business and other sources of cash, including future borrowings by us under our revolving credit facility, will be sufficient to enable us to pay our indebtedness, including
the Notes, and to fund our other liquidity needs.
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USE OF PROCEEDS
We estimate that we will receive net proceeds from this offering of approximately $592.6 million (after deducting the underwriting
discount and estimated offering expenses payable by us). We expect to use the net proceeds from this offering to fund a portion of the purchase price for the VTTI Acquisition. If the VTTI Acquisition
is not consummated, or the SPA is terminated, in each case, prior to July 1, 2017, we will be required to redeem all of the Notes then outstanding at 101% of the principal amount of the Notes,
plus accrued and unpaid interest to, but excluding, the date of redemption. See "Description of NotesSpecial Mandatory Redemption" in this prospectus supplement.
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CAPITALIZATION
The following table sets forth our cash and cash equivalents and capitalization as of June 30, 2016
on:
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a consolidated historical basis;
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a pro forma as adjusted basis to give effect to (1) the Term Loan Agreement entered into by the Partnership on September 30, 2016
and the borrowings thereunder to repay a portion of the outstanding balance on our revolving credit facility due September 30, 2021 and (2) the October Equity Offering and the
application of the net proceeds therefrom to fund a portion of the purchase price of the VTTI Acquisition and the exercise of the underwriters' option to purchase additional LP units and the
application of the net proceeds therefrom to repay a portion of the outstanding balance on our revolving credit facility due September 30, 2021; and
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a pro forma as further adjusted basis to give effect to the issuance and sale of the Notes offered hereby and the application of the net
proceeds therefrom to fund a portion of the purchase price of the VTTI Acquisition, as described under "Use of Proceeds," net of offering expenses.
This
table should be read in conjunction with our historical consolidated financial statements and the notes to those financial statements that are incorporated by reference in this
prospectus supplement and the accompanying base prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2016
|
|
|
|
Historical
|
|
Pro forma, as
adjusted
|
|
Pro forma, as
further adjusted
|
|
|
|
(in thousands)
|
|
Cash and cash equivalents
|
|
$
|
14,762
|
|
$
|
14,762
|
|
$
|
14,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
|
|
5.125% Notes due July 1, 2017
|
|
$
|
125,000
|
|
$
|
125,000
|
|
$
|
125,000
|
|
6.050% Notes due January 15, 2018
|
|
|
300,000
|
|
|
300,000
|
|
|
300,000
|
|
2.650% Notes due November 15, 2018
|
|
|
400,000
|
|
|
400,000
|
|
|
400,000
|
|
5.500% Notes due August 15, 2019
|
|
|
275,000
|
|
|
275,000
|
|
|
275,000
|
|
4.875% Notes due February 1, 2021
|
|
|
650,000
|
|
|
650,000
|
|
|
650,000
|
|
4.150% Notes due July 1, 2023
|
|
|
500,000
|
|
|
500,000
|
|
|
500,000
|
|
4.350% Notes due October 15, 2024
|
|
|
300,000
|
|
|
300,000
|
|
|
300,000
|
|
6.750% Notes due August 15, 2033
|
|
|
150,000
|
|
|
150,000
|
|
|
150,000
|
|
5.850% Notes due November 15, 2043
|
|
|
400,000
|
|
|
400,000
|
|
|
400,000
|
|
5.600% Notes due October 15, 2044
|
|
|
300,000
|
|
|
300,000
|
|
|
300,000
|
|
3.950% Notes due December 1, 2026 offered hereby
|
|
|
|
|
|
|
|
|
600,000
|
|
Revolving credit facility due September 30, 2021
1
|
|
|
542,489
|
|
|
216,679
|
|
|
216,679
|
|
Term loan agreement
|
|
|
|
|
|
250,000
|
|
|
250,000
|
|
Unamortized discounts and debt issuance costs
|
|
|
(29,980
|
)
|
|
(29,980
|
)
|
|
(37,382
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
3,912,509
|
|
|
3,836,699
|
|
|
4,429,297
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners' capital:
|
|
|
|
|
|
|
|
|
|
|
Limited Partners
|
|
|
3,890,598
|
|
|
4,471,559
|
|
|
4,471,559
|
|
Accumulated other comprehensive loss
|
|
|
(92,528
|
)
|
|
(92,528
|
)
|
|
(92,528
|
)
|
Noncontrolling interests
|
|
|
286,854
|
|
|
286,854
|
|
|
286,854
|
|
|
|
|
|
|
|
|
|
|
|
|
Total partners' capital
|
|
|
4,084,924
|
|
|
4,665,885
|
|
|
4,665,885
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
7,997,433
|
|
$
|
8,502,584
|
|
$
|
9,095,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
1
-
A
total of approximately $417.2 million was outstanding under our revolving credit facility as of October 24, 2016.
S-15
Table of Contents
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes supplements the general description of the debt securities included in the
accompanying base prospectus. You should review this description together with the description of the debt securities included in the accompanying base prospectus. To the extent this description is
inconsistent with the description in the accompanying base prospectus, this description will control and replace the inconsistent description in the accompanying base prospectus. As used in this
description, the terms "we," "us" and "our" refer to Buckeye Partners, L.P., and not to any of our subsidiaries or affiliates.
We
will issue the Notes under an Indenture, dated July 10, 2003, between us and U.S. Bank National Association (as successor-in-interest to SunTrust Bank, a Georgia banking
corporation), as trustee, and a supplemental indenture thereto (the Indenture, as amended and supplemented by the supplemental
indenture, the "indenture"). The terms of the Notes include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act of 1939, as amended. We have
summarized some of the material provisions of the Notes and the indenture below. The summary supplements the description of the Indenture contained in the accompanying base prospectus, and we
encourage you to read that description for additional material provisions that may be important to you. We also urge you to read the indenture because it, and not this description, defines your rights
as a holder of Notes. The following description of the Notes and the description of the Indenture contained in the accompanying base prospectus are not complete and are subject to, and are qualified
in their entirety by reference to, all the provisions of the indenture. You may request copies of the indenture from us as set forth under "Where You Can Find More Information." Capitalized terms
defined in the accompanying base prospectus and the indenture have the same meanings when used in this prospectus supplement.
General Description of the Notes
The Notes will be:
-
-
our senior unsecured obligations, ranking equally in right of payment with all of our existing and future unsubordinated indebtedness;
-
-
non-recourse to our general partner;
-
-
senior in right of payment to all of our existing and future subordinated debt;
-
-
effectively junior to any of our existing and future secured debt to the extent of the collateral securing such debt; and
-
-
structurally junior to all existing and future debt and other liabilities of our subsidiaries, including our operating subsidiaries. Certain of
our operating subsidiaries provide guarantees under our revolving credit facility. One of our subsidiaries, Buckeye Energy Services LLC, is party to a secured credit facility.
See
"Description of Other Indebtedness" in this prospectus supplement.
The
Notes will not be guaranteed by any of our subsidiaries or affiliates or any other party. The indenture does not limit the aggregate principal amount of debt securities that may be
issued thereunder and provides that debt securities may be issued thereunder from time to time in one or more additional series. Except to the extent described below, the indenture does not limit our
ability or the ability of our subsidiaries to incur additional indebtedness.
S-16
Table of Contents
Further Issuances
We may, from time to time, without notice to or the consent of the holders of the Notes, increase the principal amount of the Notes under the
indenture and issue such increased principal amount (or any portion thereof), in which case any additional notes so issued will have the same form and terms (other than the issue date, the public
offering price, the first interest payment date, if applicable, and under certain circumstances, the date from which interest thereon will begin to accrue), and will carry the same right to receive
accrued and unpaid interest, as the Notes previously issued, and such additional notes will form a single series with the Notes.
Principal, Maturity and Interest
We will issue the Notes in an initial aggregate principal amount of $600.0 million. The Notes will mature on December 1, 2026 and
will bear interest at the annual rate of 3.950%.
Interest
on the Notes will accrue from November 7, 2016 and will be payable semi-annually in arrears on June 1 and December 1 of each year, commencing on
June 1, 2017. We will make each interest payment to the holders of record at the close of business on the May 15 and November 15 preceding such interest payment date (whether or
not a business day). Interest will be computed and paid on the basis of a 360-day year consisting of twelve 30-day months. If any interest payment date falls on a day that is not a business day, the
payment will be made on the next business day, and no interest shall accrue on the amount of interest due on that interest payment date for the period from and after such interest payment date to the
next business day.
Global Notes: Book-Entry System
Global Notes
The Notes of each series will be represented by one or more fully registered global notes, without interest coupons and will be deposited upon
issuance with the trustee as custodian for The Depository Trust Company, New York, New York ("DTC"), and registered in the name of DTC or its nominee, in each case, for credit to an account of a
direct or indirect participant as described below.
Except
as set forth below, the global notes may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in
the global notes may not be exchanged for definitive notes in registered certificated form ("certificated notes") except in the limited circumstances described below. See "Certain
Book-Entry Procedures for the Global Notes" in this prospectus supplement.
Except
in the limited circumstances described below, owners of beneficial interests in the global notes will not be entitled to receive physical delivery of notes in certificated form.
Transfers
of beneficial interests in the global notes are subject to the applicable rules and procedures of DTC and its direct or indirect participants, which may change.
The
Notes may be presented for registration of transfer and exchange at the offices of the trustee.
Certain Book-Entry Procedures for the Global Notes
All interests in the global notes will be subject to the operations and procedures of DTC, Euroclear and Clearstream Luxembourg. The
descriptions of the operations and procedures of DTC, Euroclear and Clearstream Luxembourg set forth below are provided solely as a matter of convenience. These operations and procedures are solely
within the control of the respective settlement systems and are subject to change by them from time to time. We obtained the information in this section and elsewhere in this prospectus supplement
concerning DTC, Euroclear and Clearstream Luxembourg and their respective book-entry systems from sources that we believe are reliable, but we take no
S-17
Table of Contents
responsibility
for the accuracy of any of this information, and investors are urged to contact the relevant system or its participants directly to discuss these matters.
DTC.
DTC has advised us that it is:
-
-
a limited-purpose trust company organized under the laws of the State of New York;
-
-
a "banking organization" within the meaning of the New York State Banking Law;
-
-
a member of the Federal Reserve System;
-
-
a "clearing corporation" within the meaning of the New York Uniform Commercial Code, as amended; and
-
-
a "clearing agency" registered pursuant to Section 17A of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
DTC
was created to hold securities for its participants (collectively, the "participants") and to facilitate the clearance and settlement of securities transactions between its
participants through electronic book-entry changes to the accounts of its participants, thereby eliminating the need for physical transfer and delivery of certificates. DTC's participants include
securities brokers and dealers (including some or all of the underwriters), banks and trust companies, clearing corporations and certain other organizations. Indirect access to DTC's system is also
available to other entities such as Clearstream Luxembourg, Euroclear, banks, brokers, dealers and trust companies (collectively, the "indirect participants") that clear through or maintain a
custodial relationship with a participant, either directly or indirectly. Investors who are not participants may beneficially own securities held by or on behalf of DTC only through participants or
indirect participants in DTC.
Clearstream Luxembourg.
Clearstream Luxembourg is incorporated under the laws of Luxembourg as a professional depositary. Clearstream
Luxembourg
holds securities for its participating organizations ("Clearstream Luxembourg Participants") and facilitates the clearance and settlement of securities transactions between Clearstream Luxembourg
Participants through electronic book-entry changes in accounts of Clearstream Luxembourg Participants, thereby eliminating the need for physical movement of certificates. Clearstream Luxembourg
provides Clearstream Luxembourg Participants with, among other things, services for safekeeping, administration, clearance and establishment of internationally traded securities and securities lending
and borrowing. Clearstream Luxembourg interfaces with domestic markets in several countries. As a professional depositary, Clearstream Luxembourg is subject to regulation by the Luxembourg Monetary
Institute. Clearstream Luxembourg Participants are recognized financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations, and may include the underwriters. Indirect access to Clearstream Luxembourg is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a Clearstream Luxembourg Participant either directly or indirectly.
Distributions
with respect to Notes held beneficially through Clearstream Luxembourg will be credited to cash accounts of Clearstream Luxembourg Participants in accordance with its rules
and procedures to the extent received by the U.S. depositary for Clearstream Luxembourg.
Euroclear.
Euroclear was created in 1968 to hold securities for participants of Euroclear ("Euroclear Participants") and to clear and
settle
transactions between Euroclear Participants through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Euroclear includes various other services, including securities lending and borrowing and interfaces with domestic markets in several markets in
several countries. Euroclear is operated by Euroclear Bank SA/NV (the "Euroclear Operator"), under contract with Euroclear Clearance Systems S.C., a Belgian
S-18
Table of Contents
cooperative
corporation (the "Cooperative"). All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator, not the Cooperative. The Cooperative establishes policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries and may include the underwriters. Indirect access to Euroclear is also available to other firms that clear through or
maintain a custodial relationship with a Euroclear Participant, either directly or indirectly.
The
Euroclear Operator is regulated and examined by the Belgian Banking Commission. Distributions of principal and interest with respect to Notes held through Euroclear or Clearstream
Luxembourg will be credited to the cash accounts of Euroclear or Clearstream Luxembourg participants in accordance with the relevant system's rules and procedures, to the extent received by such
system's depositary.
Links
have been established among DTC, Clearstream Luxembourg and Euroclear to facilitate the initial issuance of the Notes and cross-market transfers of the Notes associated with
secondary market trading. DTC will be linked indirectly to Clearstream Luxembourg and Euroclear through the DTC accounts of their respective U.S. depositaries.
Book-Entry Procedures.
We expect that, pursuant to procedures established by DTC:
-
-
upon deposit of each global note, DTC will credit, on its book-entry registration and transfer system, the accounts of participants designated
by the underwriters with an interest in that global note; and
-
-
ownership of beneficial interests in the global notes will be shown on, and the transfer of ownership interests in the global notes will be
effected only through, records maintained by DTC (with respect to the interests of participants) and by participants and indirect participants (with respect to the interests of persons other than
participants).
The
laws of some jurisdictions may require that some purchasers of Notes take physical delivery of those Notes in definitive form. Accordingly, the ability to transfer beneficial
interests in notes represented by a global note to those persons may be limited. In addition, because DTC can act only on behalf of its participants, who in turn act on behalf of persons who hold
interests through participants, the ability of a person holding a beneficial interest in a global note to pledge or transfer that interest to persons or entities that do not participate in DTC's
system, or to otherwise take actions in respect of that interest, may be affected by the lack of a physical note in respect of that interest.
So
long as DTC or its nominee is the registered owner of a global note, DTC or that nominee, as the case may be, will be considered the sole legal owner or holder of the notes
represented by that global note for all purposes of the Notes and the indenture. Except as provided below, owners of beneficial interests in a global note (1) will not be entitled to have the
Notes represented by that global note registered in their names, (2) will not receive or be entitled to receive physical delivery of certificated notes, and (3) will not be considered
the owners or holders of the Notes represented by that beneficial interest under the indenture for any purpose, including with respect to the giving of any direction, instruction or approval to the
trustee. Accordingly, each holder owning a beneficial interest in a global note must rely on the procedures of DTC and, if that holder is not a participant or an indirect participant, on the
procedures of the participant through which that holder owns its interest, to exercise any rights of a holder of Notes under the indenture or that global note. We understand that under existing
industry practice, in the event that we request any action of holders of notes, or a holder that is an owner of a beneficial interest in a global note desires to take any action that DTC, as the
holder of that global note, is entitled to take, DTC would authorize the participants to take that action and the participants would authorize holders owning through those participants to take that
action or would otherwise act upon the instruction of those holders. Neither we nor the trustee will have any responsibility or liability for any aspect of the records relating to or payments made on
account of notes by DTC, or for maintaining, supervising or reviewing any records of DTC relating to the Notes.
S-19
Table of Contents
Payments with respect to the principal of and interest on a global note will be payable by the trustee to or at the direction of DTC or its nominee in its
capacity as the registered holder of the global note under the indenture. Under the terms of the indenture, we and the trustee may treat the persons in whose names the Notes, including the global
notes, are registered as the owners thereof for the purpose of receiving payment thereon and for any and all other purposes whatsoever. Accordingly, neither we nor the trustee has or will have any
responsibility or liability for the payment of those amounts to owners of beneficial interests in a global note. Payments by the participants and the indirect participants to the owners of beneficial
interests in a global note will be governed by standing instructions and customary industry practice and will be the responsibility of the participants and indirect participants and not of DTC.
Transfers
between participants in DTC will be effected in accordance with DTC's procedures, and will be settled in same-day funds. Transfers between participants in Euroclear or
Clearstream Luxembourg will be effected in the ordinary way in accordance with their respective rules and operating procedures.
Cross-market
transfers between the participants in DTC, on the one hand, and Euroclear or Clearstream Luxembourg participants, on the other hand, will be effected through DTC in
accordance
with DTC's rules on behalf of Euroclear or Clearstream Luxembourg, as the case may be, by its respective depositary. However, those cross-market transactions will require delivery of instructions to
Euroclear or Clearstream Luxembourg, as the case may be, by the counterparty in that system in accordance with the rules and procedures and within the established deadlines (Brussels time) of that
system. Euroclear or Clearstream Luxembourg, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect
final settlement on its behalf by delivering or receiving interests in the relevant global notes in DTC, and making or receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC.
Euroclear
participants and Clearstream Luxembourg participants may not deliver instructions directly to the depositaries for Euroclear or Clearstream Luxembourg.
Although
we understand that DTC, Euroclear and Clearstream Luxembourg have agreed to the foregoing procedures to facilitate transfers of interests in the global notes among participants
in DTC, Euroclear and Clearstream Luxembourg, they are under no obligation to perform or to continue to perform those procedures, and those procedures may be discontinued at any time. Neither we nor
the trustee will have any responsibility for the performance by DTC, Euroclear or Clearstream Luxembourg or their respective participants or indirect participants of their respective obligations under
the rules and procedures governing their operations.
Methods of Receiving Payments on the Notes
We will make payments on the Notes at the office or agency of the paying agent within the City and State of New York unless we elect to make
interest payments by check mailed to you at your addresses set forth in the register of holders.
Because
of time zone differences, the securities account of a Euroclear or Clearstream Luxembourg participant purchasing an interest in a global note from a participant in DTC will be
credited, and any such crediting will be reported to the relevant Euroclear or Clearstream Luxembourg participant, during the securities settlement processing day (which must be a business day for
Euroclear and Clearstream Luxembourg) immediately following the settlement date of DTC. DTC has advised us that cash received in Euroclear or Clearstream Luxembourg as a result of sales of interests
in a global note by or through a Euroclear or Clearstream Luxembourg participant to a participant in DTC will be received with value on the settlement date of DTC but will be available in the relevant
Euroclear or
S-20
Table of Contents
Clearstream
Luxembourg cash account only as of the business day for Euroclear or Clearstream Luxembourg following DTC's settlement date.
Structural Subordination
The Notes will be "structurally subordinated" to all indebtedness and other liabilities, including deposits, trade payables and lease
obligations, of our subsidiaries. This is because our right to receive any assets of any of our subsidiaries upon its liquidation or reorganization, and thus your right, as a holder of Notes issued by
us, to participate in those assets, will be effectively subordinated to the claims of that subsidiary's creditors, including its depositors and trade creditors.
Special Mandatory Redemption
Upon the occurrence of the earlier of the following two events (each, a "Special Mandatory Redemption Trigger Event"): (1) July 1,
2017, if the VTTI Acquisition has not been consummated prior to such date, or (2) the termination of the SPA, we will be required to redeem all of the Notes (the "Special Mandatory Redemption")
at a redemption price equal to 101% of the the principal amount of the Notes, plus accrued and unpaid interest to, but excluding, the redemption date. Within ten days of the occurrence of the Special
Mandatory Redemption Trigger Event, notice of the Special Mandatory Redemption will be mailed to each holder at its registered address, stating that a Special Mandatory Redemption Trigger Event has
occurred and that all of the Notes will be redeemed on the redemption date set forth in such notice (which will be no earlier than 15 days and no later than 30 days from the date such
notice is mailed).
On
or before the redemption date for the Special Mandatory Redemption, we will deposit with a paying agent (or with the trustee) sufficient money to pay the redemption price and accrued
interest on the Notes to be redeemed. Unless we default in payment of such redemption price on the date of redemption, interest will cease to accrue on such Notes.
Optional Redemption
If we elect to redeem the Notes before the Par Call Date we will pay an amount equal to the greater of (1) 100% of the principal amount
of the Notes to be redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest on such Notes that would have been due if the Notes matured on
the Par Call Date (exclusive of interest accrued but unpaid to, but excluding, the redemption date) discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate (as defined below) plus 35 basis points, plus accrued and unpaid interest, if any, on the principal amount being redeemed to, but excluding, such
redemption date. If we elect to redeem a series of notes on or after the Par Call Date, we will pay an amount equal to 100% of the principal amount of the notes of such series redeemed plus accrued
and unpaid interest on the notes of such series redeemed to, but excluding, the redemption date.
"
Adjusted Treasury Rate
" means, with respect to any date of redemption, the rate per annum equal to the semi-annual equivalent yield to
maturity of the Comparable Treasury Issue (as defined below), assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury
Price (as defined below) for the date of redemption.
"
Comparable Treasury Issue
" means the United States Treasury security selected by the Quotation Agent as having a maturity comparable to
the remaining term of the Notes to be redeemed, determined as if the Notes matured on the Par Call Date (the "Remaining Life"), that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the Remaining Life of the Notes.
S-21
Table of Contents
"
Comparable Treasury Price
" means, with respect to any date of redemption, (a) the average of the Reference Treasury Dealer
Quotations (as defined below) for the date of redemption, after excluding the highest and lowest Reference Treasury Dealer Quotations, or (b) if the trustee obtains fewer than three Reference
Treasury Dealer Quotations, the average of all such Reference Treasury Dealer Quotations.
"
Par Call Date
" means September 1, 2026 (the date that is three months prior to the maturity date of the Notes).
"
Primary Treasury Dealer
" means a primary U.S. Government securities dealer in New York City.
"
Quotation Agent
" means Barclays Capital, Inc. or another Reference Treasury Dealer (as defined below) appointed by us.
"
Reference Treasury Dealer
" means each of (a) Barclays Capital, Inc., J.P. Morgan Securities LLC and Wells Fargo
Securities, LLC, or an affiliate or successor of the foregoing; (b) a Primary Treasury Dealer selected by SunTrust Robinson Humphrey, Inc.;
provided
,
however
, that if the foregoing shall cease to be a Primary Treasury Dealer, we shall
substitute therefor another Primary Treasury Dealer; and (c) any other Primary Treasury Dealers selected by us.
"
Reference Treasury Dealer Quotations
" means, with respect to each Reference Treasury Dealer and any date of redemption, the average, as
determined by the trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the trustee by that
Reference Treasury Dealer at 5:00 p.m., New York City time, on the third business day preceding that date of redemption.
Unless
we default in payment of the redemption price, on and after the date of redemption, interest will cease to accrue on the Notes or portions thereof called for redemption.
On
or before a redemption date, we will deposit with a paying agent (or with the trustee) sufficient money to pay the redemption price and accrued interest on the Notes to be redeemed.
In
the event fewer than all of the Notes of a series are to be redeemed at any time, the trustee will select Notes (or any portion of notes in integral multiples of $1,000) for
redemption in the manner as the trustee shall deem appropriate and fair, in its sole discretion. However, no note with a principal amount of $2,000 or less will be redeemed in part. Notice of any
optional redemption will be mailed by first class mail at least thirty (30) days but not more than sixty (60) days before the redemption date to each holder of Notes to be redeemed at
its registered address. If any note is to be redeemed in part only, the notice of redemption that relates to that note will state the portion of the principal amount of that note to be redeemed. On
and after the redemption date, interest will cease to accrue on Notes or portions of Notes called for redemption and accepted for payment.
Paying Agent and Registrar for the Notes
The trustee will initially act as paying agent and registrar. We may change the paying agent or registrar without prior notice to you, and we or
any of our subsidiaries may act as paying agent or registrar. However, we will at all times maintain an office or agency in The City of New York where the Notes may be presented for payment and where
we will be required to make such payment in the event of such presentation.
Additional Event of Default
With respect to the Notes, the occurrence of any of the following events shall, in addition to the other events or circumstances described in
"Events of Default" in the accompanying base prospectus, constitute an Event of Default: default under any mortgage, indenture or instrument under which there may be issued or by which there may be
secured or evidenced any indebtedness of us or any of our
S-22
Table of Contents
subsidiaries
(or the payment of which is guaranteed by us or any of our subsidiaries), whether such indebtedness or guarantee now exists or is created after the date of issuance of any Notes, if
(a) that default (x) is caused by a failure to pay principal of or premium, if any, or interest on such indebtedness prior to the expiration of any grace period provided in such
indebtedness (a "Payment Default"), or (y) results in the acceleration of the maturity of such indebtedness to a date prior to its originally stated maturity, and, (b) in each case
described in clauses (x) or (y) above, the principal amount of any such indebtedness, together with the principal amount of any other such indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates $50 million or more.
Covenants
The discussions under "Limitations on Liens" and "Limitations on Sale-Leasebacks" set forth in "Description of Debt Securities" in the
accompanying base prospectus will not be applicable to the Notes and are replaced in their entirety with the following:
Limitations on Liens
We will not, nor will we permit any Restricted Subsidiary (as defined below) to, create, assume, incur or suffer to exist any lien upon any
Principal Property (as defined below) or upon any Capital Interests (as defined below) of any Restricted Subsidiary owning or leasing any Principal Property, whether owned or leased on the date of the
indenture or thereafter acquired, to secure any debt of us or any other Person (other than the securities issued under the indenture), without in any such case making effective provision whereby all
of the securities outstanding under the indenture shall be secured equally and ratably with, or prior to, such debt so long as such debt shall be so secured. The following are excluded from this
restriction:
(1) Permitted
Liens (as defined below);
(2) any
lien upon any property or assets created at the time of acquisition of such property or assets by us or any Restricted Subsidiary or within one year after such time
to secure all or a portion of the purchase price for such property or assets or debt incurred to finance such purchase price, whether such debt was incurred prior to, at the time of or within one year
after the date of such acquisition;
(3) any
lien upon any property or assets to secure all or part of the cost of construction, development, repair or improvements thereon or to secure debt incurred prior to,
at the time of, or within one year after completion of such construction, development, repair or improvements or the commencement of full operations thereof (whichever is later), to provide funds for
any such purpose;
(4) any
lien upon any property or assets existing thereon at the time of the acquisition thereof by us or any Restricted Subsidiary (whether or not the obligations secured
thereby are assumed by us or any Restricted Subsidiary);
provided
,
however
, that such lien only
encumbers the property or assets so acquired;
(5) any
lien upon any property or assets of a Person existing thereon at the time such Person becomes a Restricted Subsidiary by acquisition, merger or otherwise;
provided
,
however
, that such lien only encumbers the property or assets of such Person at the time such
Person becomes a Restricted Subsidiary;
(6) any
lien upon any property or assets of us or any Restricted Subsidiary in existence on the Issue Date (as defined below) or provided for pursuant to agreements existing
on the Issue Date;
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(7) liens
imposed by law or order as a result of any proceeding before any court or regulatory body that is being contested in good faith, and liens which secure a judgment
or other court-ordered award or settlement in an aggregate amount not in excess of $1 million as to which we or the applicable Restricted Subsidiary have not exhausted our or its appellate
rights;
(8) any
extension, renewal, refinancing, refunding or replacement (or successive extensions, renewals, refinancings, refundings or replacements) of liens, in whole or in
part, referred to in clauses (1) through (7), inclusive, above;
provided
,
however
, that any such
extension, renewal, refinancing, refunding or replacement lien shall be limited to the property or assets covered by the lien extended, renewed, refinanced, refunded or replaced and that the
obligations secured by any such extension, renewal, refinancing, refunding or replacement lien shall be in an amount not greater than the amount of the obligations secured by the lien extended,
renewed, refinanced, refunded or replaced and any expenses of us and our Restricted Subsidiaries (including any premium) incurred in connection with such extension, renewal, refinancing, refunding or
replacement; or
(9) any
lien resulting from the deposit of moneys or evidence of indebtedness in trust for the purpose of defeasing debt of us or any Restricted Subsidiary.
Notwithstanding
the foregoing, we may, and may permit any Restricted Subsidiary to, create, assume, incur, or suffer to exist any lien upon any Principal Property to secure debt of us or
any Person other than the securities issued under the indenture, that is not excepted by clauses (1) through (9), inclusive, above without securing the securities issued under the indenture,
provided
that the aggregate principal amount of all debt then outstanding secured by such lien and all similar liens, together with all Attributable
Indebtedness (as defined below) from Sale-Leaseback Transactions (as defined below), excluding Sale-Leaseback Transactions permitted by clauses (1) through (4), inclusive, of the first
paragraph of the restriction on sale-leasebacks covenant described below, does not exceed 10% of Consolidated Net Tangible Assets (as defined below).
"
Attributable Indebtedness
," when used with respect to any Sale-Leaseback Transaction, means, as at the time of determination, the present
value (discounted at the rate set forth or implicit in the terms of the lease included in such transaction) of the total obligations of the lessee for rental payments (other than amounts required to
be paid on account of property taxes, maintenance, repairs, insurance, assessments, utilities, operating and labor costs and other items that do not constitute payments for property rights) during the
remaining term of the lease included in such Sale-Leaseback Transaction (including any period for which such lease has been extended). In the case of any lease that is terminable by the lessee upon
the payment of a penalty or other termination payment, such amount shall be the lesser of the amount determined assuming termination upon the first date such lease may be terminated (in which case the
amount shall also include the amount of the penalty or termination payment, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so
terminated) or the amount determined assuming no such termination.
"
Capital Interests
" means any and all shares, interests, participations, rights or other equivalents (however designated) of capital
stock, including, without limitation, with respect to partnerships, partnership interests (whether general or limited) and any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, such partnership.
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"
Consolidated Net Tangible Assets
" means, at any date of determination, the total amount of assets after deducting therefrom:
(1) all
current liabilities excluding:
-
-
any current liabilities that by their terms are extendible or renewable at the option of the obligor thereon to a time more than
12 months after the time as of which the amount thereof is being computed; and
-
-
current maturities of long-term debt, and
(2) the
value, net of any applicable reserves, of all goodwill, trade names, trademarks, patents and other like intangible assets, all as set forth on the consolidated
balance sheet of us and our consolidated subsidiaries for our most recently completed fiscal quarter, prepared in accordance with generally accepted accounting principles.
"
Issue Date
" means with respect to any series of securities issued under the indenture, the date on which securities of that series are
initially issued under the indenture.
"
Material Adverse Effect
" means:
(1) an
impairment of the operation by us and our Restricted Subsidiaries of the pipeline systems of us and our Restricted Subsidiaries which materially adversely affects the
manner in which such pipeline systems, taken as a whole, have been operated by us and our Restricted Subsidiaries (whether due to damage to, or a defect in the right, title or interest of us or any of
our Restricted Subsidiaries in and to, any of the assets constituting such pipeline system or for any other reason);
(2) a
material decline in the financial condition or results of operations or business prospects of us and our Restricted Subsidiaries, taken as a whole; or
(3) our
inability to make timely payments of principal and interest on the securities issued under the indenture, in each case as a result (whether or not simultaneous) of
the occurrence of one or more events and/or the materialization or failure to materialize of one or more conditions and/or the taking of or failure to take one or more actions described in the
indenture by reference to a Material Adverse Effect.
"
Permitted Liens
" means:
(1) liens
upon rights-of-way for pipeline purposes;
(2) any
statutory or governmental lien or lien arising by operation of law, or any mechanics', repairmen's, materialmen's, suppliers', carriers', landlords', warehousemen's
or similar lien incurred in the ordinary course of business which is not yet due or which is being contested in good faith by appropriate proceedings and any undetermined lien which is incidental to
construction, development, improvement or repair;
(3) the
right reserved to, or vested in, any municipality or public authority by the terms of any right, power, franchise, grant, license, permit or by any provision of law,
to purchase or recapture or to designate a purchaser of, any property;
(4) liens
of taxes and assessments which are:
-
-
for the then current year,
-
-
not at the time delinquent, or
-
-
delinquent but the validity of which is being contested at the time by us or any Restricted Subsidiary in good faith;
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(5) liens
of, or to secure performance of, leases, other than capital leases;
(6) any
lien upon, or deposits of, any assets in favor of any surety company or clerk of court for the purpose of obtaining indemnity or stay of judicial proceedings;
(7) any
lien upon property or assets acquired or sold by us or any Restricted Subsidiary resulting from the exercise of any rights arising out of defaults on receivables;
(8) any
lien incurred in the ordinary course of business in connection with workmen's compensation, unemployment insurance, temporary disability, social security, retiree
health or similar laws or regulations or to secure obligations imposed by statute or governmental regulations;
(9) any
lien in favor of us or any Restricted Subsidiary;
(10) any
lien in favor of the United States of America or any state thereof, or any department, agency or instrumentality or political subdivision of the United States of
America or any state thereof, to secure partial, progress, advance, or other payments pursuant to any contract or statute, or any debt incurred by us or any Restricted Subsidiary for the purpose of
financing all or any part of the purchase price of, or the cost of constructing, developing, repairing or improving, the property or assets subject to such lien;
(11) any
lien securing industrial development, pollution control or similar revenue bonds;
(12) any
lien securing debt of us or any Restricted Subsidiary, all or a portion of the net proceeds of which are used, substantially concurrent with the funding thereof
(and for purposes of determining such "substantial concurrence," taking into consideration, among other things, required notices to be given to holders of outstanding securities under the indenture
(including the Notes) in connection with such refunding, refinancing or repurchase, and the required corresponding durations thereof), to refinance, refund or repurchase all outstanding securities
under the indenture (including the Notes), including the amount of all accrued interest thereon and reasonable fees and expenses and premium, if any, incurred by us or any Restricted Subsidiary in
connection therewith;
(13) liens
in favor of any Person to secure obligations under the provisions of any letters of credit, bank guarantees, bonds or surety obligations required or requested by
any governmental authority in connection with any contract or statute;
(14) any
lien upon or deposits of any assets to secure performance of bids, trade contracts, leases or statutory obligations;
(15) any
lien or privilege vested in any grantor, lessor or licensor or permittor or for rent or other charges due or for any other obligations or acts to be performed, the
payment of which rent or other charges or performance of which other obligations or acts is required under leases, easements, rights-of-way, licenses, franchises, privileges, grants or permits, so
long as payment of such rent or the performance of such other obligations or acts is not delinquent or the requirement for such payment or performance is being contested in good faith by appropriate
proceedings;
(16) defects
and irregularities in the titles to any property which do not have a Material Adverse Effect;
(17) easements,
exceptions or reservations in any property of us or any of our Restricted Subsidiaries granted or reserved for the purpose of pipelines, roads, the removal
of oil, gas, coal or other minerals, and other like purposes for the joint or common use of real property, facilities and equipment, which do not have a Material Adverse Effect;
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(18) rights
reserved to or vested in any grantor, lessor, licensor, municipality or public authority to control or regulate any property of us or any of our Restricted
Subsidiaries or to use any such property; provided, that we or such Restricted Subsidiary shall not be in default in respect of any material obligation (except that we or such Restricted Subsidiary
may be contesting any such obligation in good faith) to such grantor, lessor, licensor, municipality or public authority; and
provided
,
further
, that such
control, regulation or use will not have a Material Adverse Effect;
(19) any
obligations or duties to any municipality or public authority with respect to any lease, easement, right-of-way, license, franchise, privilege, permit or grant; or
(20) liens
or burdens imposed by any law or governmental regulation, including, without limitation, those imposed by environmental and zoning laws, ordinances, and
regulations;
provided
, in each case, we or any of our Restricted Subsidiaries are not in default in any material obligation (except that we or such
Restricted Subsidiary may be contesting any such obligation in good faith) to such Person in respect of such property;
provided
,
further
, that the
existence of such liens and burdens do not have a Material Adverse Effect.
"
Person
" means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company,
trust, other entity, unincorporated organization or government or any agency or political subdivision thereof.
"
Principal Property
" means, whether owned or leased on the date of the Indenture or thereafter acquired:
(1) any
pipeline assets of us or any Subsidiary (as defined below) of us, including any related facilities employed in the transportation, distribution, storage or marketing
of refined petroleum products, that are located in the United States of America or any territory or political subdivision thereof; and
(2) any
processing or manufacturing plant or terminal owned or leased by us or any Subsidiary of us that is located in the United States or any territory or political
subdivision thereof, except, in the case of either of the foregoing clauses (1) or (2):
-
-
any such assets consisting of inventories, furniture, office fixtures and equipment, including data processing equipment, vehicles
and equipment used on, or useful with, vehicles, and
-
-
any such assets, plant or terminal which, in the good faith opinion of the board of directors of our general partner, is not
material in relation to the activities of us or of us and our Subsidiaries, taken as a whole.
"
Restricted Subsidiary
" shall mean our subsidiaries identified on Exhibit A of the Indenture as well as any Subsidiary of us formed
after the date of the Indenture that has not been designated by the board of directors of our general partner, at its creation or acquisition, as an Unrestricted Subsidiary (as defined below). We may
thereafter redesignate an Unrestricted Subsidiary as a Restricted Subsidiary, and it will thereafter be a Restricted Subsidiary;
provided
, that such
Restricted Subsidiary may not thereafter be redesignated as an Unrestricted Subsidiary, and
provided
,
further
, that no Subsidiary may be designated as an
Unrestricted Subsidiary at any time other than at its creation or acquisition.
"
Sale-Leaseback Transaction
" means the sale or transfer by us or any Subsidiary of us of any Principal Property to a Person (other than us
or a Subsidiary of us) and the taking back by us or any Subsidiary of us, as the case may be, of a lease of such Principal Property.
"
Subsidiary
" means, with respect to any Person:
(1) any
corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Interests entitled, without regard to the
occurrence of any
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contingency,
to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of
such Person or combination thereof; or
(2) in
the case of a partnership, more than 50% of the partners' Capital Interests, considering all partners' Capital Interests as a single class, is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or combination thereof.
"
Unrestricted Subsidiary
" shall mean our subsidiaries identified on Exhibit A of the Indenture as well as any Subsidiary of us
formed after the date of the Indenture that has been designated by the board of directors of our general partner as an "Unrestricted Subsidiary" at the time of its creation or acquisition; provided
that no debt or other obligation of such Unrestricted Subsidiary may be assumed or guaranteed by us or any Restricted Subsidiary, nor may any asset of us or any Restricted Subsidiary, directly or
indirectly, contingently or otherwise, become encumbered or otherwise subject to the satisfaction thereof.
Limitations on Sale-Leasebacks
We will not, and will not permit any Subsidiary of us to, engage in a Sale-Leaseback Transaction, unless:
(1) such
Sale-Leaseback Transaction occurs within one year from the date of completion of the acquisition of the Principal Property subject thereto or the date of the
completion of construction, development or substantial repair or improvement, or commencement of full operations on such Principal Property, whichever is later;
(2) the
Sale-Leaseback Transaction involves a lease for a period, including renewals, of not more than three years;
(3) the
Attributable Indebtedness from that Sale-Leaseback Transaction is an amount equal to or less than the amount we or such Subsidiary would be allowed to incur as debt
secured by a lien on the Principal Property subject thereto without equally and ratably securing the securities issued under the indenture; or
(4) we
or such Subsidiary, within a one-year period after such Sale-Leaseback Transaction, applies or causes to be applied an amount not less than the net sale proceeds from
such Sale-Leaseback Transaction to (A) the prepayment, repayment, redemption, reduction or retirement of any Pari Passu Debt (as defined below) of us or any Subsidiary of us, or (B) the
expenditure or expenditures for Principal Property used or to be used in the ordinary course of business of us or our Subsidiaries.
Notwithstanding
the foregoing, we may, and may permit any Subsidiary of us to, effect any Sale-Leaseback Transaction that is not excepted by clauses (1) through (4), inclusive, of
the above paragraph,
provided
that the Attributable Indebtedness from such Sale-Leaseback Transaction, together with the aggregate principal amount of
then outstanding debt (other than the securities issued under the indenture) secured by liens upon Principal Properties not excepted by clauses (1) through (9), inclusive, of the first
paragraph of the limitation on liens covenant described above, do not exceed 10% of the Consolidated Net Tangible Assets.
"
Funded Debt
" means all debt maturing one year or more from the date of the creation thereof, all debt directly or indirectly renewable or
extendible, at the option of the debtor, by its terms or by the terms of any instrument or agreement relating thereto, to a date one year or more from the date of the creation thereof, and all debt
under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of one year or more.
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"
Pari Passu Debt
" means any of our Funded Debt, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless,
in the case of any particular Funded Debt, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Funded Debt shall be subordinated in
right of payment to the securities issued under the indenture.
Additional Covenant
SEC Reports; Financial Statements
Regardless of whether we are then subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, from and after the
Issue Date of the Notes, we will
electronically file with the SEC, so long as the Notes are outstanding, the annual, quarterly and other periodic reports that we are required to file (or would otherwise be required to file) with the
SEC pursuant to Sections 13 and 15(d) of the Exchange Act, and such documents will be filed with the SEC on or prior to the respective dates (the "Required Filing Dates") by which we are
required to file (or would otherwise be required to file) such documents, unless, in each case, such filings are not then permitted by the SEC.
If
such filings are not then permitted by the SEC, or such filings are not generally available on the internet free of charge, from and after the Issue Date of the Notes, we will provide
the trustee with, and the trustee will mail to any holder of Notes requesting in writing to the trustee copies of, each annual, quarterly and other periodic report specified in Sections 13 and
15(d) of the Securities Exchange Act within 15 days after its Required Filing Date.
Concerning the Trustee
U.S. Bank National Association will act as indenture trustee, authenticating agent, security registrar and paying agent with respect to the
Notes.
Governing Law
The indenture and the Notes will be governed by and construed in accordance with the law of the State of New York.
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DESCRIPTION OF OTHER INDEBTEDNESS
As of June 30, 2016, we had outstanding:
-
-
$125 million of 5.125% notes due 2017;
-
-
$300 million of 6.050% notes due 2018;
-
-
$400 million of 2.650% notes due 2018;
-
-
$275 million of 5.500% notes due 2019;
-
-
$650 million of 4.875% notes due 2021;
-
-
$500 million of 4.150% notes due 2023;
-
-
$300 million of 4.350% notes due 2024;
-
-
$150 million of 6.750% notes due 2033;
-
-
$400 million of 5.850% notes due 2043; and
-
-
$300 million of 5.600% notes due 2044.
The
notes listed above have substantially similar terms, other than maturity and interest rate, to those of the Notes described herein.
As
of October 24, 2016, we had a borrowing capacity of $1.5 billion with approximately $417.2 million of indebtedness outstanding under our revolving credit
facility. Our revolving credit facility's maturity date is September 30, 2021. The revolving credit facility provides for letters of credit to be issued at the request of the borrowers in an
aggregate amount not to exceed a $500.0 million sublimit and for swing line loans to be issued at the request of the borrowers in an aggregate amount not to exceed a $100.0 million
sublimit. Indebtedness under the revolving credit facility bears interest under one of two rate options, selected by us, equal to either (i) the highest of (a) the federal funds rate
plus 0.5%, (b) SunTrust Bank's prime rate, and (c) an adjusted London Interbank Offered Rate determined on a daily basis for an interest period of one month, in each case plus an
applicable margin, or (ii) an adjusted London Interbank Offered Rate plus an applicable margin. The applicable margin is determined based on the current utilization level of the revolving
credit facility and ratings assigned by Standard & Poor's Rating Services and Moody's Investor Service for our senior unsecured non-credit enhanced long-term debt. We will also pay a fee based
on our credit ratings on the actual daily unused amount of the aggregate commitments. The weighted average interest rate for borrowings under the revolving credit facility was 2.02% at
October 24, 2016.
On
September 30, 2016, we entered into a Term Loan Agreement (the "Term Loan Agreement") with the several banks and other financial institutions party thereto as lenders (the
"Lenders") and SunTrust Bank, in its capacity as administrative agent (the "Term Loan Administrative Agent"). The Term Loan Agreement provides for a senior unsecured credit facility in an aggregate
principal amount of up to $250 million, subject to various terms and conditions contained in the Term Loan Agreement. Interest accrues on the term loans at a LIBOR rate or a base rate plus an
applicable margin based on our election for each interest period. The applicable margin used in connection with interest rates and fees is based on the credit ratings assigned to our senior, unsecured
long-term debt securities. The applicable margin for LIBOR rate loans ranges from 1.0% to 1.60% and the applicable margin for base rate loans ranges from 0% to 0.60%.
Immediately
after entering into the Term Loan Agreement, we borrowed the full $250 million under the Term Loan Agreement. Proceeds of the term loan facility were used to repay a
portion of the outstanding balance on our revolving credit facility due September 30, 2021. The Term Loan Agreement has a scheduled maturity of September 30, 2019, with an option for us
to extend the term for two successive one-year periods.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain U.S. federal income tax considerations that may be relevant to the acquisition, ownership and
disposition of the Notes. This discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), applicable U.S. Treasury regulations promulgated thereunder,
judicial authority and administrative interpretations, all as of the date of this document, and all of which are subject to change, possibly with retroactive effect, or are subject to different
interpretations. We cannot assure you that the Internal Revenue Service, or IRS, will not challenge one or more of the tax consequences described in this discussion, and we have not obtained, nor do
we intend to obtain, a ruling from the IRS or an opinion of counsel with respect to the U.S. federal income tax consequences of acquiring, owning or disposing of the Notes.
This
discussion is limited to holders who purchase the Notes in this offering for cash at a price equal to the issue price of the Notes (i.e., the first price at which a
substantial amount of the Notes is sold for cash other than to bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers) and who
hold the Notes as capital assets (generally, property held for investment). This discussion does not address any U.S. federal tax considerations (such as estate and gift tax considerations) other than
U.S. federal income tax considerations or the tax considerations arising under the laws of any foreign, state, local or other jurisdiction or any income tax treaty. In addition, this discussion does
not address all tax considerations that may be important to a particular holder in light of the holder's circumstances, or to certain categories of investors that may be subject to special rules, such
as:
-
-
dealers in securities or currencies;
-
-
traders in securities that have elected the mark-to-market method of accounting for their securities;
-
-
U.S. holders (as defined below) whose functional currency is not the U.S. dollar;
-
-
persons holding Notes as part of a hedge, straddle, conversion or other "synthetic security" or integrated transaction;
-
-
former U.S. citizens or long-term residents of the United States;
-
-
financial institutions;
-
-
insurance companies;
-
-
regulated investment companies;
-
-
real estate investment trusts;
-
-
persons subject to the alternative minimum tax;
-
-
entities that are tax-exempt for U.S. federal income tax purposes; and
-
-
partnerships and other pass-through entities and holders of interests therein.
If
an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds Notes, the U.S. federal income tax treatment of a partner of the partnership generally
will depend upon the status of the partner and the activities of the partnership and upon certain determinations made at the partner level. If you are a partner of a partnership considering an
investment in the Notes, you are urged to consult your own tax advisor about the U.S. federal income tax consequences of acquiring, owning and disposing of the Notes.
INVESTORS CONSIDERING THE PURCHASE OF NOTES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR
PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE
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ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NOTES UNDER OTHER U.S. FEDERAL TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX
TREATY.
Certain Additional Payments
In certain circumstances (see "Description of NotesOptional Redemption" and "Description of NotesSpecial Mandatory
Redemption" in this prospectus supplement), we may be obligated to redeem the notes prior to maturity or pay amounts on the Notes that are in excess of stated interest or principal on the Notes. These
potential payments may implicate the provisions of the U.S. Treasury regulations relating to "contingent payment debt instruments." We do not intend to treat the possibility of paying such additional
amounts as causing the Notes to be treated as contingent payment debt instruments. It is possible that the IRS may take a different position, in which case, if such position is sustained, a holder
might be required to accrue ordinary interest income at a higher rate than the stated interest rate and to treat as ordinary income rather than capital gain any gain realized on the taxable
disposition of the Note. The remainder of this discussion assumes that the Notes will not be treated as contingent payment debt instruments. You are encouraged to consult your own tax advisor
regarding the possible application of the contingent payment debt instrument rules to the Notes.
Tax Consequences to U.S. Holders
The following summary will apply to you if you are a U.S. holder of the Notes. You are a "U.S. holder" for purposes of this discussion if you
are a beneficial owner of a Note and you are for U.S. federal income tax purposes:
-
-
an individual who is a U.S. citizen or U.S. resident alien;
-
-
a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, that was created or organized in or under the
laws of the United States, any state thereof or the District of Columbia;
-
-
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
-
-
a trust (i) the administration of which is subject to the primary supervision of a U.S. court and that has one or more United States
persons that have the authority to control all substantial decisions of the trust or (ii) that has made a valid election under applicable U.S. Treasury regulations to be treated as a United
States person.
Interest on the Notes
Interest on the Notes generally will be taxable to you as ordinary income at the time it is received or accrued in accordance with your regular
method of accounting for U.S. federal income tax purposes.
Disposition of the Notes
You will generally recognize capital gain or loss on the sale, redemption, exchange, retirement or other taxable disposition of a Note equal to
the difference, if any, between the proceeds you receive (excluding any proceeds attributable to accrued but unpaid interest, which will be taxable as ordinary interest income to the extent you have
not previously included such amounts in income) and your adjusted tax basis in the Notes. The proceeds you receive will include the amount of any cash and the fair market value of any other property
received for the Note. Your adjusted tax basis in the Note will generally equal the amount you paid for the Note. Any gain or loss will be long-term capital gain or loss if you held the Note for more
than one year at the time of the sale, redemption, exchange, retirement or other taxable disposition. Long-term capital gains of individuals, estates and trusts
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currently
are eligible for reduced rates of U.S. federal income tax. The deductibility of capital losses may be subject to limitation.
Information Reporting and Backup Withholding
Information reporting generally will apply to payments of interest on, and the proceeds of the sale or other disposition (including a
redemption, exchange or retirement) of, Notes held by you, and backup withholding will apply to such payments unless you provide to the applicable withholding agent your taxpayer identification
number, certified under penalties of perjury, as well as certain other information or otherwise establish an exemption from backup withholding. Backup withholding is not an additional tax. Any amount
withheld under the backup withholding rules is allowable as a credit against your U.S. federal income tax liability, if any, and a refund may be obtained from the IRS if the amounts withheld exceed
your actual U.S. federal income tax liability and you timely provide the required information or appropriate claim form to the IRS.
Additional Tax on Net Investment Income
An additional 3.8% tax is imposed on the "net investment income" of certain United States citizens and resident aliens and on the undistributed
"net investment income" of certain estates and trusts. Among other items, "net investment income" generally includes gross income from interest and net gain from the disposition of property, such as
the Notes, less certain deductions. You are encouraged to consult your tax advisor with respect to this additional tax and its applicability in your particular circumstances.
Tax Consequences to Non-U.S. Holders
The following summary will apply to you if you are a non-U.S. holder of Notes. You are a "non-U.S. holder" for purposes of this discussion if
you are a beneficial owner of Notes that is, for U.S. federal income tax purposes, an individual, corporation, estate or trust that is not a U.S. holder.
Interest on the Notes
Subject to the discussion of backup withholding and FATCA withholding, below, payments to you of interest on the Notes generally will not be
subject to U.S. federal income tax and will be exempt from withholding of U.S. federal income tax under the "portfolio interest" exemption if you properly certify as to your foreign status, as
described below, and:
-
-
you do not own actually or constructively, 10% or more of our capital or profits interests;
-
-
you are not a "controlled foreign corporation" that is related to us (actually or constructively);
-
-
you are not a bank whose receipt of interest on the Notes is in connection with an extension of credit made pursuant to a loan agreement
entered into in the ordinary course of your trade or business; and
-
-
interest on the Notes is not effectively connected with your conduct of a U.S. trade or business.
The
portfolio interest exemption generally applies only if you also appropriately certify as to your foreign status. You can generally meet the certification requirement by providing a
properly executed IRS Form W-8BEN or IRS Form W-8BEN-E (or applicable successor form) to the applicable withholding agent. If you hold the Notes through a financial institution or other
agent acting on your behalf, you may be required to provide appropriate certifications to the agent. Your agent will then generally be required to provide appropriate certifications to the applicable
withholding agent, either directly or through other intermediaries. Special rules apply to foreign partnerships, estates and trusts, and in certain circumstances certifications as to the foreign
status of partners, trust owners or
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beneficiaries
may have to be provided to the applicable withholding agent. In addition, special rules apply to qualified intermediaries that enter into withholding agreements with the IRS.
If
you cannot satisfy the requirements described above, payments of interest made to you will be subject to U.S. federal withholding tax at a 30% rate, unless (i) you provide the
applicable withholding agent with a properly executed IRS Form W-8BEN or IRS Form W-8BEN-E (or applicable successor form) claiming an exemption from (or a reduction of) withholding under
the benefits of an income tax treaty, or (ii) the payments of such interest are effectively connected with your conduct of a trade or business in the United States (and, if required by an
applicable income tax treaty, are attributable to a permanent establishment maintained by you in the United States) and you meet the certification requirements described below (See
"Income or Gain Effectively Connected with a U.S. Trade or Business" in this prospectus supplement).
The
certifications described above and below must be provided to the applicable withholding agent prior to the payment of interest and must be updated periodically. If you do not timely
provide the applicable withholding agent with the required certification, but you qualify for a reduced rate under an applicable income tax treaty, you may obtain a refund of any excess amounts
withheld if you timely provide the required information or appropriate claim form to the IRS.
Disposition of the Notes
Subject to the discussion of backup withholding and FATCA withholding, below, you generally will not be subject to U.S. federal income tax on
any gain realized on the sale, redemption, exchange, retirement or other taxable disposition of a Note unless:
-
-
the gain is effectively connected with the conduct by you of a U.S. trade or business (and, if required by an applicable income tax treaty, you
maintain a permanent establishment in the United States to which such gain is attributable); or
-
-
you are a non-resident alien individual who has been present in the United States for 183 days or more in the taxable year of
disposition and certain other requirements are met.
If
your gain is described in the first bullet point above, you generally will be subject to U.S. federal income tax in the manner described under "Income or Gain Effectively
Connected with a U.S. Trade or Business." If you are a non-U.S. holder described in the second bullet point above, you will be subject to a flat 30% (or lower applicable income tax treaty rate) U.S.
federal income tax on the gain derived from the sale or other disposition, which may be offset by certain U.S. source capital losses.
Income or Gain Effectively Connected with a U.S. Trade or Business
If any interest on the Notes or gain from the sale, redemption, exchange, retirement or other taxable disposition of the Notes is effectively
connected with a U.S. trade or business conducted by you (and, if required by an applicable income tax treaty, you maintain a permanent establishment in the United States to which such interest or
gain is attributable), then the interest income or gain will be subject to U.S. federal income tax at regular graduated income tax rates generally in the same manner as if you were a U.S. holder.
Effectively connected interest income will not be subject to U.S. federal withholding tax if you satisfy certain certification requirements by providing to the applicable withholding agent a properly
executed IRS Form W-8ECI (or successor form). In addition, if you are a corporation, that portion of your earnings and profits that is effectively connected with your U.S. trade or business may
also be subject to a "branch profits tax" at a 30% rate unless an applicable income tax treaty provides for a lower rate. For this purpose, interest received on a Note and gain recognized on the
disposition of a Note will be included in earnings and profits if the interest or gain is effectively connected with the conduct by you of a U.S. trade or business.
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Information Reporting and Backup Withholding
Payments to you of interest on a Note, and amounts withheld from such payments, if any, generally will be required to be reported to the IRS and
to you. Copies of the information returns reporting such interest payments and withholding may also be made available to the tax authorities of the country in which you reside or are established under
the provisions of a specific treaty or agreement.
Backup
withholding generally will not apply to payments to you of interest on a Note if the certification described in "Tax Consequences to Non-U.S.
HoldersInterest on the Notes" is duly provided or you otherwise establish an exemption.
Proceeds
from the disposition of a Note effected by the U.S. office of a U.S. or foreign broker will be subject to information reporting requirements and backup withholding unless you
properly certify under
penalties of perjury as to your foreign status on IRS Form W-8BEN or IRS Form W-8BEN-E (or other applicable or successor IRS Form W-8) and certain other conditions are met or you
otherwise establish an exemption. Information reporting requirements and backup withholding generally will not apply to any proceeds from the disposition of a Note effected outside the United States
by a foreign office of a broker. However, unless such a broker has documentary evidence in its records that you are not a United States person and certain other conditions are met, or you otherwise
establish an exemption, information reporting will apply to a payment of the proceeds of the disposition of a Note effected outside the United States by such a broker if it has certain relationships
with the United States.
Backup
withholding is not an additional tax. Any amount withheld under the backup withholding rules is allowable as a credit against your U.S. federal income tax liability, if any, and a
refund may be obtained from the IRS if the amounts withheld exceed your actual U.S. federal income tax liability and you timely provide the required information or appropriate claim form to the IRS.
Withholding on Payments to Certain Foreign Entities
Sections 1471 through 1474 of the Code and the U.S. Treasury regulations and administrative guidance issued thereunder (referred to as
"FATCA") impose a 30% U.S. federal withholding tax on payments of interest on the Notes and on the gross proceeds from the sale or other disposition of the Notes (if such sale or other disposition
occurs after December 31, 2018), if paid to a "foreign financial institution" or a "non-financial foreign entity" (each as defined in the Code) (including, in some cases, when such foreign
financial institution or non-financial foreign entity is acting as an intermediary), unless: (i) in the case of a foreign financial institution, such institution enters into an agreement with
the U.S. government to withhold on certain payments, and to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which includes
certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners); (ii) in the case of a non-financial foreign entity, such
entity certifies that it does not have any "substantial United States owners" (as defined in the Code) or provides the withholding agent with a certification identifying its direct and indirect
substantial United States owners (generally by providing an IRS Form W-8BEN-E); or (iii) the foreign financial institution or non-financial foreign entity otherwise qualifies for an
exemption from these rules and provides appropriate documentation (such as an IRS Form W-8BEN-E). Foreign financial institutions located in jurisdictions that have an intergovernmental
agreement with the United States with respect to these rules may be subject to different rules. Under certain circumstances, a beneficial owner of Notes might be eligible for refunds or credits of
such taxes. You should consult your tax advisor regarding the effects of FATCA on your investment in the Notes.
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THE PRECEDING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. WE URGE YOU TO CONSULT YOUR OWN
TAX ADVISOR REGARDING THE PARTICULAR U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF ACQUIRING, OWNING AND DISPOSING OF OUR NOTES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN
APPLICABLE LAWS.
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UNDERWRITING
Barclays Capital Inc., J.P. Morgan Securities LLC, SunTrust Robinson Humphrey, Inc. and Wells Fargo Securities, LLC
are serving as the representatives of the underwriters for this offering. Subject to the terms and conditions in the underwriting agreement between us and the underwriters, we have agreed to sell to
each underwriter, and each underwriter has severally agreed to purchase from us, the principal amount of Notes that appears opposite its name in the table below.
|
|
|
|
|
Underwriters
|
|
Principal
amount of
Notes
|
|
Barclays Capital Inc.
|
|
$
|
99,000,000
|
|
J.P. Morgan Securities LLC
|
|
|
99,000,000
|
|
SunTrust Robinson Humphrey, Inc.
|
|
|
99,000,000
|
|
Wells Fargo Securities, LLC
|
|
|
99,000,000
|
|
BNP Paribas Securities Corp.
|
|
|
42,000,000
|
|
Deutsche Bank Securities Inc.
|
|
|
42,000,000
|
|
PNC Capital Markets LLC
|
|
|
42,000,000
|
|
SMBC Nikko Securities America, Inc.
|
|
|
42,000,000
|
|
BB&T Capital Markets, a division of BB&T Securities, LLC.
|
|
|
18,000,000
|
|
Morgan Stanley & Co. LLC
|
|
|
18,000,000
|
|
|
|
|
|
|
Total
|
|
$
|
600,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
underwriters have agreed to purchase all of the Notes if any of them are purchased.
Notes
sold by the underwriters to the public will initially be offered at the public offering price set forth on the cover of this prospectus supplement. Notes sold by the underwriters
to securities dealers may be sold at a discount from the public offering price of up to 0.400% of the principal amount per Note. The underwriters may allow, and any such dealer may reallow, a
concession not in excess of 0.250% of the principal amount per Note to certain other dealers. If all the Notes are not sold at the public offering price, the underwriters may change the public
offering price and the other selling terms.
The
following table shows the underwriting discount to be paid by us to the underwriters in connection with the offering:
|
|
|
|
|
|
|
Paid by us
|
|
Per Note
|
|
|
0.650
|
%
|
Total
|
|
$
|
3,900,000
|
|
We
estimate that our share of the total expenses of the offering, excluding the underwriting discount, will be approximately $1.4 million and will be payable by us.
New Issue of Notes
The Notes are a new issue of securities with no established trading market. We do not intend to apply for listing of the Notes on any securities
exchange or for quotation of the Notes on any automated dealer quotation system. We have been advised by the underwriters that they presently intend to make a market in the Notes after completion of
the offering. However, they are under no obligation to do so and may discontinue any market-making activities at any time without any notice. We cannot assure the liquidity of the trading market for
the Notes or that an active public market for the Notes will develop. If an active public trading market for the Notes does not develop, the market price and liquidity of the Notes may be adversely
affected. If the Notes are traded, they may trade at a discount from their initial offering price, depending on prevailing interest rates, the market for similar
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securities,
our operating performance and financial condition, general economic conditions and other factors.
Indemnification
We have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
Stabilization
In connection with the offering, the underwriters may purchase and sell the Notes in the open market. These transactions may include short
sales, stabilizing transactions and purchases on the open market to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater principal amount of Notes than
they are required to purchase in the offering. Stabilizing transactions consist of certain bids or purchases made for the purpose of preventing or retarding a decline in the market price of the Notes
while the offering is in process.
The
underwriters may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the
representatives have repurchased Notes sold by or for the account of such underwriter in stabilizing or short covering transactions.
These
activities by the underwriters, as well as other purchases by the underwriters for their own accounts, may stabilize, maintain or otherwise affect the market price of the Notes. As
a result, the price of the Notes may be higher than the price that might otherwise exist in the open market.
Neither
we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of
the Notes. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not
be discontinued without notice.
Settlement Date
We expect delivery of the Notes will be made against payment therefor on or about the delivery date specified on the cover page of this
prospectus supplement, which is the seventh business day following the date of this prospectus supplement (such settlement being referred to as "T+7"). Under Rule 15c6-1 of the Exchange Act,
trades in the secondary market generally are required to settle in three business days unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the
Notes on the date of this prospectus supplement or during the next succeeding three business days will be required, by virtue of the fact that the Notes initially will settle in T+7, to specify an
alternate settlement cycle at the time of any such trade to prevent failed settlement and should consult their own advisers.
Other Relationships
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include
securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the
underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us, for which they
received or will receive customary fees and expenses. Certain of the underwriters and their respective affiliates are agents and lenders under our revolving credit facility and our Term Loan
Agreement. Certain of the underwriters also serve as sales agents under our Equity Distribution Agreements.
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In
addition, in the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively
trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment
and securities activities may involve securities and instruments of ours or our affiliates. The underwriters and their respective affiliates may also make investment recommendations or publish or
express independent research views in respect of such securities or financial instruments and may at any time hold, or recommend to clients that they acquire, long or short positions in such
securities and instruments.
Selling Restrictions
This prospectus supplement and the accompanying base prospectus have not been approved by an authorized person for the purposes of
section 21 of the Financial Services and Markets Act 2000 ("FSMA") and are, accordingly, only being distributed in the United Kingdom to, and are only directed at (i) investment
professionals falling within the description of persons in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "Financial Promotion
Order"); or (ii) high net worth companies and other persons falling within Article 49(2)(a) to (d) of the Financial Promotion Order; or (iii) to any other person to whom
they may otherwise lawfully be communicated or made in accordance with the Financial Promotion Order (all such persons together being referred to as "relevant persons").
The
notes are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such notes will be engaged in only with, relevant persons. Any person
who is not a relevant person should not act or rely on this document or any of its contents.
An
invitation or inducement to engage in investment activity (within the meaning of Section 21 of FSMA) in connection with the issue or sale of any notes which are the subject of
the offering contemplated by this prospectus will only be communicated or caused to be communicated in circumstances in which Section 21(1) of FSMA does not apply to us.
In relation to each member state of the European Economic Area, no offer of notes which are the subject of the offering has been, or will be
made to the public in that Member State, other than under the following exemptions under the Prospectus Directive:
-
-
to any legal entity which is a qualified investor as defined in the Prospectus Directive;
-
-
to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining the
prior consent of the representatives for any such offer; or
-
-
in any other circumstances falling within Article 3(2) of the Prospectus Directive,
provided
that no such offer of notes referred to in (a) to (c) above shall result in a requirement for the Partnership or any representative to publish a prospectus
pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.
This
prospectus has been prepared on the basis that any offer of Notes in any Member State will be made pursuant to an exemption under the Prospectus Directive from the requirement to
publish a prospectus for offers of notes. Accordingly any person making or intending to make an offer in that Relevant Member State of Notes which are the subject of the offering contemplated in this
prospectus may only do so in circumstances in which no obligation arises for the Partnership or any of the representatives to publish a prospectus pursuant to Article 3 of the Prospectus
Directive in relation to
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such
offer. Neither the Partnership nor the representatives have authorized, nor do they authorize, the making of any offer of notes in circumstances in which an obligation arises for the Partnership
or the representatives to publish a prospectus for such offer.
The Notes may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer to the
public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), or (ii) to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap.571, Laws
of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a "prospectus" within the meaning of the Companies Ordinance (Cap.32, Laws
of Hong Kong), and no advertisement, invitation
or document relating to the Notes may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the
contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to Notes which are or are intended to
be disposed of only to persons outside Hong Kong or only to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made
thereunder.
The Notes have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and
Exchange Law) and each underwriter has agreed that it will not offer or sell any Notes, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein
means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a
resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws,
regulations and ministerial guidelines of Japan.
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other
document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Notes may not be circulated or distributed, nor may the Notes be offered or sold, or be
made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of
the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions,
specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where
the Notes are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of
which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an
accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the
beneficiaries' rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the Notes under Section 275 except:
(1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any
person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; or
(3) by operation of law.
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LEGAL MATTERS
The validity of the Notes is being passed upon for us by Vinson & Elkins L.L.P. Certain legal matters will be passed upon for the
underwriters by Andrews Kurth Kenyon LLP.
EXPERTS
The consolidated financial statements, incorporated in this prospectus supplement by reference from the Buckeye Partners, L.P. Annual
Report on Form 10-K for the year ended December 31, 2015, and the effectiveness of Buckeye Partners, L.P. and its subsidiaries' internal control over financial reporting have been
audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports which are incorporated herein by reference. Such consolidated financial
statements have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
FORWARD-LOOKING STATEMENTS
Statements included or incorporated by reference in this prospectus supplement contain various forward-looking statements and information that
are based on our beliefs, as well as assumptions made by us and information currently available to us. When used in this document, words such as "proposed," "anticipate," "project," "potential,"
"could," "should," "continue," "estimate," "expect," "may," "believe," "will," "plan," "seek," "outlook" and similar expressions and statements regarding our plans and objectives for future operations
are intended to identify forward-looking statements. Although we believe that such expectations reflected in such forward-looking statements are
reasonable, we cannot give any assurances that such expectations will prove to be correct. Such statements are subject to a variety of risks, uncertainties and assumptions as described in more detail
in Item 1A. "Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2015 and under "Risk Factors" in this prospectus supplement and the
accompanying prospectus. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those anticipated,
estimated, projected or expected. Although the expectations in the forward-looking statements are based on our current beliefs and expectations, caution should be taken not to place undue reliance on
any such forward-looking statements because such statements speak only as of the date hereof. Except as required by federal and state securities laws, we undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information, future events or any other reason.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and other reports with and furnish other information to the Securities and Exchange Commission, or the SEC. You may
read and copy any document we file with or furnish to the SEC at the SEC's public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at
1-800-732-0330 for further information on their public reference room. Our SEC filings are also available at the SEC's web site at
www.sec.gov
. You can
also obtain information about us at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.
The
SEC allows us to "incorporate by reference" the information we have filed with the SEC. This means that we can disclose important information to you without actually including the
specific information in this prospectus supplement and the accompanying base prospectus by referring you to those documents. The information incorporated by reference is an important part of this
prospectus supplement and the accompanying base prospectus. Information that we file later with the SEC (which does not include any information furnished pursuant to Item 2.02 or
Item 7.01 on any Current Report on Form 8-K, or any corresponding information furnished under Item 9.01 or included as an exhibit)
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will
automatically update and may replace information in this prospectus supplement and the accompanying base prospectus, and information previously filed with the SEC. In addition to the documents
listed in "Where You Can Find More Information" on page 1 of the accompanying base prospectus, we incorporate by reference the documents listed below:
-
-
our Annual Report on Form 10-K for the year ended December 31, 2015, filed on February 25, 2016;
-
-
the information specifically incorporated by reference into our Annual Report on Form 10-K for the year ended December 31, 2015
from our Definitive Proxy Statement on Schedule 14A filed on April 20, 2016;
-
-
our Quarterly Reports on Form 10-Q for the quarter ended March 31, 2016, filed on May 6, 2016, and for the quarter ended
June 30, 2016, filed on August 5, 2016;
-
-
our Current Reports on Form 8-K, filed on March 9, 2016, May 18, 2016, June 10, 2016, October 3, 2016 and
October 24, 2016; and
-
-
the description of our LP units contained in the Registration Statement on Form 8-A filed on August 9, 2005.
If
information in incorporated documents conflicts with information in this prospectus supplement or the accompanying base prospectus you should rely on the most recent information. If
information in an incorporated document conflicts with information in another incorporated document, you should rely on the most recent incorporated document.
You
may request a copy of any document incorporated by reference in this prospectus supplement or the accompanying base prospectus, at no cost, by writing or calling us at the following
address:
Buckeye
Partners, L.P.
One Greenway Plaza
Suite 600
Houston, Texas 77046
(832) 615-8600
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PROSPECTUS
Buckeye Partners, L.P.
Limited Partnership Units
Debt Securities
We may offer limited partnership units ("LP Units") and debt securities from time to time. This prospectus describes the general terms of, and the
general manner in which we will offer these securities.
You
should read this prospectus and the applicable prospectus supplement and the documents incorporated by reference herein and therein carefully before you invest in our securities.
This prospectus may not be used to consummate sales of securities unless accompanied by a prospectus supplement.
Our LP
Units are traded on the New York Stock Exchange under the symbol "BPL." The last reported sale price of our LP Units on November 19, 2014 was $81.65
per LP Unit.
Investing in our securities involves a high degree of risk. Limited partnerships are inherently different from corporations. You should carefully
consider each of the factors referred to under "Risk Factors" on page 3 of this prospectus, contained in the applicable prospectus supplement and in the documents incorporated by reference
herein and therein before you make an investment in our securities.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
THE
DATE OF THIS PROSPECTUS IS NOVEMBER 21, 2014
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TABLE OF CONTENTS
In making your investment decision, you should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized
anyone to provide you with any other information. If anyone provides you with different or inconsistent information, you should not rely on it.
You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front cover of this prospectus. You
should not assume that the information contained in the documents incorporated by reference in this prospectus is accurate as of any date other than the respective dates of those documents. Our
business, financial condition, results of operations and prospects may have changed since those dates.
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we have filed with the Securities and Exchange Commission (the "SEC") using a "shelf"
registration process. Under this shelf registration process, we may sell the securities described in this prospectus in one or more offerings. This prospectus provides you with a general description
of the securities we may offer. Each time we sell securities with this prospectus, we will provide a prospectus supplement that will contain specific information about the terms of that offering. The
prospectus supplement may also add to, update or change information in this prospectus. If there is any inconsistency between the information in this prospectus and any prospectus supplement, you
should rely on the information in that prospectus supplement. As used in this prospectus, the "Partnership," "we," "our," "us," or like terms mean Buckeye Partners, L.P. References to
"Buckeye GP," "the general partner," or "our general partner" refer to Buckeye GP LLC, the general partner of the Partnership.
The
information in this prospectus is accurate as of its date. Therefore, before you invest in our securities, you should carefully read this prospectus and any prospectus supplement
relating to the securities offered to you together with the additional information described under the heading "Where You Can Find More Information."
BUCKEYE PARTNERS, L.P.
We are a publicly traded master limited partnership that owns and operates a diversified network of integrated assets providing midstream
logistic solutions, primarily consisting of the transportation, storage, and marketing of liquid petroleum products. We are one of the largest independent liquid petroleum products pipeline operators
in the United States in terms of volumes delivered with approximately 6,000 miles of pipeline and more than 120 liquid petroleum products terminals with aggregate storage capacity of over
110 million barrels across our portfolio of pipelines, inland terminals, and an integrated network of marine terminals located primarily on the U.S. East Coast and in the Caribbean. Our
flagship marine terminal in The Bahamas is one of the largest marine crude oil and petroleum products storage facilities in the world and provides an array of logistics and blending services for the
global flow of petroleum products. Our network of marine terminals enables us to facilitate global flows of crude oil, refined petroleum products, and other commodities and to offer our customers
connectivity to some of the world's most important bulk storage and blending hubs. In September 2014, we expanded our network of marine midstream assets by acquiring a controlling interest in a
company with assets located in Corpus Christi, Texas and the Eagle Ford Shale. We are also a wholesale distributor of refined petroleum products in areas served by our pipelines and terminals.
Finally, we also operate or maintain third-party pipelines under agreements with major oil and gas, petrochemical and chemical companies and perform certain engineering and construction management
services for third parties.
Our
executive offices are located at One Greenway Plaza, Suite 600, Houston, Texas 77046. Our telephone number is (832) 615-8600. We make our periodic reports and other
information filed with or furnished to the SEC available, free of charge, through our website as soon as reasonably practicable. Information on our website or any other website is not incorporated by
reference into this prospectus and does not constitute a part of this prospectus unless specifically so designated and filed with the SEC.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports and other information with the SEC. You may read and copy any document we file at the SEC's Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-732-0330 for further information on their public reference room. Our SEC filings are also available at
the SEC's website at http://www.sec.gov. You can also
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obtain
information about us at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005, or on our website at http://www.buckeye.com. Information on our website or any
other website is not incorporated by reference into this prospectus and does not constitute a part of this prospectus unless specifically so designated and filed with the SEC.
INFORMATION WE INCORPORATE BY REFERENCE
The SEC allows us to "incorporate by reference" the information we have filed with the SEC. This means that we can disclose important
information to you without actually including the specific information in this prospectus by referring you to those documents. The information incorporated by reference is an important part of this
prospectus. Information that we file later with the SEC will automatically update and may replace information in this prospectus and information previously filed with the SEC.
We
incorporate by reference the documents listed below and any future filings we make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934,
or the Exchange Act, including all such documents we may file with the SEC after the date of the initial registration statement and prior to the effectiveness of the registration statement, until all
offerings under this registration statement are completed (excluding any information furnished under Items 2.02 or 7.01 on any current report on Form 8-K).
-
-
Annual Report on Form 10-K for the year ended December 31, 2013, filed on February 26, 2014;
-
-
Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, filed on May 5, 2014; Quarterly Report on
Form 10-Q for the quarter ended June 30, 2014, filed on August 8, 2014; and Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, filed on
November 7, 2014;
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-
Current Reports on Form 8-K, filed on February 14, 2014, February 27, 2014, April 7, 2014, June 6, 2014,
June 25, 2014, July 3, 2014, July 29, 2014, August 14, 2014, September 2, 2014, September 8, 2014, September 12, 2014, September 16, 2014,
September 29, 2014 and October 6, 2014; and
-
-
The description of our limited partnership units contained in the Registration Statement on Form 8-A filed on August 9, 2005.
You
may request a copy of any document incorporated by reference in this prospectus, at no cost, by writing or calling us at the following address:
Buckeye
Partners, L.P.
One Greenway Plaza
Suite 600
Houston, Texas 77046
(832) 615-8600
You
should rely only on the information contained in or incorporated by reference in this prospectus or any prospectus supplement. We have not authorized anyone else to provide you with
any information. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information incorporated by reference or provided in this
prospectus or any prospectus supplement is accurate as of any date other than its respective date.
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RISK FACTORS
An investment in our securities involves a significant degree of risk. Before you invest in our securities you should carefully consider those
risks discussed in the "Forward-Looking Statements" section of this prospectus, the risk factors included in our most recent Annual Report on Form 10-K and as supplemented by our Quarterly
Reports on Form 10-Q, each of which is incorporated herein by reference, and those risk factors that may be included in any applicable prospectus supplement, together with all of the other
information included in this prospectus, any prospectus supplement and the documents we incorporate by reference in evaluating an investment in our securities.
If
any of the risks discussed in the foregoing documents were to occur, our business, financial condition, results of operations and cash flow could be materially adversely affected. In
that case, we may be unable to pay distributions to our unitholders, or pay interest on, or the principal of, any debt
securities. In that event, the trading price of our securities could decline and you could lose all or part of your investment.
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FORWARD-LOOKING STATEMENTS
Statements included or incorporated by reference in this prospectus contain various forward-looking statements and information that are based on
our beliefs, as well as assumptions made by us and information currently available to us. When used in this document, words such as "proposed," "anticipate," "project," "potential," "could," "should,"
"continue," "estimate," "expect," "may," "believe," "will," "plan," "seek," "outlook" and similar expressions and statements regarding our plans and objectives for future operations are intended to
identify forward-looking statements. Although we believe that such expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that such expectations will
prove to be correct. Such statements are subject to a variety of risks, uncertainties and assumptions as described in more detail in Item 1A. "Risk Factors" included in our Annual Report on
Form 10-K for the year ended December 31, 2013 and under "Risk Factors" in this prospectus. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove
incorrect, our actual results may vary materially from those anticipated, estimated, projected or expected. Although the expectations in the forward-looking statements are based on our current beliefs
and expectations, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date hereof. Except as required by federal and
state securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or any other reason.
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RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of consolidated earnings to fixed charges for the periods presented:
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Years Ended December 31,
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Nine Months
Ended
September 30,
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2009
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2010
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2011
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2012
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2013
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2014
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2013
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1.15
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1.26
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3.04
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2.65
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3.31
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2.85
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3.32
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These
computations include us and our operating subsidiaries and are based on the historical results of Buckeye Partners, L.P. For these ratios, "earnings" means the sum of the
following:
-
-
income from continuing operations before taxes (excluding income attributable to noncontrolling interests);
-
-
plus
equity income less than distributions, or less equity income greater than distributions,
as applicable; and
-
-
less
capitalized interest, excluding amortization of capitalized interest.
The
term "fixed charges" means the sum of the following:
-
-
interest and debt expense;
-
-
plus
capitalized interest; and
-
-
plus
a portion of rentals representing an interest factor.
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USE OF PROCEEDS
Except as otherwise provided in the applicable prospectus supplement, we will use the net proceeds we receive from the sale of the securities
covered by this prospectus for general partnership purposes, including repayment of debt, acquisitions and capital expenditures and additions to working capital.
The
actual application of proceeds we receive from the sale of any particular offering of securities using this prospectus will be described in the applicable prospectus supplement
relating to such offering.
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DESCRIPTION OF THE LIMITED PARTNERSHIP UNITS
General
The LP Units represent limited partner interests in us. The holders of LP Units are entitled to receive distributions, if made, in accordance
with our amended and restated partnership agreement and exercise the rights or privileges available to limited partners thereunder. For a description of the rights and privileges of holders of LP
Units in and to partnership distributions, please read "How We Make Cash Distributions." For a description of the rights and privileges of
limited partners under our amended and restated partnership agreement, including voting rights, please read "Our Amended and Restated Partnership Agreement."
Voting
Each holder of LP Units is entitled to one vote for each LP Unit held by such holder on all matters submitted to a vote of the unitholders.
Certain events, as more fully described in our amended and restated partnership agreement, require the approval of the limited partners holding in the aggregate at least two-thirds of the outstanding
LP Units. Other events, as more fully described in our amended and restated partnership agreement, require the approval of the limited partners holding in the aggregate at least 80% of the outstanding
LP Units. Please read "Our Amended and Restated Partnership AgreementVoting."
No Preemptive Rights
The holders of LP Units are not entitled to preemptive rights in respect of issuances of securities by us.
Transfer Agent and Registrar
The transfer agent and registrar for the LP Units is American Stock Transfer & Trust Company, LLC. You may contact them at the following
address: 6201 15th Avenue, Brooklyn, NY 11219.
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HOW WE MAKE CASH DISTRIBUTIONS
Set forth below is a summary of the significant provisions of our amended and restated partnership agreement that relate to distributions.
General
Our amended and restated partnership agreement does not require distributions to be made quarterly or at any other time. Under our amended and
restated partnership agreement, our general partner, from time to time and not less than quarterly, is required to review our accounts to determine whether distributions are appropriate. Our general
partner is permitted to make such distributions as it may determine, without being limited to current or accumulated income or gains. Cash distributions may be made from any of our funds, including,
without limitation, revenues, capital contributions or borrowed funds. Our general partner may also distribute other Partnership property, additional LP Units, or other securities of the Partnership
or other entities. Distributions are made concurrently to all applicable record holders on the record date set for purposes of such distributions.
LP Units Eligible for Distributions
The LP Units generally participate pro rata in our distributions. As of November 20, 2014, there were approximately 127,022,640 LP Units
issued and outstanding. We currently have a long-term incentive plan and a unit deferral and incentive plan (together, the "LTIP") which provide for the issuance of up to 4,500,000 LP Units, subject
to certain adjustments. As of November 20, 2014, there were 25,600 LP Units issuable upon exercise of options granted to employees pursuant to our unit option and distribution equivalent plan.
Distributions of Cash upon Liquidation
If we dissolve in accordance with our amended and restated partnership agreement, we will sell or otherwise dispose of our assets in a process
called a liquidation. We will first apply the proceeds of liquidation to the payment of our creditors, including by way of a reserve of cash or other assets of the Partnership for contingent
liabilities. We will distribute any remaining proceeds to our unitholders, in accordance with their capital account balances, as adjusted to reflect any gain or loss upon the sale or other disposition
of our assets in liquidation.
If
the sale of our assets in liquidation would be impracticable or would cause undue loss, the sale may be deferred for a reasonable amount of time or the assets (except those necessary
to satisfy liabilities) may be distributed to our limited partners in lieu of cash in the same manner as cash or proceeds of a sale would have been distributed.
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THE PARTNERSHIP AGREEMENT
The following is a summary of the material provisions of our amended and restated partnership agreement.
The
following provisions of our amended and restated partnership agreement are summarized elsewhere in this prospectus.
-
-
with regard to distributions, please read "How We Make Distributions";
-
-
with regard to allocations of taxable income and taxable loss, please read "Material U.S. Federal Income Tax Consequences."
Organization and Duration
The Partnership was organized on July 11, 1986 and has a term extending until the close of business on December 31, 2086.
Purpose
The purpose of the Partnership under our amended and restated partnership agreement is to engage in any lawful activity for which limited
partnerships may be organized under the Delaware Revised Uniform Limited Partnership Act ("DRULPA").
Our
general partner is authorized to perform all acts deemed necessary to carry out our purposes and to conduct our business.
Power of Attorney
Each of our limited partners grants to our general partner and, if appointed, a liquidator, a power of attorney to, among other things, execute
and file documents required for our qualification, continuance or dissolution.
Issuance of Additional Securities
Our amended and restated partnership agreement authorizes our general partner to cause us to issue an unlimited number of additional limited
partner interests and other equity securities for the consideration and on the terms and conditions established by our general partner without the approval of any limited partners. Without the prior
approval of the holders of two-thirds of the outstanding LP Units, our general partner is prohibited from causing us to issue any class or series of limited partner interests having preferences or
other special or senior rights over the previously outstanding LP Units. Without the approval of a majority of the holders of the outstanding LP Units, our general partner is prohibited from causing
us to issue limited partner interests to itself or its affiliates unless the limited partner interests are of a class previously listed or admitted to trading on a national securities exchange and
property is contributed to us with a value at least equal to the fair market value of the issued limited partner interests.
It
is possible that we will fund acquisitions, and other capital requirements, through the issuance of additional limited partner interests, including LP Units or other equity
securities. Holders of any additional LP Units that we issue will be entitled to share with then-existing holders of LP Units in our distributions of available cash. In addition, the issuance of
additional partnership interests may dilute (i) the percentage interests of then-existing holders of LP Units in our net assets and (ii) the voting rights of then-existing holders of LP
Units under our amended and restated partnership agreement.
The
holders of LP Units do not have preemptive rights to acquire additional LP Units or other partnership interests.
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Limited Liability
Assuming that a limited partner does not participate in the control of our business within the meaning of the DRULPA and that it otherwise acts
in conformity with the provisions of our amended and restated partnership agreement, the partner's liability under the DRULPA will be limited, subject to possible exceptions, to the amount of capital
the partner is obligated to contribute to the Partnership for the partner's LP Units plus the partner's share of any
undistributed profits and assets and any funds wrongfully distributed to it, as described below. If it were determined, however, that the right, or exercise of the right, by our limited partners as a
group:
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to elect members of the board of directors of our general partner;
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to remove or replace our general partner;
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to approve certain amendments to our amended and restated partnership agreement; or
-
-
to take any other action under our amended and restated partnership agreement
constituted
"participation in the control" of our business for the purposes of the DRULPA, then the limited partners could be held personally liable for our obligations under the laws of Delaware, to
the same extent as our general partner. This liability would extend to persons who transact business with us who reasonably believe that a limited partner is a general partner based on the limited
partner's conduct. Neither our amended and restated partnership agreement nor the DRULPA specifically provides for legal recourse against our general partner if a limited partner were to lose limited
liability through any fault of our general partner. Although this does not mean that a limited partner could not seek legal recourse, we know of no precedent for this type of a claim in Delaware case
law.
Under
the DRULPA, a limited partnership may not make a distribution to a partner if, after the distribution, all liabilities of the limited partnership, other than liabilities to
partners on account of their partnership interests and liabilities for which the recourse of creditors is limited to specific property of the limited partnership, would exceed the fair value of the
assets of the limited partnership. For the purpose of determining the fair value of the assets of a limited partnership, the DRULPA provides that the fair value of property subject to liability for
which recourse of creditors is limited will be included in the assets of the limited partnership only to the extent that the fair value of that property exceeds the nonrecourse liability. The DRULPA
provides that a limited partner who receives a distribution and knew at the time of the distribution that the distribution was in violation of the
DRULPA will be liable to the limited partnership for the amount of the distribution for three years from the date of distribution. Under the DRULPA, an assignee who becomes a substituted limited
partner of a limited partnership is liable for the obligations of its assignor to make contributions to the limited partnership, excluding any obligations of the assignor with respect to wrongful
distributions, as described above, except the assignee is not obligated for liabilities unknown to it at the time it became a limited partner and that could not be ascertained from the partnership
agreement.
Our
subsidiaries conduct business in multiple jurisdictions. Maintenance of our limited liability as a limited partner or member of our subsidiaries formed as limited partnerships or
limited liability companies may require compliance with legal requirements in the jurisdictions in which such subsidiaries conduct business, including qualifying our subsidiaries to do business there.
Limitations on the liability of a limited partner or member for the obligations of a limited partnership or limited liability company have not been clearly established in many jurisdictions. If it
were determined that we were, by virtue of our limited partner interest or limited liability company interest in our subsidiaries or otherwise, conducting business in any state without compliance with
the applicable limited partnership or limited liability company statute, or that the right or exercise of the right by the limited partners as a group to elect members of the board of directors of our
general partner, to remove or replace our general partner, to approve certain amendments to our amended and restated partnership agreement, or to take other action under our amended and restated
partnership agreement constituted
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"participation
in the control" of our business for purposes of the statutes of any relevant jurisdiction, then the limited partners could be held personally liable for our obligations under the law of
that jurisdiction to the same extent as our general partner under the circumstances. We will operate in a manner that our general partner considers reasonable and necessary or appropriate to preserve
the limited liability of the limited partners.
Voting Rights
The following matters require the vote of our unitholders as specified below.
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Election of the board of directors of our general partner
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All directors on the board of directors of our general partner will be elected by a plurality of the votes cast at meetings of the limited partners. Please read "Meetings; Voting."
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Amendment of the amended and restated partnership agreement
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Certain amendments may be made by our general partner without the approval of our unitholders. Certain other amendments
require the approval of holders of a majority of outstanding LP Units. Certain other amendments require the approval of holders of a super-majority of outstanding LP Units. Please read "Amendment of Our Amended and Restated Partnership
Agreement."
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Sale of all or substantially all of the Partnership's assets
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Holders of two-thirds of outstanding LP Units. Please read "Merger, Sale or Other Disposition of Assets."
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Dissolution of the Partnership
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Holders of two-thirds of outstanding LP Units. Please read "Termination and Dissolution."
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Removal/Replacement of our general partner
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Holders of 80% of outstanding LP Units. Please read "Withdrawal or Removal of Our General Partner."
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Amendment of Our Amended and Restated Partnership Agreement
General.
Amendments to our amended and restated partnership agreement may be proposed only by our general partner. To adopt a proposed
amendment,
other than certain amendments discussed below, our general partner must seek written approval of the holders of the number of units required to approve the amendment or call a meeting of the limited
partners to consider and vote upon the proposed amendment. Except as otherwise described below, an amendment must be approved by the limited partners holding in the aggregate at least a majority of
the outstanding LP Units, referred to as a "Majority Interest." No amendments to certain provisions and definitions in our amended and restated partnership agreement relating to or requiring "special
approval" or the approval of a majority of the members of the audit committee of the board of directors of our general partner may be made without first obtaining such special approval.
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No Unitholder Approval.
Our general partner may generally make amendments to our amended and restated partnership agreement without the
approval of
any limited partner or assignee to reflect:
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-
a change in our name, the location of our principal place of business, our registered agent or our registered office;
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a change that our general partner deems appropriate or necessary for us to qualify or to continue our qualification as a limited partnership or
a partnership in which the limited partners have limited liability under the laws of any state or jurisdiction or to ensure that neither we nor any of our operating partnerships will be treated as an
association taxable as a corporation for federal income tax purposes;
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a change that is appropriate or necessary, in the opinion of our counsel, to prevent us, Buckeye GP Holdings L.P. ("Holdings"), our general
partner or any of our subsidiaries from in any manner being subjected to the provisions of the Investment Company Act of 1940, the Investment Advisors Act of 1940, or "plan asset" regulations adopted
under the Employee Retirement Income Security Act of 1974, whether or not substantially similar to plan asset regulations currently applied or proposed; or
-
-
any other changes or events similar to any of the matters described in the clauses above.
In
addition, our general partner may make amendments to our amended and restated partnership agreement without the approval of any limited partner or assignee if those amendments, in the
discretion of our general partner, reflect:
-
-
a change that in the good faith opinion of our general partner does not adversely affect our limited partners in any material respect;
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-
a change to divide our outstanding units into a greater number of units, to combine the outstanding units into a smaller number of units or to
reclassify our units in a manner that in the good faith opinion of our general partner does not adversely affect any class of our limited partners in any material respect;
-
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a change that our general partner deems appropriate or necessary to satisfy any requirements, conditions or guidelines contained in any order,
rule or regulation of any federal or state agency or contained in any federal or state statute; or
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a change that our general partner deems appropriate or necessary to facilitate the trading of any of the LP Units or comply with any rule,
regulation, requirement, condition or guideline of any exchange on which any units are or will be listed or admitted to trading.
Opinion of Counsel and Partnership Unitholder Approval.
No amendments to our amended and restated partnership agreement will become
effective without
the approval of holders of at least 80% of the LP Units unless we obtain an opinion of counsel to the effect that the amendment will not result in the loss of limited liability of any of our limited
partners or cause us or any of our operating partnerships to be treated as an association taxable as a corporation for federal income tax purposes.
Any
amendment to our amended and restated partnership agreement that reduces the voting percentage required to take any action must be approved by the affirmative vote of our limited
partners constituting not less than the voting requirement sought to be reduced.
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Merger, Sale or Other Disposition of Assets
Our amended and restated partnership agreement generally prohibits our general partner, without the prior approval of the holders of at least
two-thirds of the outstanding LP Units and special approval, from causing us to, among other things, sell, exchange or otherwise dispose of all or substantially all of the consolidated assets
owned by us and our operating partnerships. In addition, our amended and restated partnership agreement generally prohibits our general partner from causing us to merge or consolidate with another
entity without special approval. Our general partner may, however, mortgage, pledge, hypothecate or grant a security interest in all or substantially all of our assets without the approval of the
holders of outstanding LP Units and without special approval.
Withdrawal or Removal of Our General Partner
Our general partner may withdraw as general partner of the Partnership by giving 90 days' advance written notice, provided such
withdrawal is approved by the vote of the holders of not less than 80% of the outstanding LP Units or we receive an opinion of counsel regarding limited liability and tax matters.
Upon
receiving notice of the withdrawal of our general partner, prior to the effective date of such withdrawal, the holders of LP Units representing a Majority Interest may select
a successor to the withdrawing general partner. If a successor is not elected, we will be dissolved, wound up and liquidated, unless within 90 days of that withdrawal, all of our partners agree
in writing to continue our business and to appoint a successor general partner. Please read "Termination and Dissolution" below.
Our
general partner may not be removed unless that removal is approved by the vote of the holders of not less than 80% of the outstanding LP Units, we receive an opinion of
counsel regarding limited liability and tax matters, the successor general partner or an affiliate thereof agrees to indemnify and hold harmless our general partner and its affiliates from any
liability or obligation arising out of, or causes the general partner and its affiliates to be released from, any and all liabilities and obligations (including loan guarantees) under fringe benefit
plans sponsored by the general partner or any of its affiliates in connection with our business, except as otherwise prohibited by our amended and restated partnership agreement, and all required
regulatory approvals for removal of our general partner shall have been obtained. Any removal of our general partner is also subject to the approval of a successor general partner by the vote of the
holders of LP Units representing a Majority Interest and the agreement of the successor general partner or one of its affiliates to indemnify the removed general partner against, or to cause it
to be released from, certain liabilities.
If
our general partner withdraws or is removed, we are required to reimburse the departing general partner for all amounts due the departing general partner.
Transfer of General Partner Interest
Our general partner is prohibited under our amended and restated partnership agreement from transferring its general partner interest.
Termination and Dissolution
We will continue as a limited partnership until the close of business on December 31, 2086 or until earlier terminated under our amended
and restated partnership agreement. We will dissolve upon:
-
(1)
-
the
expiration of our term on December 31, 2086;
-
(2)
-
the
withdrawal of our general partner unless a person becomes a successor general partner prior to or on the effective date of such withdrawal;
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(3)
-
the
bankruptcy or dissolution of our general partner, or any other event that results in its ceasing to be our general partner other than by reason of a withdrawal
or removal; or
-
(4)
-
the
election of our general partner to dissolve us, if approved by the holders of two-thirds of the outstanding LP Units.
Upon
a dissolution under clause (2) or (3) and the failure of all partners to agree in writing to continue our business and to elect a successor general partner, the
holders of LP Units representing a Majority Interest may also elect, within 180 days of such dissolution, to reconstitute the Partnership and continue our business on the same terms and
conditions described in our amended and restated partnership agreement by forming a new limited partnership on terms identical to those in our amended and restated partnership agreement and having as
general partner a person approved by the holders of LP
Units representing a Majority Interest subject to our receipt of an opinion of counsel to the effect that:
-
(1)
-
the
action would not result in the loss of limited liability of any limited partner; and
-
(2)
-
neither
the Partnership nor the reconstituted limited partnership would be treated as an association taxable as a corporation for federal income tax purposes.
Liquidation and Distribution of Proceeds
Upon our dissolution, unless we are reconstituted and continued as a new partnership by the holders of LP Units representing a Majority
Interest, our general partner or, if our general partner has withdrawn, been removed, dissolved or become bankrupt, the liquidator authorized to wind up our affairs will, acting with all of the powers
of our general partner that the liquidator deems appropriate or necessary in its good faith judgment, liquidate our assets and apply and distribute the proceeds of the liquidation as described in "How
We Make Cash DistributionsDistributions of Cash Upon Liquidation."
Meetings; Voting
For purposes of determining the holders of LP Units entitled to notice of or to vote at any meeting or to give approvals without a
meeting, our general partner may set a record date, which date for purposes of notice of a meeting shall not be less than 10 days nor more than 60 days before the date of the meeting. If
a meeting is adjourned, notice need not be given of the adjourned meeting and a new record date does not need to be set, if the time and place thereof are announced at the meeting at which the
adjournment is taken, unless such adjournment (together with any prior adjournments that did not have a new record date set) is for more than 60 days. The Partnership may transact any business
at the adjourned meeting that might have been transacted at the original meeting.
Any
action that is required or permitted to be taken by our unitholders may be taken either at a meeting of our unitholders or without a meeting if consents in writing describing the
action so taken are signed by holders of the number of units necessary to authorize or take that action at a meeting, except that election of directors by unitholders may only be done at a meeting.
Special meetings of our unitholders may be called by our general partner or by our unitholders owning at least 20% of the outstanding LP Units.
Annual
meetings of limited partners for the election of directors to the board of directors of our general partner (as described below), and such other matters as the board of directors
of our general partner submits to a vote of the limited partners, will be held on the first Tuesday in June of each year or on such other date as is fixed by our general partner. Unitholders may vote
either in person or by proxy at meetings. The holders of a majority of the outstanding LP Units, represented in person or by proxy, will constitute a quorum.
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Except
as described below with respect to the election of directors, each record holder of a LP Unit has one vote per LP Unit, although additional limited partner
interests having special voting rights could be issued. Please read "Issuance of Additional Securities." LP Units held in nominee or street name account will be voted by the broker
or other nominee in accordance with the instruction of the beneficial owner unless the arrangement between the beneficial owner and its nominee provides otherwise. With respect to the election of
directors, our amended and restated partnership agreement provides that if, at any time, any person or group beneficially owns 20% or more of the outstanding LP Units, then all LP
Units owned by such person or group in excess of 20% of the outstanding LP Units may not be voted, and in each case, the foregoing LP Units will not be counted when calculating the
required votes for such matter and will not be deemed to be outstanding for purposes of determining a quorum for such meeting. Such LP Units will not be treated as a separate class for purposes
of our amended and restated partnership agreement. Notwithstanding the foregoing, the board of directors of our general partner may, by action specifically referencing votes for the election of
directors, determine that the limitation described above will not apply to a specific person or group.
Board of Directors
General.
The number of directors of our general partner's board will be not less than six and not more than eleven. Any decrease in the
number of
directors by our general partner's board may not have the effect of shortening the term of any incumbent director. The board of directors of our general partner must maintain at least three directors
meeting the independence and experience requirements of any national securities exchange on which our LP Units are listed or quoted
Directors.
Our directors are classified with respect to their terms of office by dividing them into three classes, each class to be as
nearly equal
in number as possible. The directors that are designated to Class I will serve for a term that expires at the 2017 annual meeting, the directors designated to Class II will serve for a
term that expires at the 2015 annual meeting, and the directors designated to Class III will serve for a term that expires at the 2016 annual meeting. At each annual meeting of our unitholders,
directors to replace directors whose terms expire at such annual meeting will be elected to hold office until the third succeeding annual meeting. Each director will hold office for the term for which
such director is elected or until such director's earlier death, resignation or removal. Any vacancies may be filled by a majority of the remaining directors then in office. A director may be removed
only for cause and only upon a vote of the majority of the remaining directors then in office.
Nominations of Directors.
Nominations of persons for election as directors may be made at an annual meeting of the limited partners
only
(a) by or at the direction of the directors or any committee thereof or (b) by any public limited partner who (i) was a record holder at the time the notice provided for in our
amended and restated partnership agreement is delivered to our general partner, (ii) is entitled to vote at the meeting and (iii) complies with the notice procedures set forth in our
amended and restated partnership agreement.
For
any nominations brought before an annual meeting by a public limited partner, the limited partner must give timely notice thereof in writing to our general partner. The notice must
contain certain information as described in our amended and restated partnership agreement. To be timely, a public limited partner's notice must be delivered to our general partner not later than the
close of business on the 90th day, nor earlier than the close of business on the 120th day, prior to the first anniversary of the preceding year's annual meeting (provided, however, that
in the event that the date of the annual meeting is more than 30 days before or more than 70 days after such anniversary date, notice by the limited partner must be so delivered not
earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the
10th day following the day on which public announcement of the date of such meeting is first made by us or our general partner). The public announcement of an
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adjournment
or postponement of an annual meeting will not commence a new time period (or extend any time period) for the giving of a limited partner's notice as described above.
In
the event that the number of directors is increased effective at an annual meeting and there is no public announcement by us or our general partner naming the nominees for the
additional directorships at least 100 days prior to the first anniversary of the preceding year's annual meeting, a public limited partner's notice will also be considered timely, but only with
respect to nominees for the additional directorships, if it is delivered to our general partner not later than the close of business on the 10th day following the day on which such public
announcement is first made by us or our general partner.
Nominations
of persons for election as directors also may be made at a special meeting of limited partners at which directors are to be elected in accordance with the provisions of our
amended and restated partnership agreement.
Only
such persons who are nominated in accordance with the procedures set forth in our amended and restated partnership agreement will be eligible to be elected at an annual or special
meeting of limited partners to serve as directors. Notwithstanding the foregoing, unless otherwise required by law, if the public limited partner who nominated a person to serve as a director (or a
qualified representative of the limited partner) does not appear at the annual or special meeting of limited partners to present such nomination, such nomination will be disregarded notwithstanding
that proxies in respect of such vote may have been received by our general partner or us.
In
addition to the provisions described above and in our amended and restated partnership agreement, a public limited partner must also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder; provided, however, that any references in our amended and restated partnership agreement to the Exchange Act or the rules promulgated thereunder
are not intended to and do not limit any requirements applicable to nominations pursuant to our amended and restated partnership agreement, and compliance with our amended and restated partnership
agreement is the exclusive means for a limited partner to make nominations.
Indemnification
Our amended and restated partnership agreement and the agreements of limited partnership or operating agreements of our subsidiaries, as the
case may be (together with our
amended and restated partnership agreement, the "Organizational Agreements") provide that we or our subsidiaries, as the case may be, shall indemnify (to the extent permitted by applicable law)
certain persons (each, an "Indemnitee") against expenses (including legal fees and expenses), judgments, fines and amounts paid in settlement actually and reasonably incurred by such Indemnitee in
connection with any threatened, pending or completed claim, demand, action, suit or proceeding (a "claim") to which the Indemnitee is or was an actual or threatened party and which relates to the
Organizational Agreements or our, or any of our subsidiaries', property, business, affairs or management. This indemnity is available only if the Indemnitee acted in good faith and the action or
omission which is the basis of such claim, demand, action, suit or proceeding does not involve the gross negligence or willful misconduct of such Indemnitee. Indemnitees include our general partner,
any affiliates of such general partner, any person who is or was a director, officer, manager, member, employee or agent of such general partner or any affiliate, or any person who is or was serving
at the request of such general partner or any such affiliate as a director, officer, manager, member, partner, trustee, employee or agent of another individual, corporation, limited liability company,
partnership, trust, unincorporated organization, association or other entity; and an Indemnitee shall be indemnified only in connection with any claim made by reason of such Indemnitee's status as
such or any action taken or omitted to be taken in the Indemnitee's capacity as such. Expenses subject to indemnity will be paid by us to the Indemnitee in advance, subject to receipt of an
undertaking by or on behalf of the Indemnitee to repay such amount if it is ultimately
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determined
by a court of competent jurisdiction that the Indemnitee is not entitled to indemnification. We maintain a liability insurance policy on behalf of certain of the Indemnitees.
Section 18-108
of the Delaware Limited Liability Company Act provides that, subject to such standards and restrictions set forth in its limited liability company agreement, a
Delaware limited liability company may indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever. Article V of the amended and
restated limited liability company agreement of our general partner currently provides for the indemnification of affiliates of our general partner and members, managers, partners, officers,
directors, employees, agents and trustees of our general partner or any affiliate of our general partner and such persons who serve at the request of our general partner as members, managers,
partners, officers, directors, employees, agents, trustees and fiduciaries of any other enterprise against certain liabilities under certain circumstances.
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DESCRIPTION OF DEBT SECURITIES
The debt securities will be our direct unsecured general obligations and will be issued under an Indenture, dated July 10, 2003, between
us and U.S. Bank National Association, as successor trustee, and a supplemental indenture thereto. This Indenture, as supplemented by any supplemental indentures relating to debt securities to be
issued hereunder, is referred to herein as the Indenture, and U.S. Bank National Association, as successor trustee, is referred to herein as the Trustee.
The
debt securities will be governed by the provisions of the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended. We and the
Trustee have entered into supplements to the Indenture, and may enter into future supplements to the Indenture from time to time. We have summarized selected provisions of the Indenture below. The
Indenture has been incorporated by reference as an exhibit to the registration statement of which this prospectus is a part. You should read the Indenture for provisions that may be important to you,
because the
Indenture, and not this description, governs your rights as a holder of debt securities. In the summary below, we have included references to section numbers of the Indenture so that you can easily
locate these provisions. Capitalized terms used in the summary have the meanings specified in the Indenture.
Specific Terms of Each Series of Debt Securities in the Prospectus Supplement
A prospectus supplement and a supplemental indenture relating to any series of debt securities being offered will include specific terms
relating to the offering. These terms will include some or all of the following:
-
-
the form and title of the debt securities;
-
-
the total principal amount of the debt securities;
-
-
the portion of the principal amount which will be payable if the maturity of the debt securities is accelerated;
-
-
any right we may have to defer payments of interest by extending the dates payments are due and whether interest on those deferred amounts will
be payable as well;
-
-
the dates on which the principal of the debt securities will be payable;
-
-
the interest rate that the debt securities will bear and the interest payment dates for the debt securities;
-
-
any optional redemption provisions;
-
-
any sinking fund or other provisions that would obligate us to repurchase or otherwise redeem the debt securities;
-
-
any changes to or additional Events of Default or covenants; and
-
-
any other terms of the debt securities.
No Limitation on Amount of Debt Securities
The Indenture does not limit the amount of debt securities that may be issued. The Indenture allows debt securities to be issued up to any
principal amount that may be authorized by us and may be in any currency or currency unit designated by us. (Section 3.01)
Registration of Notes
Debt securities of a series may be issued in certificated or global form. (Sections 2.01 and 2.02)
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Denominations
The prospectus supplement for each issuance of debt securities will state whether the securities will be issued in amounts other than $1,000
each or multiples thereof. (Section 3.02)
No Personal Liability of General Partner
Our general partner and its directors, officers, employees and sole member will not have any liability for our obligations under the Indenture
or the debt securities. Each holder of debt securities by accepting a debt security waives and releases our general partner and its directors, officers, employees and sole member from all such
liability. (Section 1.15) The waiver and release are part of the consideration for the issuance of the debt securities.
Consolidation, Merger or Sale
We will only consolidate or merge with or into any other partnership or corporation or sell, lease or transfer all or substantially all of our
assets according to the terms and conditions of the Indenture, which includes the following requirements:
-
-
the remaining or acquiring partnership or corporation is organized under the laws of the United States, any state or the District of Columbia;
-
-
the remaining or acquiring partnership or corporation assumes our obligations under the Indenture; and
-
-
immediately after giving effect to the transaction no Event of Default exists.
The
remaining or acquiring partnership or corporation will be substituted for us in the Indenture with the same effect as if it had been an original party to the Indenture. Thereafter,
the successor may exercise our rights and powers under the Indenture, in our name or in its own name. Any act or proceeding required or permitted to be done by our Board of Directors or any of our
officers may be done by the board of directors or officers of the successor. If we sell or transfer all or substantially all of our assets, the purchaser must assume all of our liabilities and
obligations under the Indenture and under the debt securities, and, as a result we will be released from such liabilities and obligations. (Sections 8.01 and 8.02)
Modification of the Indenture
Under the Indenture, generally, our rights and obligations and the rights of the holders of debt securities may be modified with the consent of
the holders of a majority in aggregate principal amount of the outstanding debt securities of each series affected by the modification. No modification of the principal or interest payment terms, and
no modification reducing the percentage required for modifications, is effective against any holder without its consent. We and the Trustee may amend the Indenture without the consent of any holder of
the debt securities to make technical changes, such as:
-
-
correcting errors;
-
-
providing for a successor trustee;
-
-
qualifying the Indenture under the Trust Indenture Act; or
-
-
adding provisions relating to a particular series of debt securities. (Sections 9.01 and 9.02)
Events of Default
"Event of Default," when used in the Indenture, will mean any of the following:
-
-
failure to pay the principal of or any premium on any debt security when due;
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-
-
failure to pay interest on any debt security for 30 days;
-
-
failure to perform any other covenant in the Indenture that continues for 90 days after being given written notice;
-
-
failure to pay when due principal of or interest on debt greater than $100 million of the Partnership or any Subsidiary (as defined
below) or acceleration of such debt;
-
-
specific events in bankruptcy, insolvency or reorganization of the Partnership or our Subsidiaries; or
-
-
any other Event of Default included in the Indenture or a supplemental indenture. (Section 5.01)
An
Event of Default for a particular series of debt securities does not necessarily constitute an Event of Default for any other series of debt securities issued under the Indenture. The
Trustee may withhold notice to the holders of debt securities of any default (except in the payment of principal or interest) if it considers such withholding of notice to be in the interests of the
holders. (Section 6.02)
If
an Event of Default for any series of debt securities occurs and continues, the Trustee or the holders of not less than 25% in aggregate principal amount of the debt securities
outstanding of that series may declare the entire principal of and accrued and unpaid interest, if any, on all the debt securities of that series to be due and payable immediately. If this happens,
subject to specific conditions, the holders of a majority of the aggregate principal amount of the debt securities of that series can void the declaration. (Section 5.02)
Other
than its duties in case of a default, the Trustee is not obligated to exercise any of its rights or powers under the Indenture at the request, order or direction of any holders,
unless the holders offer the Trustee indemnity or security satisfactory to the Trustee. (Section 6.01) If they provide this satisfactory indemnification or security, the holders of a majority
in principal amount of any series of debt securities may direct the time, method and place of conducting any proceeding or any remedy available to the Trustee, or exercising any power conferred upon
the Trustee, for any series of debt securities unless contrary to law. (Section 5.12)
Limitations on Liens
The Indenture provides that the Partnership will not, nor will it permit any Restricted Subsidiary (as defined below) to, create, assume, incur
or suffer to exist any lien upon any Principal Property (as defined below) or upon any shares of capital stock of any Restricted Subsidiary (if such Restricted Subsidiary is a corporation) owning or
leasing any Principal Property, whether owned or leased on the date of the Indenture or thereafter acquired, to secure any debt of the Partnership or any other person (other than the debt securities
issued thereunder), without in any such case making effective provision whereby all of the debt securities outstanding thereunder shall be secured equally and ratably with, or prior to, such debt so
long as such debt shall be so secured. The following are excluded from this restriction:
-
(1)
-
Permitted
Liens (as defined below);
-
(2)
-
any
lien upon any property or assets created at the time of acquisition of such property or assets by the Partnership or any Restricted Subsidiary or within one year
after such time to secure all or a portion of the purchase price for such property or assets or debt incurred to finance such purchase price, whether such debt was incurred prior to, at the time of or
within one year after the date of such acquisition;
-
(3)
-
any
lien upon any property or assets to secure all or part of the cost of construction, development, repair or improvements thereon or to secure debt incurred prior
to, at the time
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of,
or within one year after completion of such construction, development, repair or improvements or the commencement of full operations thereof (whichever is later), to provide funds for any such
purpose;
-
(4)
-
any
lien upon any property or assets existing thereon at the time of the acquisition thereof by the Partnership or any Restricted Subsidiary (whether or not the
obligations secured thereby are assumed by the Partnership or any Restricted Subsidiary), provided, however, that such lien only encumbers the property or assets so acquired;
-
(5)
-
any
lien upon any property or assets of a person existing thereon at the time such person becomes a Restricted Subsidiary by acquisition, merger or otherwise,
provided, however, that such lien only encumbers the property or assets of such person at the time such person becomes a Restricted Subsidiary;
-
(6)
-
any
lien upon any property or assets of the Partnership or any Restricted Subsidiary in existence on the Issue Date (as defined below) or provided for pursuant to
agreements existing on the Issue Date;
-
(7)
-
liens
imposed by law or order as a result of any proceeding before any court or regulatory body that is being contested in good faith, and liens which secure a
judgment or other court-ordered award or settlement in an aggregate amount not in excess of $1 million as to which the Partnership or the applicable Restricted Subsidiary has not exhausted its
appellate rights;
-
(8)
-
liens
arising in connection with Sale-Leaseback Transactions (as defined below) permitted under the Indenture as described below; or
-
(9)
-
any
extension, renewal, refinancing, refunding or replacement, or successive extensions, renewals, refinancings, refundings or replacements of liens, in whole or in
part, referred to in clauses (1) through (8) above, provided, however, that any such extension, renewal, refinancing, refunding or replacement lien shall be limited to the property or
assets covered by the lien extended, renewed, refinanced, refunded or replaced and that the obligations secured by any such extension, renewal, refinancing, refunding or replacement lien shall be in
an amount not greater than the amount of the obligations secured by the lien extended, renewed, refinanced, refunded or replaced and any expenses of the Partnership and its Restricted Subsidiaries
(including any premium) incurred in connection with such extension, renewal, refinancing, refunding or replacement;
-
(10)
-
any
lien resulting from the deposit of moneys or evidence of indebtedness in trust for the purpose of defeasing debt of the Partnership or any Restricted
Subsidiary.
Notwithstanding
the foregoing, under the Indenture, the Partnership may, and may permit any Restricted Subsidiary to, create, assume, incur, or suffer to exist any lien upon any
Principal Property to secure debt of the Partnership or any person other than the debt securities, that is not excepted by clauses (1) through (10), inclusive, above without securing the debt
securities issued under the Indenture,
provided
that the aggregate principal amount of all debt then outstanding secured by such lien and all similar
liens, together with all net sale proceeds from Sale-Leaseback Transactions, excluding Sale-Leaseback Transactions permitted by clauses (1) through (4), inclusive, of the first paragraph of the
restriction on sale-leasebacks covenant described below, does not exceed 10% of Consolidated Net Tangible Assets (as defined below). (Section 10.06)
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"Consolidated
Net Tangible Assets" means, at any date of determination, the total amount of assets after deducting therefrom:
-
(1)
-
all
current liabilities excluding:
-
-
any current liabilities that by their terms are extendible or renewable at the option of the obligor thereon to a time more than
12 months after the time as of which the amount thereof is being computed; and
-
-
current maturities of long-term debt,
and
-
(2)
-
the
value, net of any applicable reserves, of all goodwill, trade names, trademarks, patents and other like intangible assets, all as set forth, on the consolidated
balance sheet of the Partnership and its consolidated subsidiaries for the Partnership's most recently completed fiscal quarter, prepared in accordance with generally accepted accounting principles.
"Issue
Date" means with respect to any series of debt securities issued under either Indenture the date on which debt securities of that series are initially issued under that Indenture.
"Material
Adverse Effect" means:
-
(1)
-
an
impairment of the operation by the Partnership and its Restricted Subsidiaries of the pipeline systems of the Partnership and its Restricted Subsidiaries which
materially adversely affects the manner in which such pipeline systems, taken as a whole, have been operated by the Partnership and its Restricted Subsidiaries (whether due to damage to, or a defect
in the right, title or interest of the Partnership or any of its Restricted Subsidiaries in and to, any of the assets constituting such pipeline system or for any other reason);
-
(2)
-
a
material decline in the financial condition or results of operations or business prospects of the Partnership and its Restricted Subsidiaries, taken as a whole; or
-
(3)
-
an
inability of the Partnership to make timely payments of principal and interest on the Securities, in each case as a result (whether or not simultaneous) of the
occurrence of one or more events and/or the materialization or failure to materialize of one or more conditions and/or the taking of or failure to take one or more actions described in this Indenture
by reference to a Material Adverse Effect.
"Permitted
Liens" means:
-
(1)
-
liens
upon rights-of-way for pipeline purposes;
-
(2)
-
any
statutory or governmental lien or lien arising by operation of law, or any mechanics', repairmen's, materialmen's, suppliers', carriers', landlords',
warehousemen's or similar lien incurred in the ordinary course of business which is not yet due or which is being contested in good faith by appropriate proceedings and any undetermined lien which is
incidental to construction, development, improvement or repair;
-
(3)
-
the
right reserved to, or vested in, any municipality or public authority by the terms of any right, power, franchise, grant, license, permit or by any provision of
law, to purchase or recapture or to designate a purchaser of, any property;
-
(4)
-
liens
of taxes and assessments which are:
-
-
for the then current year,
-
-
not at the time delinquent, or
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-
-
delinquent but the validity of which is being contested at the time by the Partnership or any Restricted Subsidiary in good faith;
-
(5)
-
liens
of, or to secure performance of, leases, other than capital leases;
-
(6)
-
any
lien upon, or deposits of, any assets in favor of any surety company or clerk of court for the purpose of obtaining indemnity or stay of judicial proceedings;
-
(7)
-
any
lien upon property or assets acquired or sold by the Partnership or any Restricted Subsidiary resulting from the exercise of any rights arising out of defaults
on receivables;
-
(8)
-
any
lien incurred in the ordinary course of business in connection with workmen's compensation, unemployment insurance, temporary disability, social security,
retiree health or similar laws or regulations or to secure obligations imposed by statute or governmental regulations;
-
(9)
-
any
lien in favor of the Partnership or any Restricted Subsidiary;
-
(10)
-
any
lien in favor of the United States of America or any state thereof, or any department, agency or instrumentality or political subdivision of the United States
of America or any state thereof, to secure partial, progress, advance, or other payments pursuant to any contract or statute, or any debt incurred by the Partnership or any Restricted Subsidiary for
the purpose of financing all or any part of the purchase price of, or the cost of constructing, developing, repairing or improving, the property or assets subject to such lien;
-
(11)
-
any
lien securing industrial development, pollution control or similar revenue bonds;
-
(12)
-
any
lien securing debt of the Partnership or any Restricted Subsidiary, all or a portion of the net proceeds of which are used, substantially concurrent with the
funding thereof (and for purposes of determining such "substantial concurrence," taking into consideration, among other things, required notices to be given to holders of outstanding securities under
the Indenture (including the debt securities) in connection with such refunding, refinancing or repurchase, and the required corresponding durations thereof), to refinance, refund or repurchase all
outstanding securities under the Indenture (including the debt securities), including the amount of all accrued interest thereon and reasonable fees and expenses and premium, if any, incurred by the
Partnership or any Restricted Subsidiary in connection therewith;
-
(13)
-
liens
in favor of any Person (as defined below) to secure obligations under the provisions of any letters of credit, bank guarantees, bonds or surety obligations
required or requested by any governmental authority in connection with any contract or statute;
-
(14)
-
any
lien upon or deposits of any assets to secure performance of bids, trade contracts, leases or statutory obligations;
-
(15)
-
any
lien or privilege vested in any grantor, lessor or licensor or permittor for rent or other charges due or for any other obligations or acts to be performed, the
payment of which rent or other charges or performance of which other obligations or acts is required under leases, easements, rights-of-way, leases, licenses, franchises, privileges, grants or
permits, so long as payment of such rent or the performance of such other obligations or acts is not delinquent or the requirement for such payment or performance is being contested in good faith by
appropriate proceedings;
-
(16)
-
defects
and irregularities in the titles to any property which do not have a Material Adverse Effect (as defined above);
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-
(17)
-
easements,
exceptions or reservations in any property of the Partnership or any of its Restricted Subsidiaries granted or reserved for the purpose of pipelines,
roads, the removal of oil, gas, coal or other minerals, and other like purposes for the joint or common use of real property, facilities and equipment, which do not have a Material Adverse Effect;
-
(18)
-
rights
reserved to or vested in any grantor, lessor, licensor, municipality or public authority to control or regulate any property of the Partnership or any of its
Restricted Subsidiaries or to use any such property,
provided
that the Partnership or such Restricted Subsidiary shall not be in default in respect of
any material obligation (except that the Partnership or such Restricted Subsidiary may be contesting any such obligation in good faith) to such grantor, lessor, licensor, municipality or public
authority; and
provided
,
further
, that such control, regulation or use will not have a Material Adverse
Effect;
-
(19)
-
any
obligations or duties to any municipality or public authority with respect to any lease, easement, right-of-way, license, franchise, privilege, permit or grant;
or
-
(20)
-
liens
or burdens imposed by any law or governmental regulation, including, without limitation, those imposed by environmental and zoning laws, ordinances, and
regulations;
provided
, in each case, the Partnership or any of its Restricted Subsidiaries is not in default in any material obligation (except that the
Partnership or such Restricted Subsidiary may be contesting any such obligation in good faith) to such Person in respect of such property;
provided
,
further
, that the existence of such liens and burdens do not have a Material Adverse Effect.
"Person"
means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, other entity, unincorporated organization or
government or any agency or political subdivision thereof.
"Principal
Property" means, whether owned or leased on the date of the Indenture or thereafter acquired:
-
(1)
-
any
pipeline assets of the Partnership or any Subsidiary (as defined below), including any related facilities employed in the transportation, distribution, storage
or marketing of refined petroleum products, that are located in the United States of America or any territory or political subdivision thereof; and
-
(2)
-
any
processing or manufacturing plant or terminal owned or leased by the Partnership or any Subsidiary that is located in the United States or any territory or
political subdivision thereof, except, in the case of either of the foregoing clauses (1) or (2):
-
-
any such assets consisting of inventories, furniture, office fixtures and equipment, including data processing equipment, vehicles
and equipment used on, or useful with, vehicles, and
-
-
any such assets, plant or terminal which, in the good faith opinion of the Board of Directors, is not material in relation to the
activities of the Partnership or of the Partnership and our Subsidiaries (as defined below), taken as a whole.
"Restricted
Subsidiary" shall mean the subsidiaries of the Partnership identified on Exhibit A of the Indenture as well as any Subsidiary of the Partnership formed after the date
of the Indenture that has not been designated by the Board of Directors, at its creation or acquisition, as an Unrestricted
Subsidiary (as defined below). The Partnership may thereafter redesignate an Unrestricted Subsidiary as a Restricted Subsidiary and it will thereafter be a Restricted Subsidiary,
provided
that such
Restricted Subsidiary may not thereafter be redesignated as an Unrestricted Subsidiary, and
provided
,
further
, that no Subsidiary may be designated as an
Unrestricted Subsidiary at any time other
than at its creation or acquisition.
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"Sale-Leaseback
Transaction" means the sale or transfer by the Partnership or any Subsidiary of any Principal Property to a Person (other than the Partnership or a Subsidiary) and the
taking back by the Partnership or any Subsidiary, as the case may be, of a lease of such Principal Property.
"Subsidiary"
means, with respect to any Person:
-
(1)
-
any
corporation, association or other business entity of which more than 50% of the total voting power of shares of equity interests entitled, without regard to the
occurrence of any contingency, to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of such Person or combination thereof; or
-
(2)
-
in
the case of a partnership, more than 50% of the partners' equity interests, considering all partners' equity interests as a single class is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person or combination thereof.
"Unrestricted
Subsidiary" shall mean the subsidiaries of the Partnership identified on Exhibit A of the Indenture as well as any Subsidiary of the Partnership formed after the
date of the Indenture that has been designated by the Board of Directors as an "Unrestricted Subsidiary" at the time of its creation or acquisition,
provided
that no Debt or other obligation of such
Unrestricted Subsidiary may be assumed or guaranteed by the Partnership or any Restricted Subsidiary,
nor may any asset of the Partnership or any Restricted Subsidiary, directly or indirectly, contingently or otherwise, become encumbered or otherwise subject to the satisfaction thereof.
Limitations on Sale-Leasebacks
The Indenture provides that the Partnership will not, and will not permit any Subsidiary to, engage in a Sale-Leaseback Transaction,
unless:
-
(1)
-
such
Sale-Leaseback Transaction occurs within one year from the date of completion of the acquisition of the Principal Property subject thereto or the date of the
completion of construction, development or substantial repair or improvement, or commencement of full operations of such Principal Property, whichever is later;
-
(2)
-
the
Sale-Leaseback Transaction involves a lease for a period, including renewals, of not more than three years;
-
(3)
-
the
Attributable Indebtedness (as defined below) from that Sale-Leaseback transaction is an amount equal to or less than the amount the Partnership or such
Subsidiary would be allowed to incur as debt secured by a lien on the Principal Property subject thereto without equally and ratably securing the debt securities; or
-
(4)
-
the
Partnership or such Subsidiary, within a one-year period after such Sale-Leaseback Transaction, applies or causes to be applied an amount not less than the net
sale proceeds from such Sale-Leaseback Transaction to (A) the prepayment, repayment, redemption, reduction or retirement of any Pari Passu Debt (as defined below) of the Partnership or any
Subsidiary, or (B) the expenditure or expenditures for Principal Property used or to be used in the ordinary course of business of the Partnership or our Subsidiaries.
Notwithstanding
the foregoing, under the Indenture the Partnership may, and may permit any Subsidiary to, effect any Sale-Leaseback Transaction that is not excepted by clauses (1)
through (4), inclusive, of the above paragraph,
provided
that the Attributable Indebtedness from such Sale-Leaseback Transaction, together with the
aggregate principal amount of then outstanding debt (other than the debt securities) secured by liens upon Principal Properties not excepted by clauses (1)
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through
(10), inclusive, of the first paragraph of the limitation on liens covenant described above, do not exceed 10% of the Consolidated Net Tangible Assets. (Section 10.07)
"Attributable
Indebtedness," when used with respect to any Sale-Leaseback Transaction, means, as at the time of determination, the present value, discounted at the rate set forth or
implicit in the terms of the lease included in such transaction, of the total obligations of the lessee for rental payments, other than amounts required to be paid on account of property taxes,
maintenance, repairs, insurance, assessments, utilities, operating and labor costs and other items that do not constitute payments for property rights during the remaining term of the lease included
in such Sale-Leaseback Transaction including any period for which such lease has been extended. In the case of any lease that is terminable by the lessee upon the payment of a penalty or other
termination payment, such amount shall be the lesser of the amount determined assuming termination upon the first date such lease may be terminated, in which case the amount shall also include the
amount of the penalty or termination payment, but no rent shall be considered as required to be paid under such lease subsequent to the first date upon which it may be so terminated, or the amount
determined assuming no such termination.
"Funded
Debt" means all debt maturing one year or more from the date of the creation thereof, all debt directly or indirectly renewable or extendible, at the option of the debtor, by its
terms or by the terms of any instrument or agreement relating thereto, to a date one year or more from the date of the creation thereof, and all debt under a revolving credit or similar agreement
obligating the lender or lenders to extend credit over a period of one year or more.
"Pari
Passu Debt" means any Funded Debt of the Partnership, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Funded
Debt, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Funded Debt shall be subordinated in right of payment to the debt
securities.
Payment and Transfer
Principal, interest and any premium on fully registered securities will be paid at designated places. Payment will be made by check mailed to
the persons in whose names the debt securities are registered on days specified in the Indenture or any prospectus supplement. Other forms of payment relating to the debt securities will be paid at a
place designated by us and specified in a prospectus supplement. (Section 3.07)
Fully
registered securities may be transferred or exchanged at the corporate trust office of the Trustee or at any other office or agency maintained by us for such purposes, without the
payment of any service charge except for any tax or governmental charge. (Section 3.05)
Discharging Our Obligations
We may choose to either discharge our obligations on the debt securities of any series in a legal defeasance, or to release ourselves from our
covenant restrictions on the debt securities of any series in a covenant defeasance. We may do so at any time after we deposit with the Trustee sufficient cash or government securities to pay the
principal, interest, any premium and any other sums due to the stated maturity date or a redemption date of the debt securities of the series. If we choose the legal defeasance option, the holders of
the debt securities of the series will not be entitled to the benefits of the Indenture except for registration of transfer and exchange of debt securities, replacement of lost, stolen, destroyed or
mutilated debt securities, conversion or exchange of debt securities, sinking fund payments and receipt of principal and interest on the original stated due dates or specified redemption dates.
(Section 13.02)
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We may discharge our obligations under the Indenture or release ourselves from covenant restrictions only if, in addition to making the deposit with the Trustee,
we meet some specific requirements. Among other things:
-
-
we must deliver an opinion of our legal counsel that the discharge will not result in holders having to recognize taxable income or loss or
subject them to different tax treatment. In the case of legal defeasance, this opinion must be based on either an Internal Revenue Service, or IRS, letter ruling or change in federal tax law;
-
-
we may not have a default on the debt securities discharged on the date of deposit;
-
-
the discharge may not violate any of our agreements; and
-
-
the discharge may not result in our becoming an investment company in violation of the Investment Company Act of 1940. (Section 13.03)
Book Entry, Delivery and Form
The debt securities of a series may be issued in whole or in part in the form of one or more global certificates that will be deposited with a
depositary identified in a prospectus supplement.
Unless
otherwise stated in any prospectus supplement, The Depository Trust Company, New York, New York, or DTC, will act as depositary. Book-entry notes of a series will be issued in the
form of a global note that will be deposited with DTC. This means that we will not issue certificates to each holder. One global note will be issued to DTC who will keep a computerized record of its
participants (for example, your broker) whose clients have purchased the notes. The participant will then keep a record of its clients who purchased the notes. Unless it is exchanged in whole or in
part for a certificate note, a global note may not be transferred; except that DTC, its nominees and their successors may transfer a global note as a whole to one another.
Beneficial
interests in global notes will be shown on, and transfers of global notes will be made only through, records maintained by DTC and its participants.
DTC
has provided us the following information: DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New
York Banking Law, a member of the United States Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered under the
provisions of Section 17A of the Exchange Act. DTC holds securities that its participants ("Direct Participants") deposit with DTC. DTC also records the settlement among Direct Participants of
securities transactions, such as transfers and pledges, in deposited securities through computerized records for Direct Participant's accounts. This eliminates the need to exchange certificates.
Direct
Participants include securities brokers and dealers, banks, trust companies, clearing corporations and other organizations.
According
to DTC, the foregoing information with respect to DTC has been provided to the financial community for informational purposes only and is not intended to serve as a
representation, warranty or contract modification of any kind.
DTC's
book-entry system is also used by other organizations such as securities brokers and dealers, banks and trust companies that work through a Direct Participant. The rules that apply
to DTC and its participants are on file with the SEC.
DTC
is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., The American Stock Exchange, Inc. and by the Financial Industry Regulatory
Authority.
We
will wire principal and interest payments to DTC's nominee. We and the Trustee will treat DTC's nominee as the owner of the global notes for all purposes. Accordingly, we, the Trustee
and any
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paying
agent will have no direct responsibility or liability to pay amounts due on the global notes to owners of beneficial interests in the global notes.
It
is DTC's current practice, upon receipt of any payment of principal or interest, to credit Direct Participants' accounts on the payment date according to their respective holdings of
beneficial interests in the global notes as shown on DTC's records. In addition, it is DTC's current practice to assign any consenting or voting rights to Direct Participants whose accounts are
credited with notes on a record date, by using an omnibus proxy. Payments by participants to owners of beneficial interests in the global notes, and voting by participants, will be governed by the
customary practices between the participants and owners of beneficial interests, as is the case with notes held for the account of customers registered in "street name." However, payments will be the
responsibility of the participants and not of DTC, the Trustee or us.
Notes
represented by a global note will be exchangeable for certificate notes with the same terms in authorized denominations only if:
-
-
DTC notifies us that it is unwilling or unable to continue as depositary or if DTC ceases to be a clearing agency registered under applicable
law and a successor depositary is not appointed by us within 90 days; or
-
-
we determine not to require all of the notes of a series to be represented by a global note and notify the Trustee of our decision.
The Trustee
Resignation or Removal of Trustee.
Under the Indenture and the Trust Indenture Act of 1939, as amended, governing Trustee conflicts of
interest, any
uncured conflict of interest with respect to any series of debt securities will force the Trustee to resign as trustee under the Indenture. Any resignation will require the appointment of a successor
trustee under the Indenture in accordance with its terms and conditions.
The
Trustee may resign or be removed by us with respect to one or more series of debt securities and a successor trustee may be appointed to act with respect to any such series. The
holders of a majority in aggregate principal amount of the debt securities of any series may remove the Trustee with respect to the debt securities of such series. (Section 6.10)
Limitations on Trustee if it is Our Creditor.
The Indenture contains limitations on the right of the Trustee thereunder, in the event
that it becomes
a creditor of the Partnership, to obtain payment of claims in some cases, or to realize on property received in respect of any such claim as security or otherwise. (Section 6.13)
Certificates to Be Furnished to Trustee.
The Indenture provides that, in addition to other certificates that may be specifically
required by other
provisions of the Indenture, every application by us for action by the Trustee shall be accompanied by an officers' certificate stating that, in the opinion of the signers, all conditions precedent to
such action have been complied with. (Section 1.02)
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MATERIAL TAX CONSEQUENCES
This section summarizes the material U.S. federal income tax consequences that may be relevant to prospective unitholders and is based upon
current provisions of the U.S. Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed U.S. Treasury regulations thereunder (the "Treasury Regulations"), and current
administrative rulings and court decisions, all of which are subject to change. Changes in these authorities may cause the U.S. federal income tax consequences to a prospective unitholder to vary
substantially from those described below, possibly on a retroactive basis. Unless the context otherwise requires, references in this section to "us" or "we" are references to Buckeye
Partners, L.P. and our operating subsidiaries.
Legal
conclusions contained in this section, unless otherwise noted, are the opinion of Vinson & Elkins L.L.P. insofar as they relate to matters of U.S. federal income tax
law and are based on the accuracy of representations made by us to them for this purpose. However, this section does not address all federal income tax matters that affect us or our unitholders and
does not describe the application of the alternative minimum tax that may be applicable to certain unitholders. Furthermore, this section focuses on unitholders who are individual citizens or
residents of the United States (for federal income tax purposes), whose functional currency is the U.S. dollar, who use the calendar year as their taxable year, and who hold LP Units as capital
assets (generally, property that is held for investment). This section has only limited applicability to corporations, partnerships (and entities treated as partnerships for U.S. federal income tax
purposes), estates, trusts, non-resident aliens or other unitholders subject to specialized tax treatment, such as tax-exempt institutions, non-U.S. persons, individual retirement accounts ("IRAs"),
employee benefit plans, real estate investment trusts or mutual funds. Accordingly, we encourage each prospective unitholder to consult such unitholder's own tax advisor in analyzing the federal,
state, local and non-U.S. tax consequences that are particular to that unitholder resulting from its ownership or disposition of its LP Units and potential changes in applicable tax laws.
We
are relying on opinions and advice of Vinson & Elkins L.L.P. with respect to the matters described herein. An opinion of counsel represents only that counsel's best
legal judgment and does not bind the Internal Revenue Service (the "IRS") or a court. Accordingly, the opinions and statements made herein may not be sustained by a court if contested by the IRS. Any
such contest of the matters described herein may materially and adversely impact the market for our LP Units and the prices at which such LP Units trade. In addition, our costs of any
contest with the IRS will be borne indirectly by our unitholders because the costs will reduce our cash available for distribution. Furthermore, the tax consequences of an investment in us may be
significantly modified by future legislative or administrative changes or court decisions, which may be retroactively applied.
For
the reasons described below, Vinson & Elkins L.L.P. has not rendered an opinion with respect to the following federal income tax issues: (1) the treatment of a
unitholder whose LP Units are the subject of a securities loan (e.g., a loan to a short seller to cover a short sale of LP Units) (please read "Tax Consequences
of LP Unit OwnershipTreatment of Securities Loans"); (2) whether our monthly convention for allocating taxable income and losses is permitted by existing Treasury
Regulations (please read "Disposition of LP UnitsAllocations Between Transferors and Transferees"); and (3) whether our method for taking into account
Section 743 adjustments is sustainable in certain cases (please read "Tax Consequences of LP Unit OwnershipSection 754 Election" and "Uniformity
of LP Units").
Taxation of the Partnership
Partnership Status.
We are treated as a partnership for U.S. federal income tax purposes and, therefore, generally will not be
liable for
entity-level federal income taxes. Instead, as described below, each of our unitholders will take into account its respective share of our items of income, gain, loss and
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deduction
in computing its federal income tax liability as if the unitholder had earned such income directly, even if no cash distributions are made to the unitholder.
Section 7704
of the Code generally provides that publicly traded partnerships will be treated as corporations for federal income tax purposes. However, if 90% or more of a
partnership's gross income for every taxable year it is publicly traded consists of "qualifying income," the partnership may continue to be treated as a partnership for U.S. federal income tax
purposes (the "Qualifying Income Exception"). Qualifying income includes (i) income and gains derived from the transportation, storage, refining, processing and marketing of crude oil, natural
gas and products thereof (including NGLs), (ii) interest (other than from a financial business), (iii) dividends, (iv) gains from the sale of real property and (v) gains
from the sale or other disposition of capital assets held for the production of qualifying income. We estimate that less than 5% of our current gross income is not qualifying income; however, this
estimate could change from time to time.
Based
upon factual representations made by us and our general partner, Vinson & Elkins L.L.P. is of the opinion that we will be treated as a partnership for federal income
tax purposes. The representations made by us and our general partner upon which Vinson & Elkins L.L.P. has relied in rendering its opinion include, without limitation:
-
(a)
-
Other
than Buckeye Development & Logistics I LLC, neither we nor any of our partnership or limited liability company subsidiaries has elected to be
treated as a corporation for federal income tax purposes;
-
(b)
-
For
each taxable year, more than 90% of our gross income has been and will be income of a character that Vinson & Elkins L.L.P. has opined is
"qualifying income" within the meaning of Section 7704(d) of the Code; and
-
(c)
-
Each
hedging transaction that we treat as resulting in qualifying income has been and will be appropriately identified as a hedging transaction pursuant to
applicable Treasury Regulations, and has been and will be associated with crude oil, natural gas, or products thereof that are held or to be held by us in activities that Vinson &
Elkins L.L.P. has opined generate qualifying income.
We
believe that these representations are true and will be true in the future.
If
we fail to meet the Qualifying Income Exception, other than a failure that is determined by the IRS to be inadvertent and that is cured within a reasonable time after discovery (in
which case the IRS may also require us to make adjustments with respect to our unitholders or pay other amounts), we will be treated as transferring all of our assets, subject to liabilities, to a
newly formed corporation, on the first day of the year in which we fail to meet the Qualifying Income Exception, in return for stock in that corporation and then as distributing that stock to our
unitholders in liquidation of their interests in us.
This deemed contribution and liquidation should not result in the recognition of taxable income by our unitholders or us so long as our liabilities do not exceed the tax basis of our assets.
Thereafter, we would be treated as an association taxable as a corporation for federal income tax purposes.
The
present federal income tax treatment of publicly traded partnerships, including us, or an investment in our LP Units may be modified by administrative or legislative action or
judicial interpretation at any time. For example, from time to time, members of the U.S. Congress propose and consider substantive changes to the existing federal income tax laws that affect publicly
traded partnerships. One such legislative proposal would have eliminated the Qualifying Income Exception upon which we rely for our treatment as a partnership for U.S. federal income tax purposes. We
are unable to predict whether any such changes will ultimately be enacted. However, it is possible that a change in law could affect us and may be applied retroactively. Any such changes could
negatively impact the value of an investment in our LP Units.
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If for any reason we are taxable as a corporation in any taxable year, our items of income, gain, loss and deduction would be taken into account by us in
determining the amount of our liability for federal income tax, rather than being passed through to our unitholders. Accordingly, our taxation as a corporation would materially reduce the cash
available for distribution to unitholders and thus would likely substantially reduce the value of our LP Units. In addition, any distribution made to a unitholder at a time we are treated as a
corporation would be (i) a taxable dividend to the extent of our current or accumulated earnings and profits then (ii) a nontaxable return of capital to the extent of the unitholder's
tax basis in our LP Units and thereafter (iii) taxable capital gain.
The
remainder of this discussion is based on Vinson & Elkins L.L.P.'s opinion that we will be treated as a partnership for federal income tax purposes.
Tax Consequences of LP Unit Ownership
Limited Partner Status.
Unitholders who are admitted as limited partners of Buckeye Partners, L.P. as well as unitholders
whose units are held
in street name or by a nominee and who have the right to direct the nominee in the exercise of all substantive rights attendant to the ownership of units, will be treated as partners of Buckeye
Partners, L.P. for federal income tax purposes. For a discussion related to the risks of losing partner status as a result of securities loans, please read "Treatment of Securities
Loans." Unitholders who are not treated as partners of the partnership as described above are urged to consult their own tax advisors with respect to their tax consequences of holding LP Units
in Buckeye Partners, L.P.
Flow-Through of Taxable Income.
Subject to the discussion below under "Entity-Level Collections of Unitholder Taxes" with
respect to
payments we may be required to make on behalf of our unitholders, we will not pay any federal income tax. Rather, each unitholder will be required to report on its federal income tax return each year
its share of our income, gains, losses and deductions for our taxable year or years ending with or within its taxable year. Consequently, we may allocate income to a unitholder even if that unitholder
has not received a cash distribution.
Basis of LP Units.
A unitholder's tax basis in its LP Units initially will be the amount paid for those LP Units
plus the
unitholders initial allocable share of our liabilities. That basis generally will be (i) increased by the unitholder's share of our income and by any increases in such unitholder's share of our
liabilities, and (ii) decreased, but not below zero, by the amount of all distributions to the unitholder, the unitholder's share of our losses, and any decreases in the unitholder's share of
our liabilities. The IRS has ruled that a partner who acquires interests in a partnership in separate transactions must combine those interests and maintain a single adjusted tax basis for all of
those interests.
Treatment of Distributions.
Distributions made by us to a unitholder generally will not be taxable to the unitholder, unless
such distributions
exceed the unitholder's tax basis in its LP Units, in which case the unitholder will recognize gain taxable in the manner described below under "Disposition of LP Units."
Any
reduction in a unitholder's share of our "liabilities" will be treated as a distribution by us of cash to that unitholder. A decrease in a unitholder's percentage interest in us
because of our issuance of additional LP Units may decrease the unitholder's share of our liabilities. For purposes of the foregoing, a unitholder's share of our nonrecourse liabilities
(liabilities for which no partner bears the economic risk of loss) generally will be based upon that unitholder's share of the unrealized appreciation (or depreciation) in our assets, to the extent
thereof, with any excess liabilities allocated based on the unitholder's share of our profits. Please read "Disposition of LP Units."
A
non-pro rata distribution of money or property (including a deemed distribution as a result of the reallocation of our liabilities described above) may cause a unitholder to recognize
ordinary
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income,
if the distribution reduces the unitholder's share of our "unrealized receivables," including depreciation and depletion recapture and substantially appreciated "inventory items," both as
defined in Section 751 of the Code ("Section 751 Assets"). To the extent of such reduction, the unitholder would be deemed to receive its proportionate share of the Section 751
Assets and exchange such assets with us in return for an allocable portion of the non-pro rata distribution. This deemed exchange generally will result in the unitholder's recognition of ordinary
income in an amount equal to the excess of (1) the non-pro rata portion of that distribution over (2) the unitholder's tax basis (generally zero) in the Section 751 Assets deemed
to be relinquished in the exchange.
Limitations on Deductibility of Losses.
The deduction by a unitholder of its share of our losses will be limited to the lesser
of (i) the
unitholder's tax basis in its LP Units, and (ii) in the case of a unitholder that is an individual, estate, trust or certain types of closely-held corporations, the amount for which the
unitholder is considered to be "at risk" with respect to our activities. In general, a unitholder will be at risk to the extent of its tax basis in its LP Units, reduced by (1) any
portion of that basis attributable to the unitholder's share of our liabilities, (2) any portion of that basis representing amounts otherwise protected against loss because of a guarantee, stop
loss agreement or similar arrangement and (3) any amount of money the unitholder borrows to acquire or hold its LP Units, if the lender of those borrowed funds owns an interest in us, is
related to another unitholder or can look only to the LP Units for repayment.
A
unitholder subject to the at risk limitation must recapture losses deducted in previous years to the extent that distributions (including distributions deemed to result from a
reduction in a unitholder's share of nonrecourse liabilities) cause the unitholder's at risk amount to be less than zero at the end of any taxable year. Losses disallowed to a unitholder or recaptured
as a result of the basis or at risk limitations will carry forward and will be allowable as a deduction in a later year to the extent that the unitholder's tax basis or at risk amount, whichever is
the limiting factor, is subsequently increased.
Upon a taxable disposition of LP Units, any gain recognized by a unitholder can be offset by losses that were previously suspended by the at risk limitation but not losses suspended by the
basis limitation. Any loss previously suspended by the at risk limitation in excess of that gain can no longer be used, and will not be available to offset a unitholder's salary or active business
income.
In
addition to the basis and at risk limitations, passive activity loss limitations generally limit the deductibility of losses incurred by individuals, estates, trusts, some closely
held corporations and personal service corporations from "passive activities" (generally, trade or business activities in which the taxpayer does not materially participate). The passive loss
limitations are applied separately with respect to each publicly-traded partnership. Consequently, any passive losses we generate will be available to offset only our passive income. Passive losses
that exceed a unitholder's share of passive income we generate may be deducted in full when the unitholder disposes of all of its LP Units in a fully taxable transaction with an unrelated
party. The passive activity loss rules are generally applied after other applicable limitations on deductions, including the at risk and basis limitations.
Limitations on Interest Deductions.
The deductibility of a non-corporate taxpayer's "investment interest expense" is generally
limited to the amount
of that taxpayer's "net investment income." Investment interest expense includes:
-
-
interest on indebtedness properly allocable to property held for investment;
-
-
our interest expense attributed to portfolio income; and
-
-
the portion of interest expense incurred to purchase or carry an interest in a passive activity to the extent attributable to portfolio income.
The
computation of a unitholder's investment interest expense will take into account interest on any margin account borrowing or other loan incurred to purchase or carry an LP
Unit. Net investment income includes gross income from property held for investment and amounts treated as portfolio
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income
under the passive loss rules, less deductible expenses other than interest directly connected with the production of investment income. Net investment income generally does not include
qualified dividend income (if applicable) or gains attributable to the disposition of property held for investment. A unitholder's share of a publicly-traded partnership's portfolio income and,
according to the IRS, net passive income will be treated as investment income for purposes of the investment interest expense limitation.
Entity-Level Collections of Unitholder Taxes.
If we are required or elect under applicable law to pay any federal, state, local
or non-U.S. tax on
behalf of any current or former unitholder, we are authorized to treat the payment as a distribution of cash to the relevant unitholder. Where tax is payable on behalf of all unitholders or the
relevant unitholder's identity cannot be determined, we are authorized to treat the payment as a distribution to all current unitholders. We are authorized to amend our partnership agreement in the
manner necessary to maintain uniformity of intrinsic tax characteristics of units and to adjust later distributions, so that after giving effect to these distributions, the priority and
characterization of distributions otherwise applicable under our partnership agreement is maintained as nearly as is practicable. Payments by us as described above could give rise to an overpayment of
tax on behalf of a unitholder, in which event the unitholder may be entitled to claim a refund of the overpayment amount. Unitholders are urged to consult their tax advisors to determine the
consequences to them of any tax payment we make on their behalf.
Allocation of Income, Gain, Loss and Deduction.
In general, our items of income, gain, loss and deduction will be allocated
among the unitholders in
accordance with their percentage interests in us. At any time that incentive distributions are made to our general partner, gross income will be allocated to the recipients to the extent of these
distributions. However, specified items of our income, gain, loss and deduction will be allocated under Section 704(c) of the Code (or the principles of Section 704(c) of the Code) to
account for any difference between the tax basis and fair market value of our assets at the time such assets are contributed to us and any time we issue additional LP Units (a "Book-Tax
Disparity"). As a result, the federal income tax burden associated with any Book-Tax Disparity immediately prior to an offering generally will be borne by our partners holding interests in us prior to
such offering. In addition, items of recapture income will be specially allocated to the extent possible to the unitholder who was allocated the deduction giving rise to that recapture income in order
to minimize the recognition of ordinary income by other unitholders.
An
allocation of items of our income, gain, loss or deduction, other than an allocation required by the Code to eliminate a Book-Tax Disparity, will generally be given effect for federal
income tax purposes in determining a partner's share of an item of income, gain, loss or deduction only if the allocation has "substantial economic effect" as determined under Treasury Regulations. If
an allocation does not have
substantially economic effect, it will be reallocated to our unitholders on the basis of their interests in us, which will be determined by taking into account all the facts and circumstances,
including
-
-
its relative contributions to us;
-
-
the interests of all the unitholders in profits and losses;
-
-
the interest of all the unitholders in cash flow; and
-
-
the rights of all the unitholders to distributions of capital upon liquidation.
Vinson &
Elkins L.L.P. is of the opinion that, with the exception of the issues described in "Section 754 Election" and "Disposition
of LP UnitsAllocations Between Transferors and Transferees," allocations of income, gain, loss or deduction under our partnership agreement will be given substantial economic
effect.
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Treatment of Securities Loans.
A unitholder whose LP Units are the subject of a securities loan (for example, a loan to a
"short seller" to
cover a short sale of LP Units) may be treated as having disposed of those LP Units. If so, such unitholder would no longer be treated for tax purposes as a partner with respect to
those LP Units during the period of the loan and may recognize gain or loss from the
disposition. As a result, during this period (i) any of our income, gain, loss or deduction allocated to those LP Units would not be reportable by the lending unitholder and
(ii) any cash distributions received by the unitholder as to those LP Units may be treated as ordinary taxable income.
Due
to a lack of controlling authority, Vinson & Elkins L.L.P. has not rendered an opinion regarding the tax treatment of a unitholder that enters into a securities loan
with respect to its LP Units. Unitholders desiring to assure their status as partners and avoid the risk of income recognition from a loan of their LP Units are urged to modify any
applicable brokerage account agreements to prohibit their brokers from borrowing and lending their LP Units. The IRS has announced that it is studying issues relating to the tax treatment of
short sales of partnership interests. Please read "Disposition of LP UnitsRecognition of Gain or Loss."
Tax Rates.
Under current law, the highest marginal federal income tax rates for individuals applicable to ordinary income and
long-term capital gains
(generally, gains from the sale or exchange of certain investment assets held for more than one year) are 39.6% and 20%, respectively. These rates are subject to change by new legislation at any time.
In
addition, a 3.8% net investment income tax applies to certain net investment income earned by individuals, estates, and trusts. For these purposes, net investment income generally
includes a unitholder's allocable share of our income and gain realized by a unitholder from a sale of LP Units. In the case of an individual, the tax will be imposed on the lesser of
(i) the unitholder's net investment income from all investments, or (ii) the amount by which the unitholder's modified adjusted gross income exceeds $250,000 (if the unitholder is
married and filing jointly or a surviving spouse), $125,000 (if married filing separately) or $200,000 (if the unitholder is unmarried or in any other case). In the case of an estate or trust, the tax
will be imposed on the lesser of (i) undistributed net investment income, or (ii) the excess adjusted gross income over the dollar amount at which the highest income tax bracket
applicable to an estate or trust begins.
Section 754 Election.
We have made the election permitted by Section 754 of the Code that permits us to adjust the tax
bases in our
assets as to specific purchasers of our LP Units under Section 743(b) of the Code. That election is irrevocable without the consent of the IRS. The Section 743(b) adjustment
separately applies to each purchaser of LP Units based upon the values and bases of our assets at the time of the relevant LP Unit purchase, and the adjustment will reflect the purchase
price paid. The Section 743(b) adjustment does not apply to a person who purchases LP Units directly from us.
Under
our partnership agreement, we are authorized to take a position to preserve the uniformity of LP Units even if that position is not consistent with these or any other
Treasury Regulations. A literal application of Treasury Regulations governing a Section 743(b) adjustment attributable to properties depreciable under Section 167 of the Code may give
rise to differences in the taxation of unitholders purchasing units from us and unitholders purchasing from other unitholders. If we have any such
properties, we intend to adopt methods employed by other publicly traded partnerships to preserve the uniformity of units, even if inconsistent with existing Treasury Regulations, and Vinson &
Elkins L.L.P. has not opined on the validity of this approach. Please read "Uniformity of LP Units."
The
IRS may challenge our position with respect to depreciating or amortizing the Section 743(b) adjustment we take to preserve the uniformity of LP Units due to the lack
of controlling authority. Because a unitholder's tax basis in its LP Units is reduced by its share of our items of deduction or loss, any position we take that understates deductions will
overstate a unitholder's basis in its LP Units,
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and
may cause the unitholder to understate gain or overstate loss on any sale of such LP Units. Please read "Disposition of LP UnitsRecognition of Gain or
Loss." If a challenge to such treatment were sustained, the gain from the sale of LP Units may be increased without the benefit of additional deductions.
The
calculations involved in the Section 754 election are complex and will be made on the basis of assumptions as to the value of our assets and other matters. The IRS could seek
to reallocate some or all of any Section 743(b) adjustment we allocated to our assets subject to depreciation to goodwill or nondepreciable assets. Goodwill, as an intangible asset, is
generally amortizable over a longer period of time or under a less accelerated method than our tangible assets. We cannot assure any unitholder that the determinations we make will not be successfully
challenged by the IRS or that the resulting deductions will not be reduced or disallowed altogether. Should the IRS require a different tax basis adjustment to be made, and should, in our opinion, the
expense of compliance exceed the benefit of the election, we may seek permission from the IRS to revoke our Section 754 election. If permission is granted, a subsequent purchaser of LP
Units may be allocated more income than it would have been allocated had the election not been revoked.
Tax Treatment of Operations
Accounting Method and Taxable Year.
We use the year ending December 31 as our taxable year and the accrual method of
accounting for federal
income tax purposes. Each unitholder will be required to
include in its tax return its share of our income, gain, loss and deduction for each taxable year ending within or with its taxable year. In addition, a unitholder who has a taxable year ending on a
date other than December 31 and who disposes of all of its LP Units following the close of our taxable year but before the close of its taxable year must include its share of our income,
gain, loss and deduction in income for its taxable year, with the result that it will be required to include in income for its taxable year its share of more than one year of our income, gain, loss
and deduction. Please read "Disposition of LP UnitsAllocations Between Transferors and Transferees."
Tax Basis, Depreciation and Amortization.
The tax bases of our assets will be used for purposes of computing depreciation and
cost recovery
deductions and, ultimately, gain or loss on the disposition of those assets. If we dispose of depreciable property by sale, foreclosure or otherwise, all or a portion of any gain, determined by
reference to the amount of depreciation and depletion deductions previously taken may be subject to the recapture rules and taxed as ordinary income rather than capital gain. Similarly, a unitholder
who has taken cost recovery or depreciation deductions with respect to property we own will likely be required to recapture some or all of those deductions as ordinary income upon a sale of its
interest in us. Please read "Tax Consequences of LP Unit OwnershipAllocation of Income, Gain, Loss and Deduction" and "Disposition of LP
UnitsRecognition of Gain or Loss."
The
costs we incur in offering and selling our LP Units (called "syndication expenses") must be capitalized and cannot be deducted currently, ratably or upon our termination.
While there are uncertainties regarding the classification of costs as organization expenses, which may be amortized by us, and as syndication expenses, which may not be amortized by us, the
underwriting discounts and commissions we incur will be treated as syndication expenses. Please read "Disposition of LP UnitsRecognition of Gain or Loss."
Valuation and Tax Basis of Our Properties.
The federal income tax consequences of the ownership and disposition of LP Units
will depend in
part on our estimates of the relative fair market values and the tax bases of our assets. Although we may from time to time consult with professional appraisers regarding valuation matters, we will
make many of the relative fair market value estimates ourselves. These estimates and determinations of tax basis are subject to challenge and will not be binding on the IRS or the courts. If the
estimates of fair market value or basis are later found to be incorrect, the character and amount of items of income, gain, loss or deduction previously reported by unitholders
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could
change, and unitholders could be required to adjust their tax liability for prior years and incur interest and penalties with respect to those adjustments.
Disposition of LP Units
Recognition of Gain or Loss.
A unitholder will be required to recognize gain or loss on a sale of LP Units equal to the
difference between the
unitholder's amount realized and tax basis in the LP Units sold. A unitholder's amount realized will equal the sum of the cash and the fair market value of other property it receives plus its
share of our liabilities with respect to such LP Units sold. Because the amount realized includes a unitholder's share of our liabilities, the gain recognized on the sale of LP Units
could result in a tax liability in excess of any cash received from the sale.
Except
as noted below, gain or loss recognized by a unitholder on the sale or exchange of an LP Unit held for more than one year generally will be taxable as long-term capital
gain or loss. However, gain or loss recognized on the disposition of LP Units will be separately computed and taxed as ordinary income or loss under Section 751 of the Code to the extent
attributable to Section 751 Assets, such as depreciation or depletion recapture and our "inventory items," regardless of whether such inventory item is substantially appreciated in value.
Ordinary income attributable to Section 751 Assets may exceed net taxable gain realized on the sale of an LP Unit and may be recognized even if there is a net taxable loss realized on
the sale of an LP Unit. Thus, a unitholder may recognize both ordinary income and capital gain or loss upon a sale of LP Units. Net capital loss may offset capital gains and, in the case
of individuals, up to $3,000 of ordinary income per year.
For
purposes of calculating gain or loss on the sale of units, the unitholder's adjusted tax basis will be adjusted by its allocable share of our income or loss in respect of its units
for the year of the sale. Furthermore, as described above, the IRS has ruled that a partner who acquires interests in a partnership in separate transactions must combine those interests and maintain a
single adjusted tax basis for all of those interests. Upon a sale or other disposition of less than all of those interests, a portion of that tax basis must be allocated to the interests sold using an
"equitable apportionment" method, which generally means that the tax basis allocated to the interest sold equals an amount that bears the same relation to the partner's tax basis in its entire
interest in the partnership as the value of the interest sold bears to the value of the partner's entire interest in the partnership.
Treasury
Regulations under Section 1223 of the Code allow a selling unitholder who can identify LP Units transferred with an ascertainable holding period to elect to use
the actual holding period of the LP Units transferred. Thus, according to the ruling discussed above, a unitholder will be unable to select high or low basis LP Units to sell as would be
the case with corporate stock, but, according to the Treasury Regulations, it may designate specific LP Units sold for purposes of determining the holding period of LP Units transferred.
A unitholder electing to use the actual holding period of LP Units transferred must consistently use that identification method for all subsequent sales or exchanges of our LP Units. A
unitholder considering the purchase of additional LP Units or a sale of LP Units purchased in separate transactions is urged to consult its tax advisor as to the possible consequences of
this ruling and application of the Treasury Regulations.
Specific
provisions of the Code affect the taxation of some financial products and securities, including partnership interests, by treating a taxpayer as having sold an "appreciated"
financial positions, including a partnership interest with respect to which gain would be recognized if it were sold, assigned or terminated at its fair market value, if the taxpayer or related
persons enter(s) into:
-
-
a short sale;
-
-
an offsetting notional principal contract; or
-
-
a futures or forward contract with respect to the partnership interest or substantially identical property.
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Moreover,
if a taxpayer has previously entered into a short sale, an offsetting notional principal contract or a futures or forward contract with respect to the partnership interest, the
taxpayer will be treated as having sold that position if the taxpayer or a related person then acquires the partnership interest or substantially identical property. The Secretary of the Treasury is
also authorized to issue Treasury Regulations that treat a taxpayer that enters into transactions or positions that have
substantially the same effect as the preceding transactions as having constructively sold the financial position.
Allocations Between Transferors and Transferees.
In general, our taxable income or loss will be determined annually, will be
prorated on a monthly
basis and will be subsequently apportioned among the unitholders in proportion to the number of LP Units owned by each of them as of the opening of the applicable exchange on the first business
day of the month (the "Allocation Date"). However, gain or loss realized on a sale or other disposition of our assets or, in the discretion of the general partner, any other extraordinary item of
income, gain, loss or deduction will be allocated among the unitholders on the Allocation Date in the month in which such income, gain, loss or deduction is recognized. As a result, a unitholder
transferring LP Units may be allocated income, gain, loss and deduction realized after the date of transfer.
Although
simplifying conventions are contemplated by the Code and most publicly traded partnerships use similar simplifying conventions, the use of this method may not be permitted under
existing Treasury Regulations. Recently, however, the Department of the Treasury and the IRS issued proposed Treasury Regulations that provide a safe harbor pursuant to which a publicly traded
partnership may use a similar monthly simplifying convention to allocate tax items among transferor and transferee unitholders, although such tax items must be prorated on a daily basis. Nonetheless,
the proposed regulations do not specifically authorize the use of the proration method we have adopted. Accordingly, Vinson & Elkins L.L.P. is unable to opine on the validity of this
method of allocating income and deductions between transferee and transferor unitholders. If this method is not allowed under the Treasury Regulations, or only applies to transfers of less than all of
the unitholder's interest, our taxable income or losses might be reallocated among the unitholders. We are authorized to revise our method of allocation between transferee and transferor unitholders,
as well as among unitholders whose interests vary during a taxable year, to conform to a method permitted under future Treasury Regulations.
A
unitholder who disposes of LP Units prior to the record date set for a cash distribution for that quarter will be allocated items of our income, gain, loss and deduction
attributable to the month of disposition but will not be entitled to receive a cash distribution for that period.
Notification Requirements.
A unitholder who sells or purchases any of its LP Units is generally required to notify us in
writing of that
transaction within 30 days after the transaction (or, if earlier, January 15 of the year following the transaction in the case of a seller). Upon receiving such notifications, we are
required to notify the IRS of that transaction and to furnish specified information to the transferor and transferee. Failure to notify us of a transfer of LP Units may, in some cases, lead to
the imposition of penalties. However, these reporting requirements do not apply to a sale by an individual who is a citizen of the United States and who effects the sale through a broker who will
satisfy such requirements.
Constructive Termination.
We will be considered to have "constructively" terminated as a partnership for federal income tax
purposes upon the sale or
exchange of 50% or more of the total interests in our capital and profits within a twelve-month period. For purposes of measuring whether the 50% threshold is reached, multiple sales of the
same LP Unit are counted only once. A constructive termination results in the closing of our taxable year for all unitholders. In the case of a unitholder reporting on a taxable year other than
the calendar year, the closing of our taxable year may
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result
in more than twelve months of our taxable income or loss being includable in such unitholder's taxable income for the year of termination.
A
constructive termination occurring on a date other than December 31 would result in us filing two tax returns for one fiscal year thereby increasing our administration and tax
costs. However, pursuant to an IRS relief procedure, the IRS may allow a constructively terminated partnership to provide a single Schedule K-1 for the calendar year in which a termination
occurs. We would be required to make new tax elections after a termination, including a new election under Section 754 of the Code, and a termination would result in a deferral of our
deductions for depreciation. A termination could also result in penalties if we were unable to determine that the termination had occurred. Moreover, a termination may either accelerate the
application of, or subject us to, any tax legislation enacted before the termination that would not otherwise have been applied to us as a continuing as opposed to a terminating partnership.
Uniformity of LP Units
Because we cannot match transferors and transferees of LP Units and for other reasons, we must maintain uniformity of the economic and
tax characteristics of the LP Units to a purchaser of these LP Units. In the absence of uniformity, we may be unable to completely comply with a number of federal income tax
requirements. Any non-uniformity could have a negative impact on the value of the LP Units. Please read "Tax Consequences of LP Unit OwnershipSection 754
Election."
Our
partnership agreement permits our general partner to take positions in filing our tax returns that preserve the uniformity of our LP Units. These positions may include
reducing for some unitholders the
depreciation, amortization or loss deductions to which a unitholder would otherwise be entitled or reporting a slower amortization of Section 743(b) adjustments for some unitholders than that
to which they would otherwise be entitled. Vinson & Elkins L.L.P. is unable to opine as to the validity of such filing positions. A unitholder's basis in LP Units is reduced by
its share of our deductions (whether or not such deductions were claimed on an individual income tax return) so that any position that we take that understates deductions will overstate the
unitholder's basis in its LP Units, and may cause the unitholder to understate gain or overstate loss on any sale of such LP Units. Please read "Disposition of LP
UnitsRecognition of Gain or Loss" above and "Tax Consequences of LP Unit OwnershipSection 754 Election" above. The IRS may challenge one or more of
any positions we take to preserve the uniformity of LP Units. If such a challenge were sustained, the uniformity of LP Units might be affected, and, under some circumstances, the gain
from the sale of LP Units might be increased without the benefit of additional deductions.
Tax-Exempt Organizations and Other Investors
Ownership of LP Units by employee benefit plans and other tax-exempt organizations as well as by non-resident alien individuals, non-U.S.
corporations and other non-U.S. persons (collectively, "Non-U.S. Unitholders") raises issues unique to those investors and, as described below, may have substantial adverse tax consequences to them.
Prospective unitholders that are tax-exempt entities or Non-U.S. Unitholders should consult their tax advisors before investing in our LP Units. Employee benefit plans and most other tax-exempt
organizations, including IRAs and other retirement plans, are subject to federal income tax on unrelated business taxable income. Virtually all of our income will be unrelated business taxable income
and will be taxable to a tax-exempt unitholder.
Non-U.S.
Unitholders are taxed by the United States on income effectively connected with the conduct of a U.S. trade or business ("effectively connected income") and on certain types of
U.S.-source non-effectively connected income (such as dividends), and unless exempted or further limited by an income tax treaty, will be considered to be engaged in business in the United States
because of their ownership of our LP Units. Furthermore, it is probable that they will be deemed to conduct such
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activities
through permanent establishments in the United States within the meaning of applicable tax treaties. Consequently, they will be required to file federal tax returns to report their share of
our income, gain, loss or deduction and pay federal income tax on their share of our net income or gain in a manner similar to a taxable U.S. unitholder. Moreover, under rules applicable to publicly
traded partnerships, distributions to Non-U.S. Unitholders are subject to withholding at the highest applicable effective tax rate. Each Non-U.S. Unitholder must obtain a taxpayer identification
number from the
IRS and submit that number to our transfer agent on a Form W-8BEN, W-8BEN-E or applicable substitute form in order to obtain credit for these withholding taxes.
In
addition, because a Non-U.S. Unitholder classified as a corporation will be treated as engaged in a U.S. trade or business, that corporation may be subject to the U. S. branch profits
tax at a rate of 30%, in addition to regular federal income tax, on its share of our income and gain, as adjusted for changes in the foreign corporation's "U.S. net equity," to the extent reflected in
the corporation's effectively connected earnings and profits. That tax may be reduced or eliminated by an income tax treaty between the United States and the country in which the foreign corporate
unitholder is a "qualified resident." In addition, this type of unitholder is subject to special information reporting requirements under Section 6038C of the Code.
A
Non-U.S. Unitholder who sells or otherwise disposes of an LP Unit will be subject to federal income tax on gain realized from the sale or disposition of that LP Unit to
the extent the gain is effectively connected with a U.S. trade or business of the Non-U.S. Unitholder. Under a ruling published by the IRS, interpreting the scope of "effectively connected income,"
gain recognized by a non-U.S. person from the sale of its interest in a partnership that is engaged in a trade or business in the United States will be considered to be effectively connected with a
U.S. trade or business. Thus, part or all of a Non-U.S. Unitholder's gain from the sale or other disposition of its units may be treated as effectively connected with a unitholder's indirect U.S.
trade or business constituted by its investment in us. Moreover, under the Foreign Investment in Real Property Tax Act, a Non-U.S. Unitholder generally will be subject to federal income tax upon the
sale or disposition of an LP Unit if (i) it owned (directly or constructively applying certain attribution rules) more than 5% of our LP Units at any time during the five-year
period ending on the date of such disposition and (ii) 50% or more of the fair market value of our worldwide real property interests and our other assets used or held for use in a trade or
business consisted of U.S. real property interests which include U.S. real estate (including land, improvements, and certain associated personal property) and interests in certain entities holding
U.S. real estate at any time during the shorter of the period during which such unitholder held the LP Units or the 5-year period ending on the date of disposition. Currently, more than 50% of
our assets consist of U.S. real property interests and we do not expect that to change in the foreseeable future. Therefore, Non-U.S. Unitholders may be subject to federal income tax on gain from the
sale or disposition of their LP Units.
Administrative Matters
Information Returns and Audit Procedures.
We intend to furnish to each unitholder, within 90 days after the close of each
taxable year,
specific tax information, including a Schedule K-1, which describes its share of our income, gain, loss and deduction for our preceding taxable year. In preparing this
information, which will not be reviewed by counsel, we will take various accounting and reporting positions, some of which have been mentioned earlier, to determine each unitholder's share of income,
gain, loss and deduction. We cannot assure our unitholders that those positions will yield a result that conforms to the requirements of the Code, Treasury Regulations or administrative
interpretations of the IRS.
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The IRS may audit our federal income tax information returns. Neither we nor Vinson & Elkins L.L.P. can assure prospective unitholders that the IRS
will not successfully challenge the positions we adopt, and such a challenge could adversely affect the value of the LP Units. The IRS may audit our federal income tax information returns.
Adjustments resulting from an IRS audit may require each unitholder to adjust a prior year's tax liability, and possibly may result in an audit of its own return. Any audit of a unitholder's return
could result in adjustments unrelated to our returns.
Publicly
traded partnerships generally are treated as entities separate from their owners for purposes of federal income tax audits, judicial review of administrative adjustments by the
IRS and tax settlement proceedings. The tax treatment of partnership items of income, gain, loss and deduction are determined in a partnership proceeding rather than in separate proceedings of the
partners. The Code requires that one partner be designated as the "Tax Matters Partner" for these purposes, and our partnership agreement designates our general partner.
The
Tax Matters Partner has made and will make some elections on our behalf and on behalf of unitholders. The Tax Matters Partner can extend the statute of limitations for assessment of
tax deficiencies against unitholders for items in our returns. The Tax Matters Partner may bind a unitholder
with less than a 1% profits interest in us to a settlement with the IRS unless that unitholder elects, by filing a statement with the IRS, not to give that authority to the Tax Matters Partner. The
Tax Matters Partner may seek judicial review, by which all the unitholders are bound, of a final partnership administrative adjustment and, if the Tax Matters Partner fails to seek judicial review,
judicial review may be sought by any unitholder having at least a 1% interest in profits or by any group of unitholders having in the aggregate at least a 5% interest in profits. However, only one
action for judicial review may go forward, and each unitholder with an interest in the outcome may participate in that action.
A
unitholder must file a statement with the IRS identifying the treatment of any item on its federal income tax return that is not consistent with the treatment of the item on our
return. Intentional or negligent disregard of this consistency requirement may subject a unitholder to substantial penalties.
Nominee Reporting.
Persons who hold an interest in us as a nominee for another person are required to furnish to us:
-
(1)
-
the
name, address and taxpayer identification number of the beneficial owner and the nominee;
-
(2)
-
a
statement regarding whether the beneficial owner is:
-
(a)
-
a
non-U.S. person;
-
(b)
-
a
non-U.S. government, an international organization or any wholly owned agency or instrumentality of either of the foregoing; or
-
(c)
-
a
tax-exempt entity;
-
(3)
-
the
amount and description of LP Units held, acquired or transferred for the beneficial owner; and
-
(4)
-
specific
information including the dates of acquisitions and transfers, means of acquisitions and transfers, and acquisition cost for purchases, as well as the
amount of net proceeds from sales.
Brokers
and financial institutions are required to furnish additional information, including whether they are U.S. persons and specific information on LP Units they acquire, hold
or transfer for their own account. A penalty of $100 per failure, up to a maximum of $1.5 million per calendar year, is imposed by the Code for failure to report that information to us. The
nominee is required to supply the beneficial owner of the LP Units with the information furnished to us.
Accuracy-Related Penalties.
Certain penalties may be imposed on taxpayers as a result of an underpayment of tax that is
attributable to one or more
specified causes, including negligence or disregard of rules or regulations, substantial understatements of income tax and substantial valuation
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misstatements.
No penalty will be imposed, however, for any portion of any such underpayment if it is shown that there was a reasonable cause for the underpayment of that portion and that the taxpayer
acted in good faith regarding the underpayment of that portion. Penalties may also be imposed for engaging in transactions without economic substance. We do not anticipate engaging in transactions
without economic substance or otherwise participating in transactions that would subject our unitholders to accuracy-related penalties.
State, Local and Other Tax Considerations
In addition to federal income taxes, unitholders will be subject to other taxes, including state and local income taxes, unincorporated business
taxes, and estate, inheritance or intangibles taxes that may be imposed by the various jurisdictions in which we conduct business or own property or in which the unitholder is a resident. We currently
do business or own property in more than 30 states, most of which impose income taxes. The Partnership also owns property and conducts business in Puerto Rico, St. Lucia and Grand Bahama. Under
current law, unitholders are not required to file a tax return or pay taxes in Puerto Rico, St. Lucia or Grand Bahama. We may own property or do
business in other states or foreign jurisdictions in the future that impose income or similar taxes on nonresident individuals. Although an analysis of those various taxes is not presented here, each
prospective unitholder should consider their potential impact on its investment in us. Unitholders may not be required to file a return and pay taxes in some states because its income from that
state falls below the filing and payment requirement. Unitholders will be required, however, to file state income tax returns and to pay state income taxes in many of these states in which we do
business or own property, and unitholders may be subject to penalties for failure to comply with those requirements. Some of the states may require us, or we may elect, to withhold a percentage of
income from amounts to be distributed to a unitholder who is not a resident of the state. Withholding, the amount of which may be greater or less than a particular unitholder's income tax liability to
the state, generally does not relieve a nonresident unitholder from the obligation to file an income tax return.
It is the responsibility of each unitholder to investigate the legal and tax consequences, under the laws of pertinent jurisdictions, of its investment in us. We
strongly recommend that each prospective unitholder consult, and depend on, its own tax counsel or other advisor with regard to those matters. Further, it is the responsibility of each unitholder to
file all state, local, and non-U.S., as well as U.S. federal tax returns that may be required of it. Vinson & Elkins L.L.P. has not rendered an opinion on the state, local, alternative
minimum tax or non-U.S. tax consequences of an investment in us.
Material Tax Consequences of Ownership of Debt Securities
A description of the material U.S. federal income tax consequences of the acquisition, ownership and disposition of debt securities will be set
forth on the prospectus supplement relating to the offering of debt securities.
LEGAL MATTERS
In connection with particular offerings of the securities in the future, and if stated in the applicable prospectus supplement, the validity of
those securities may be passed upon by Vinson & Elkins L.L.P., Houston, Texas, as our counsel, and for any underwriters or agents by counsel named in the applicable prospectus
supplement.
EXPERTS
The consolidated financial statements, incorporated in this Prospectus by reference from the Buckeye Partners, L.P. Annual Report on
Form 10-K, and the effectiveness of Buckeye Partners, L.P. and subsidiaries' internal control over financial reporting have been audited by Deloitte & Touche LLP, an
independent registered public accounting firm, as stated in their reports which are incorporated herein by reference. Such consolidated financial statements have been so incorporated in reliance upon
the reports of such firm given upon their authority as experts in accounting and auditing.
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$600,000,000
Buckeye Partners, L.P.
3.950% Notes due 2026
Prospectus Supplement
Joint Book-Running Managers
Barclays
J.P. Morgan
SunTrust Robinson Humphrey
Wells Fargo Securities
BNP PARIBAS
Deutsche Bank Securities
PNC Capital Markets LLC
SMBC Nikko
Co-Managers
BB&T Capital Markets
Morgan Stanley
October 27, 2016
Buckeye Partners (NYSE:BPL)
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