Teekay LNG Partners to Increase 2019 Distributions by 36 Percent and Eliminate K-1 Reporting for Unitholders
November 14 2018 - 4:02PM
Teekay GP LLC, the general partner of Teekay LNG Partners L.P.
(Teekay LNG or the Partnership) (NYSE:TGP), has today announced the
following actions affecting its unitholders:
- Common unit distributions expected to increase by 36 percent in
2019 as part of a balanced capital allocation strategy; and
- A recommendation that unitholders vote in favor of amending
Teekay LNG’s tax status to be treated as a corporation, instead of
a partnership, for U.S. federal income tax purposes, which would
result in common and preferred unitholders receiving Form 1099s,
instead of K-1s, in the future.
“With roughly half of our newbuilding program
delivered and the remaining vessels set to deliver throughout 2019,
the Partnership’s cash flows and net income are expected to grow
significantly while our balance sheet is anticipated to naturally
delever over time,” commented Mark Kremin, President and Chief
Executive Officer of Teekay Gas Group Ltd. “Our Board has
carefully assessed our future capital allocation strategy and has
concluded that a balanced approach that, in the near-term, focuses
on both delevering the balance sheet, which creates significant
equity value and builds financial strength, and returning more
capital to unitholders from its free cash flow after debt
amortization payments, is prudent and will create the most
long-term value for our unitholders. As a result, with the
recent completion of our 2018 refinancings and nearly all of our
newbuild program financings, our Board has decided to increase
Teekay LNG’s quarterly common unit cash distribution in 2019 by 36
percent to $0.19 per unit, commencing with the first quarter of
2019 distribution to be paid in May 2019.”
Mr. Kremin added, “With almost $11 billion of
forward fixed-rate revenues, we believe that our capital allocation
strategy provides a clear path to delever our balance sheet towards
our target of 5.5 times on a net debt to cash flow from vessel
operations basis over the next few years, while also providing an
enhanced ability for the Partnership to fund future growth at a
lower cost of capital. As we approach our targeted leverage
level, we believe a stronger balance sheet will enable us to
consider returning additional capital to unitholders through
distribution increases and/or common unit repurchases, which we
intend to evaluate at least annually.”
Mr. Kremin continued, “In addition, Teekay LNG
intends to change its tax status to be treated as a corporation for
US tax purposes, which we anticipate will broaden our investor base
by making Teekay LNG a more attractive investment for new
investors.”
Special Meeting of Unitholders
The Board of Directors of Teekay GP L.L.C. has
called a special meeting of common unitholders of Teekay LNG to be
held on December 18, 2018. A Notice of Special Meeting and Proxy
Statement has today been filed with the U.S. Securities and
Exchange Commission and will be mailed to common unitholders, which
describes the business to be transacted at the special meeting,
namely proposals which will allow Teekay LNG to elect to be treated
as a corporation, instead of a partnership, for U.S. federal income
tax purposes and to amend Teekay LNG’s partnership agreement
accordingly. The Board has unanimously determined that these
proposals are in the best interests of Teekay LNG and its
unitholders, and recommends that the common unitholders vote in
favor for each of the proposals, which are conditional on approval
of each other.
This proposed change to Teekay LNG’s status for
U.S. federal income tax purposes, which is subject to common
unitholder approval, should not result in Teekay LNG recognizing a
gain or loss. While some investors may incur a tax gain on
conversion, any gain recognized for U.S. tax purposes is expected
to result in tax benefits that are expected to reduce the taxable
portion of cash distributions paid by Teekay LNG in the future.
Conference Call
Teekay LNG intends to hold a conference call on
Thursday, November 15, 2018 at 11:00 a.m. (ET) to discuss its third
quarter of 2018 results and to provide additional information on
the unitholder actions announced today. All unitholders and
interested parties are invited to listen to the live conference
call by choosing from the following options:
- By dialing (888) 204-4368 or (647) 484-0478, if outside North
America, and quoting conference ID code 7444729.
- By accessing the webcast, which will be available on Teekay
LNG’s website at www.teekay.com (the archive will remain on the
website for a period of one year).
An accompanying Third Quarter 2018 Earnings
Presentation will also be available at www.teekay.com in advance of
the conference call start time.
About Teekay LNG
Teekay LNG Partners is one of the world’s
largest independent owners and operators of LNG carriers, primarily
providing LNG and LPG marine transportation services largely under
long-term, fee-based charter contracts through its interests in 49
LNG carriers (including seven newbuildings), 22 mid-size LPG
carriers, seven multigas carriers and three conventional tankers.
The Partnership’s interests in these vessels range from 20 to 100
percent. In addition, the Partnership owns a 30 percent interest in
a regasification facility, which is currently under construction.
Teekay LNG Partners was formed by Teekay Corporation (NYSE: TK) as
part of its strategy to expand its operations in the LNG and LPG
marine transportation sectors.
Teekay LNG Partners’ common units and preferred
units trade on the New York Stock Exchange under the symbols “TGP”,
“TGP PR A” and “TGP PR B”, respectively.
For Investor Relationsenquiries
contact:
Ryan HamiltonTel: +1 (604) 609-2963Website: www.teekay.com
Forward Looking Statement
This release contains forward-looking statements
(as defined in Section 21E of the Securities Exchange Act of 1934,
as amended) which reflect management’s current views with respect
to certain future events and performance, including statements,
among other things, regarding: the future operating results of the
Partnership, including expected significant increases to cash flows
and net income; delevering of the Partnership’s balance sheet; the
Partnership’s financial strength and ability to fund growth, return
capital to unitholders and expand its fleet; the effects of Teekay
LNG’s proposed election to be classified as a corporation for U.S.
federal income tax purposes, including greater appeal to certain
investors, and the tax effect on and treatment applicable to Teekay
LNG and certain unitholders upon any such reclassification and in
the future; and proposed increases in 2019 and in the future to
Teekay LNG’s quarterly distributions on its common units and the
impact of Teekay LNG’s distribution policy and capital allocation
strategy on Teekay LNG and its ability to achieve its targeted
leverage. The following factors are among those that could cause
actual results to differ materially from the forward-looking
statements, which involve risks and uncertainties, and that should
be considered in evaluating any such statement: potential shipyard
and project construction delays, newbuilding specification changes
or cost overruns; changes in production of LNG or LPG, either
generally or in particular regions; changes in trading patterns or
timing of start-up of new LNG liquefaction and regasification
projects significantly affecting overall vessel tonnage
requirements; changes in applicable industry laws and regulations
and the timing of implementation of new laws and regulations; the
impact of IMO 2020; the potential for early termination of
long-term contracts of existing vessels in the Partnership's fleet;
higher than expected costs and expenses; the inability to secure
new charters at higher rates; the outcome of the common unitholder
vote at the special meeting to approve the proposed classification
of the Partnership as a corporation for U.S. federal income tax
purposes and related amendments to its partnership agreement, and
the actual tax implications of any such reclassification and
amendments on the Partnership and unitholders; the level of income
of the Partnership that is U.S. source gross transportation income
subject to tax under Section 887 of the U.S. tax code; actual
levels of quarterly distributions approved by the Board of
Directors of the Partnership’s general partner; the inability of
charterers to make future charter payments; the inability of the
Partnership to renew or replace long-term contracts on existing
vessels; the Partnership’s or the Partnership’s joint ventures’
ability to secure or draw on financings for their vessels; and
other factors discussed in Teekay LNG Partners’ filings from time
to time with the SEC, including its Report on Form 20-F for the
fiscal year ended December 31, 2017. The Partnership expressly
disclaims any obligation to release publicly any updates or
revisions to any forward-looking statements contained herein to
reflect any change in the Partnership’s expectations with respect
thereto or any change in events, conditions or circumstances on
which any such statement is based.
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