Preferred Interest in Hi-Crush Augusta LLC
On January 31, 2013, the Partnership entered into an agreement with our sponsor to acquire 100,000 preferred units in Augusta, the entity that owns our sponsor’s Augusta Plant, for $37,500 in cash and 3,750,000 newly issued convertible Class B units in the Partnership.
The transaction represented an exchange of ownership interests between entities under common control. As a result, the Partnership recorded an investment in the preferred interest equal to the total amount of the cash paid and our sponsor’s cost basis in the preferred units. Excess consideration exchanged over the cost basis was recorded as a deemed distribution to our sponsor, determined as follows:
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| | | |
Total consideration paid | $ | 95,400 |
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Less: Cash paid | (37,500 | ) |
Less: Sponsor’s cost basis in the investment | (9,543 | ) |
Deemed distribution | $ | 48,357 |
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In connection with this acquisition, the Partnership incurred $451 of acquisition related costs during the year ended December 31, 2013, as included in general and administrative expenses.
As a preferred unit holder in Augusta, the Partnership votes as a separate class from the common unitholders of Augusta and ranks senior to all other equity classes of Augusta. The preferred units entitle the Partnership to receive a distribution equal to $3,750 per quarter, beginning January 1, 2013, plus any unpaid arrearages from prior quarters. During 2013, Augusta declared and paid three quarterly distributions of $3,750. Income pertaining to the distributions is recognized during the period the distribution is received. On January 2014, Augusta declared its fourth quarterly distribution of $3,750, to be paid on February 11, 2014.
The preferred units in Augusta will automatically convert to common units in Augusta on March 31, 2018 unless (i) there are any arrearages in preferred unit distributions, (ii) the preferred units would not have received, on an as-converted basis, an annualized distribution of at least $10,000 over the preceding four quarters or (iii) the Partnership, with concurrence of the conflicts committee of the board of directors of our General Partner, elects to convert at an earlier time. The number of common units issued upon conversion will be equal to 25% of the then outstanding common units, such that, following the conversion, the Partnership would own 20% of the common units in Augusta.
