Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. American Midstream Partners, LP (1513965) 10-K published on Apr 01, 2019 at 3:13 pm
Reporting Period: Dec 30, 2018
Absent any action with respect to the repayment or refinancing of our existing indebtedness or any waivers or amendments to the agreements governing our existing indebtedness, our Credit Agreement is scheduled to mature on September 5, 2019. Although we are actively engaged with the Credit Agreement lender group, we may not be able to extend, replace or refinance our existing Credit Agreement on terms reasonably acceptable to us, or at all, with our current lender group or with replacement lenders. If we are able to obtain replacement financing, it may be more costly or on terms more burdensome than our current Credit Agreement. In addition, we may not be able to access other external financial resources sufficient to enable us to repay the debt outstanding under our Credit Agreement upon its maturity. As renewal or refinance of the Credit Agreement remains uncertain, the audited financial statements contained in this Form 10-K include a note regarding our ability to continue as a going concern. Although we entered into the Waiver to address the existence of a going concern note and material weakness exception in the audited financial statements contained in this Form 10-K and to extend the Financial Statements Delivery Deadline to April 30, 2019, the Waiver does not waive any default or event of default other than in connection with the Financial Statements Audit Requirement and Financial Statements Delivery Deadline. There is no guarantee that our lenders will agree to waive events of default or potential events of default in the future. Moreover, such issues and waivers divert the attention of management from our operations and require the Partnership to incur certain fees and expenses. If we fail to satisfy our obligations with respect to our indebtedness or fail to comply with the financial and other restrictive covenants contained in the Credit Facility or other agreements governing our indebtedness, an event of default could result, which could permit acceleration of such debt and acceleration of our other debt. Any accelerated debt would become immediately due and payable, and we may be unable to continue as a going concern. For additional discussion of the Waiver, see Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Overview - Amendment to the Credit Agreement.
As previously disclosed, the Partnership’s Credit Agreement matures on September 5, 2019 and has not been renewed. Until such time as the Partnership has executed an agreement to refinance or extend the maturity of the Credit Agreement, the Partnership cannot conclude that it is probable that it will do so, and accordingly, this raises substantial doubt about the Partnership’s ability to continue as a going concern. For more information regarding the Partnership’s going concern qualification, see Part II. Item 8. Note 14. Debt Obligations of our 2018 Form 10-K.
As the renewal or refinance of the Credit Agreement remains uncertain, the audited financial statements contained in this Form 10-K include a note regarding our ability to continue as a going concern. Prior to our entry into the Waiver, the existence of this going concern qualification in our audited financial statements would have constituted an event of default under the Credit Agreement. Pursuant to the Waiver, the administrative agent and certain lenders (as required by the Credit Agreement) have waived the Financial Statements Audit Requirement for the fiscal year ended December 31, 2018. Although we entered into the Waiver to address the event of default otherwise arising pursuant to the existence of a going concern note and material weakness exception in our audited financial statements contained in this Form 10- K, there is no guarantee that our lenders will agree to waive events of default or potential events of default in the future. Additionally, the existence of a material weakness in the Partnership’s internal control over financial reporting may constitute an event of default under the Credit Agreement.
The minimum quarterly distribution, as defined in our partnership agreement, is $0.4125 per common unit per quarter, or $1.65 on an annualized basis. If, in any quarter, we distribute less than the minimum quarterly distribution on each common unit, then our common unitholders accumulate arrearages based on the number of initial public offering ("IPO") common units. We have 3.8 million IPO common units outstanding. The accumulated arrearages are equal to (a) the sum of the deficit between the quarterly distribution paid and the minimum quarterly distribution on all common units issued in our IPO (b) divided by the number of common units outstanding as of the end of such quarter. As we have more common units outstanding than were issued in the initial public offering, the arrearages associated with each common unit will be less than the deficit between the quarterly distribution paid on such common unit and the minimum quarterly distribution. Accumulated arrearages must be paid before any distribution will be made on our incentive distribution rights. As such, they give common unitholders a priority right to distributions, but, unlike arrearages on a debt instrument, do not create a liquidated payment obligation. At December 31, 2018, we had accumulated arrearages totaling $2.3 million.
Long-Term Cash Retention Program. In August 2018, in recognition of challenges in retaining key personnel resulting from factors including the significant drop and volatility in the price of our common units and the termination of the SXE Merger Agreement and the Contribution Agreement, our Board approved a special long-term cash retention award applicable to all employees holding unvested time-based phantom units in an amount of $6 per phantom unit. This program was approved in order to help preserve the retention incentives associated with long-term equity awards that had experienced significant declines in value without the dilutive impact and volatility associated with equity-based awards. These long-term cash awards are generally subject to acceleration under the same circumstances as the phantom units to which they relate, except that these awards will automatically vest upon an involuntary termination of the award recipient (unless such termination is for cause or due to performance deficiencies) following certain changes in control, including certain going private transactions. Performance based awards, unit options, and any subsequent awards were specifically excluding from this program.
We are also currently a defendant and counter-claimant in litigation styled Rainbow Energy Marketing, Inc. v. American Midstream (Alabama Intrastate), LLC filed on April 12, 2017 in the District Court, 157th Judicial District, in Harris County, Texas relating to a gas transportation agreement (the "Rainbow Agreement") between Rainbow Energy Marketing, Inc. (“Rainbow”) and American Midstream (Alabama Intrastate), LLC (“AMID AL”), one of our wholly-owned subsidiaries. Rainbow filed a complaint alleging AMID AL breached the Rainbow Agreement and claiming damages of approximately $6.6 million, together with attorney's fees. AMID AL filed a counterclaim, seeking to recover approximately $1.3 million in unpaid receivables under this agreement. We believe the facts in this matter support our defense against Rainbow’s claim and our right to recover our unpaid receivables, and we intend to both vigorously defend and prosecute our rights in this matter. At December 31, 2018, we have not reserved for any portion of our unpaid receivables.