Partners' Capital, Mezzanine Capital and Distributions

3 Months Ended

Mar. 31, 2020

Partners' Capital, Mezzanine Capital and Distributions

Partners’ Capital, Mezzanine Capital and Distributions

At March 31, 2020, our outstanding common units consisted of 122,539,221 Class A units and 39,997 Class B units.

Distributions

We paid or will pay the following distributions to our common unitholders in 2019 and 2020:



Distribution For	Date Paid		Per Unit Amount		Total Amount
2019
1^st Quarter	May 15, 2019		$	0.5500	$	67,419
2^nd Quarter	August 14, 2019		$	0.5500	$	67,419
3^rd Quarter	November 14, 2019		$	0.5500	$	67,419
4^th Quarter	February 14, 2020		$	0.5500	$	67,419
2020
1^st Quarter	May 15, 2020	⁽¹⁾	$	0.1500	$	18,387

(1) This distribution was declared on April 8, 2020 and will be paid to unitholders of record as of May 1, 2020.

Class A Convertible Preferred Units

At March 31, 2020 we had 25,336,778 Class A Convertible Preferred Units (our "Class A Convertible Preferred Units") outstanding. Our Class A Convertible Preferred Units rank senior to all of our currently outstanding classes or series of limited partner interests with respect to distribution and/or liquidation rights. Holders of our Class A Convertible Preferred Units vote on an as-converted basis with holders of our common units and have certain class voting rights, including with respect to any amendment to the partnership agreement that would adversely affect the rights, preferences or privileges, or otherwise modify the terms, of those Class A Convertible Preferred Units.

Accounting for the Class A Convertible Preferred Units

Our Class A Convertible Preferred Units are considered redeemable securities under GAAP due to the existence of redemption provisions upon a deemed liquidation event that is outside our control. Therefore, we present them as temporary equity in the mezzanine section of the Unaudited Consolidated Balance Sheet. Because our Class A Convertible Preferred Units are not currently redeemable and we do not have plans or expect any events that constitute a change of control in our partnership agreement, we present our Class A Convertible Preferred Units at their initial carrying amount. However, we would be required to adjust that carrying amount if it becomes probable that we would be required to redeem our Class A Convertible Preferred Units.

Initial and Subsequent Measurement

We initially recognized our Class A Convertible Preferred Units at their issuance date fair value, net of issuance costs. We will not be required to adjust the carrying amount of our Class A Convertible Preferred Units until it becomes probable that they would become redeemable. Once redemption becomes probable, we would adjust the carrying amount of our Class A Convertible Preferred Units to the redemption value over a period of time comprising the date the feature first becomes probable and the date the units can first be redeemed. Our Class A Convertible Preferred Units contain a distribution Rate Reset Election (as defined in Note 15) option. This Rate Reset Election is bifurcated and accounted for separately as an embedded derivative and recorded at fair value at each reporting period. Refer to Note 15 and Note 16 for additional discussion.

Class A Convertible Preferred Unit distributions are recognized on the date in which they are declared. Paid-in-kind ("PIK") distributions were declared and issued as follows:



Distribution For	Date Issued	Number of Units₍₁₎	Total Amount
2019
1^st Quarter	May 15, 2019	364,180	$	12,277

(1) Subsequent to the first quarter of 2019, all distributions have been and will be paid in cash.

Net Income Attributable to Genesis Energy, L.P. is reduced by Class A Convertible Preferred Unit distributions that accumulated during the period. Net income attributable to Genesis Energy, L.P. was reduced by $18.7 million and $18.4 million for the three months ended March 31, 2020 and March 31, 2019.

We paid or will pay the following cash distributions to our Class A Convertible Preferred unitholders in 2019 and 2020:



Distribution For	Date Paid		Per Unit Amount		Total Amount
2019
1^st Quarter	May 15, 2019		$	0.2458	$	6,138
2^nd Quarter	August 14, 2019		$	0.7374	$	18,684
3^rd Quarter	November 14, 2019		$	0.7374	$	18,684
4^th Quarter	February 14, 2020		$	0.7374	$	18,684
2020
1^st Quarter	May 15, 2020	⁽¹⁾	$	0.7374	$	18,684

(1) This distribution was declared on April 8, 2020 and will be paid to unitholders of record as of May 1, 2020.

Redeemable Noncontrolling Interests

On September 23, 2019, we, through a subsidiary, Alkali Holdings, entered into an amended and restated Limited Liability Company Agreement of Alkali Holdings (the "LLC Agreement") and a Securities Purchase Agreement (the "Securities Purchase Agreement") whereby certain investment fund entities affiliated with GSO Capital Partners LP (collectively "GSO") purchased $55,000,000 and committed to purchase up to approximately $350,000,000 of preferred units in Alkali Holdings, the entity that holds our trona and trona-based exploring, mining, processing, producing, marketing and selling business, including its Granger facility near Green River, Wyoming. Alkali Holdings will use the net proceeds from the Alkali Holdings preferred units to fund up to 100% of the anticipated cost of expansion of the Granger facility. As of March 31, 2020, we have received cash of $122.9 million for the $130 million of Alkali Holdings preferred units issued to date net of issuance costs, which was inclusive of our transaction related expenses and one-time commitment fee.

On April 14, 2020, we entered into an amendment to our agreements with GSO to, among other things, extend the construction timeline of the Granger expansion project by one year.

Accounting for Redeemable Noncontrolling Interests

Classification

The Alkali Holdings preferred units issued and outstanding are accounted for as a redeemable noncontrolling interest in the mezzanine section on our Unaudited Condensed Consolidated Balance Sheet due to the redemption features for a change of control.

Initial and Subsequent Measurement

We recorded the Alkali Holdings preferred units at their issuance date fair value, net of issuance costs. The fair value as of March 31, 2020 represents the carrying amount based on the issued and outstanding Alkali Holdings preferred units most probable redemption event on the six year anniversary of the closing, which is the predetermined internal rate of return measure accreted using the effective interest method to the redemption value as of the reporting date. Net Income Attributable to Genesis Energy, L.P. for the three months ended March 31, 2020 includes $4.1 million of adjustments, of which $3.3 million was allocated to the PIK distributions on the outstanding Alkali Holdings preferred units and $0.8 million was attributable to redemption accretion value adjustments. We elected to pay distributions for the period ended March 31, 2020 in-kind to our Alkali Holdings preferred unitholders. These PIK distributions increase the unitholders liquidation preference on each Alkali Holdings preferred unit.

As of the reporting date, there are no triggering, change of control, early redemption or monetization events that are probable that would require us to revalue the Alkali Holdings preferred units.

If the Alkali Holdings preferred units were redeemed on the reporting date of March 31, 2020, the redemption amount would be equal to $192.5 million, which would be the multiple of invested capital metric applied to the Alkali Holdings preferred units outstanding plus the make-whole amount on the undrawn minimum Alkali Holdings preferred units.

The following table shows the change in our redeemable noncontrolling interest balance from December 31, 2019 to March 31, 2020:



Balance as of December 31, 2019	$	125,133
PIK distributions	3,294
Redemption accretion	792
Balance as of March 31, 2020	$	129,219