Master Limited Partnerships (MLP)
Andrews Kurth was involved in the creation of the first publicly traded limited partnerships, also known as master limited partnerships (MLPs), in the early 1980s and has been involved in approximately 70 percent of the MLP and Royalty Trusts to date. Andrews Kurth has been involved with a high percentage of MLP transactions due to our experience in addressing the complex partnership, tax and business issues associated with creating an MLP. These transactions generally involve the creation of a new limited partnership to which the MLP sponsor transfers an operating business and related assets, followed by the issuance of MLP units (limited partner interests) in a public offering registered with the Securities and Exchange Commission.
Deep Experience
The units purchased by the public entitle the unitholders to receive regular quarterly cash distributions from the MLP, and the cash received generally exceeds, by a significant amount, the income required to be reflected on the unitholders’ current income tax returns, thereby resulting in “sheltered income.” For certain types of businesses, the MLP provides an excellent structure for monetizing assets that have relatively steady cash flow but that do not generate significant amounts of earnings from an accounting perspective. The MLP structure often allows the sponsor to realize a higher value for an operating business than would be the case from an outright sale of the business to a third party. Because MLPs are often formed and controlled by the sponsor, they must be structured to address conflicts of interest. These transactions are complex from a structuring and tax perspective and therefore require counsel who is experienced in dealing with these types of entities. Recently, the firm has been involved in business combinations, recapitalizations and restructurings of MLPs. These recapitalizations and restructurings typically involve complex tax structure issues, issues involving partnership law and fiduciary duties, and issues under applicable securities laws, including solicitations of proxies to obtain required unitholder votes.
