Equity

12 Months Ended

Mar. 31, 2024

Partnership Equity

The Partnership’s equity consists of a 0.1% GP interest and a 99.9% limited partner interest, which consists of common units. Our GP has the right, but not the obligation, to contribute a proportionate amount of capital to the Partnership to maintain its 0.1% GP interest. Our GP is not required to guarantee or pay any of our debts or obligations. At March 31, 2024, we owned 8.69% of our GP.

General Partner Contributions

In connection with the issuance of common units for the vesting of restricted units during the years ended March 31, 2024, 2023 and 2022, we issued 586, 1,232 and 1,103, respectively, notional units to our GP for less than $0.1 million in each of the years, in order to maintain its 0.1% interest in the Partnership.

Common Unit Repurchase Program

On August 30, 2019, the board of directors of our GP authorized a common unit repurchase program, under which we may repurchase up to $150.0 million of our outstanding common units through September 30, 2021 from time to time in the open market or in other privately negotiated transactions. We did not repurchase any units under this plan and this plan has expired.

Suspension of Common Unit and Preferred Unit Distributions

The board of directors of our GP temporarily suspended all distributions (common unit distributions which began with the quarter ended December 31, 2020 and preferred unit distributions which began with the quarter ended March 31, 2021) in order to deleverage our balance sheet and meet the financial performance ratios set within the 2026 Indenture, as discussed further in Note 7.

On February 6, 2024, the board of directors of our GP declared a cash distribution of 50% of the outstanding distribution arrearages through December 31, 2023 to the holders of the Class B Preferred Units, the Class C Preferred Units and the Class D Preferred Units. The distributions were made on February 27, 2024 to the holders of record at the close of trading on February 16, 2024. See below for a further discussion.

Class B Preferred Units

As of March 31, 2024, there were 12,585,642 of our Class B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class B Preferred Units”) outstanding.

The current distribution rate for the Class B Preferred Units is a floating rate of the three-month LIBOR interest rate (5.3314% for the quarter ended March 31, 2024) plus a spread of 7.213%. Effective July 3, 2023, the reference to LIBOR in the formulation for the distribution rate in these securities was replaced with three-month CME Term SOFR, as calculated and published by CME Group Benchmark Administration, Ltd., plus a tenor spread adjustment of 0.26161%, in accordance with the Adjustable Interest Rate (LIBOR) Act (“LIBOR Act”), and the rules implementing the LIBOR Act.

On February 27, 2024, we made a distribution payment of $55.9 million to the holders of record of the Class B Preferred Units at the close of trading on February 16, 2024.

For the quarter ended March 31, 2024, we did not declare or pay distributions to the holders of the Class B Preferred Units, thus the estimated average quarterly distribution for March 31, 2024 is $0.7840 and the estimated cumulative distributions in arrears as of March 31, 2024 for each Class B preferred unit is $5.4571. In addition, the amount of cumulative but unpaid distributions shall continue to accumulate at the then applicable rate until all unpaid distributions have been paid in full. The estimated total amount due as of March 31, 2024 is $68.7 million.

Class C Preferred Units

As of March 31, 2024, there were 1,800,000 of our Class C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Class C Preferred Units”) outstanding.

The current distribution rate for the Class C Preferred Units is 9.625% per year of the $25.00 liquidation preference per unit (equal to $2.41 per unit per year).

On February 27, 2024, we made a distribution payment of $7.3 million to the holders of record of the Class C Preferred Units at the close of trading on February 16, 2024.

For the quarter ended March 31, 2024, we did not declare or pay distributions to the holders of the Class C Preferred Units, thus the estimated average quarterly distribution for March 31, 2024 is $0.6016 and the estimated cumulative distributions in arrears as of March 31, 2024 for each Class C preferred unit is $4.8374. In addition, the amount of cumulative but unpaid distributions shall continue to accumulate at the then applicable rate until all unpaid distributions have been paid in full. The estimated total amount due as of March 31, 2024 is $8.7 million.

On April 15, 2024, the distributions for the Class C Preferred Units will accumulate at a percentage of the $25.00 liquidation preference equal to the applicable three-month LIBOR interest rate (or alternative rate as determined in accordance with our amended and restated limited partnership agreement (“Partnership Agreement”)) plus a spread of 7.384%.

Class D Preferred Units

As of March 31, 2024, there were 600,000 preferred units (“Class D Preferred Units”) and warrants exercisable to purchase an aggregate of 25,500,000 common units outstanding.

The following table summarizes the outstanding warrants at March 31, 2024:


Issuance Date and Description	Number of Warrants	Exercise Price
July 2, 2019
Premium warrants	10,000,000	$	17.45
Par warrants	7,000,000	$	14.54
October 31, 2019
Premium warrants	5,000,000	$	16.28
Par warrants	3,500,000	$	13.56

All outstanding warrants are currently exercisable and any unexercised warrants will expire on the tenth anniversary of the date of issuance. The warrants will not participate in cash distributions.

The current distribution rate for the Class D Preferred Units is 10.00% (equal to $100.00 per every $1,000 in unit value per year), and includes an additional 0.50% rate increase due to a Class D distribution payment default, as defined within our Partnership Agreement.

On February 27, 2024, we made a distribution payment of $115.0 million to the holders of record of the Class D Preferred Units at the close of trading on February 16, 2024.

For the quarter ended March 31, 2024, we did not declare or pay distributions to the holders of the Class D Preferred Units, thus the estimated average quarterly distribution for March 31, 2024 is $27.31 and the estimated cumulative distributions in arrears as of March 31, 2024 for each Class D preferred unit is $232.33. In addition, the amount of cumulative but unpaid distributions shall continue to accumulate at the then applicable rate until all unpaid distributions have been paid in full. The estimated total amount due as of March 31, 2024 is $139.4 million.

On or after July 1, 2024, the holders of our Class D Preferred Units can elect, from time to time, for the distributions to be calculated based on a floating rate equal to the applicable three-month LIBOR interest rate (or alternative rate as determined in accordance with our Partnership Agreement) plus a spread of 7.00% (“Class D Variable Rate”, as defined in our Partnership Agreement). Each Class D Variable Rate election shall be effective for at least four quarters following such election.

At any time after July 2, 2019 (“Closing Date”), the Partnership shall have the right to redeem all of the outstanding Class D Preferred Units at a price per Class D Preferred Unit equal to the sum of the then-unpaid accumulations with respect to such Class D Preferred Unit and the greater of either the applicable multiple on invested capital or the applicable redemption price based on an applicable internal rate of return, as more fully described in our Partnership Agreement. At any time on or after the eighth anniversary of the Closing Date, each Class D Preferred Unitholder will have the right to require the Partnership to redeem on a date not prior to the 180th day after such anniversary all or a portion of the Class D Preferred Units then held by such preferred unitholder for the then-applicable redemption price, which may be paid in cash or, at the Partnership’s election, a combination of cash and a number of common units not to exceed one-half of the aggregate then- applicable redemption price, as more fully described in our Partnership Agreement. Upon a Class D Change of Control (as defined in our Partnership Agreement), each Class D Preferred Unitholder will have the right to require the Partnership to redeem the Class D Preferred Units then held by such Preferred Unitholder at a price per Class D Preferred Unit equal to the applicable redemption price. The Class D Preferred Units generally will not have any voting rights, except with respect to certain matters which require the vote of the Class D Preferred Units. The Class D Preferred Units generally do not have any voting rights, except that the Class D Preferred Units shall be entitled to vote as a separate class on any matter on which unitholders are entitled to vote that adversely affects the rights, powers, privileges or preferences of the Class D Preferred Units in relation to other classes of Partnership Interests (as defined in our Partnership Agreement) or as required by law. The consent of a majority of the then-outstanding Class D Preferred Units, with one vote per Class D Preferred Unit, shall be required to approve any matter for which the preferred unitholders are entitled to vote as a separate class or the consent of the representative of the Class D Preferred Unitholders, as applicable.

Total Preferred Unit Distributions in Arrears and Subsequent Payments

The estimated total preferred unit distributions in arrears for all classes of preferred units are $216.8 million as of March 31, 2024.

On April 4, 2024, the board of directors of our GP declared a cash distribution of 55.4% of the outstanding distribution arrearages through the quarter ended March 31, 2024 to the holders of the Class B Preferred Units and the Class C Preferred Units. Each of the Class B Preferred Units received $3.0224 per unit and the Class C Preferred Units received $2.6790 per unit on April 18, 2024 to the holders of record at the close of trading on April 12, 2024. Additionally, on April 4, 2024, the board of directors of our GP declared a cash distribution 55.4% of the outstanding distribution arrearages through the quarter ended March 31, 2024 to the holders of the Class D Preferred Units. The Class D Preferred Units quarterly distribution of $77.1 million was made on April 18, 2024 to the holders of record at the close of trading on April 12, 2024.

On April 9, 2024, the board of directors of our GP declared a cash distribution to fully pay the remaining distribution arrearages and interest on the Class B Preferred Units and the Class C Preferred Units. Each of the Class B Preferred Units received $2.4750 to fully pay the remaining distribution arrearages and interest as of April 25, 2024, which included a distribution of $9.9 million earned during the quarter ended March 31, 2024. The distribution was paid on April 25, 2024 to the holders of record at the close of trading on April 19, 2024. Each of the Class C Preferred Units received $2.1860 to fully pay the remaining distribution arrearages and interest as of April 25, 2024, which included a distribution of $1.1 million earned during the quarter ended March 31, 2024. The distribution was paid on April 25, 2024 to the holders of record at the close of

trading on April 19, 2024. Additionally, on April 9, 2024, the board of directors of our GP declared a cash distribution of $63.0 million to the holders of the Class D Preferred Units to fully pay the remaining distribution arrearages and interest as of April 25, 2024, which included a distribution of $16.4 million earned during the quarter ended March 31, 2024. The distribution was made on April 25, 2024 to the holders of record at the close of trading on April 19, 2024.

Amended and Restated Partnership Agreement

On February 4, 2021, NGL Energy Holdings LLC executed the First Amendment to the Seventh Amended and Restated Agreement of Limited Partnership for the purpose of amending certain consent rights in relation to the Class D Preferred Units.

Equity-Based Incentive Compensation

Our GP adopted a long-term incentive plan (“LTIP”), which allowed for the issuance of equity-based compensation. Our GP granted certain restricted units to employees and directors, which vest in tranches, subject to the continued service of the recipients through the vesting date (“Service Awards”). The Service Awards may also vest upon a change of control, at the discretion of the board of directors of our GP. No distributions accrue to or are paid on the Service Awards during the vesting period. As the LTIP expired on May 10, 2021, we had no common units available for grant during the year ended March 31, 2024.

The following table summarizes the Service Award activity during the year ended March 31, 2024:


		Weighted-Average
		Grant Date
	Number of	Fair Value
	Units	Per Unit
Unvested Service Award units at March 31, 2023	627,975	$2.15
Units vested and issued	(606,725)	$2.15
Units forfeited	(21,250)	$2.15
Unvested Service Award units at March 31, 2024	—

In connection with the vesting of certain Service Awards during the year ended March 31, 2024, 21,302 of the newly-vested common units were surrendered by employees in satisfaction of $0.1 million of employee withholding taxes paid by the Partnership. Pursuant to the expiration of the LTIP discussed above, those surrendered units are not available for future grants.

During the years ended March 31, 2024, 2023 and 2022, we recorded compensation expense related to Service Awards of $1.1 million, $2.7 million and $3.3 million, respectively.