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Certain Provisions of the ENLK Partnership Agreement
 6 Months Ended
Jun. 30, 2024
Partners' Capital [Abstract]  
Certain Provisions of the ENLK Partnership Agreement
(7) Certain Provisions of the ENLK Partnership Agreement

a.Series B Preferred Units

As of June 30, 2024 and December 31, 2023, there were 48,760,039 and 54,575,638 Series B Preferred Units issued and outstanding, respectively.

Conversion

Series B Preferred Units are exchangeable for ENLC common units in an amount equal to the number of applicable Series B Preferred Units multiplied by the exchange ratio of 1.15, subject to certain adjustments. The exchange is subject to ENLK’s option to pay cash instead of ENLC issuing additional ENLC common units, and can occur in whole or in part at the option of the holder of the Series B Preferred Units at any time, or in whole at our option, provided the daily volume-weighted average closing price of the ENLC common units for the 30 trading days ending two trading days prior to the exchange is greater than 150% of the $15.00 per Series B Preferred Unit issue price divided by the conversion ratio of 1.15.

A summary of the exchange activity by the holders of the Series B Preferred Units during the three months ended June 30, 2024 is provided below (in millions, except per unit amounts):
Series B Preferred Units CanceledSeries B Preferred Units ExchangedENLC Common Units Issued
Loss on Exchange of Series B Preferred Units
Transaction date
UnitsUnits
$
Units
$
$
April 20242,604,046 2,608,696 (1)$38.3 3,000,000 $41.2 $(2.9)
May 20243,478,262 3,478,262 $51.6 4,000,000 $53.9 $(2.3)
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(1)Includes 4,650 accrued and unpaid Series B Preferred Units that holders were entitled to receive in a PIK Distribution in respect of the first quarter of 2024 as of the date of the exchange of such Series B Preferred Units.

In July 2024, the holders of the Series B Preferred Units exchanged 8,695,654 Series B Preferred Units into 10,000,000 ENLC common units. Additionally, on August 5, 2024, we purchased 12,698,414 Series B Preferred Units for $200.2 million. Subsequent to these post-quarter exchanges and the unit purchase, there were 27,365,971 outstanding Series B Preferred Units as of August 7, 2024, the date of this report.

Transfer Fee

Holders of Series B Preferred Units must pay a $0.15 fee (A) on each Series B Preferred Unit that is transferred to (i) anyone other than an affiliate of such holder or (ii) another holder, or (B) following the exchange of each Series B Preferred Unit into an ENLC common unit, upon the sale of each ENLC common unit in a registered offering. An initial non-refundable fee of $3.5 million, which will be credited against and reduce any fees payable upon a subsequent transfer or registered sale, was received from the holders of the Series B Preferred Units in May 2024 in connection with the exchange of Series B Preferred Units in April 2024, and was recorded as “Other income” in the consolidated statements of operations for the three and six months ended June 30, 2024.
Income and Distributions

Income is allocated to the Series B Preferred Units in an amount equal to the quarterly distribution with respect to the period earned. A summary of the distribution activity relating to the Series B Preferred Units during the six months ended June 30, 2024 and 2023 is provided below:
Declaration periodPIK DistributionCash distribution (in millions)Date paid/payable
2024
Fourth Quarter of 2023136,439 $15.3 February 9, 2024
First Quarter of 2024130,270 $14.7 May 14, 2024
Second Quarter of 2024 (1)— $12.8 August 14, 2024
2023
Fourth Quarter of 2022— $17.3 February 13, 2023
First Quarter of 2023135,421 $15.2 May 12, 2023
Second Quarter of 2023135,759 $15.3 August 11, 2023
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(1)On September 8, 2023, we amended and restated the limited partnership agreement of ENLK (the “ENLK LPA”) to terminate the rights of the holders of the Series B Preferred Units to receive PIK distributions beginning with the quarter ending June 30, 2024, and in connection with such termination of PIK distributions, increase the cash distribution per Series B Preferred Unit from $0.28125 to $0.31875, in addition to the continued payment of the Series B Excess Cash Payment Amount (as defined in the ENLK LPA).

Allocation of Taxable Income to the Series B Preferred Units

For tax purposes, holders of Series B Preferred Units are allocated items of gross income from ENLK in respect of each Series B Preferred Unit until the cumulative amount of gross income so allocated equals the cumulative amount of distributions made in respect of such Series B Preferred Unit, but not in excess of the positive net income of ENLK for the allocation year (the “Allocation Cap”). As of June 30, 2024, due to the application of the Allocation Cap, the cumulative amount of distributions made in respect of each Series B Preferred Unit exceeded the cumulative amount of gross income allocated to each Series B Preferred Unit by $7.32 per Series B Preferred Unit (the “Catch-Up Income Allocation”). As a result, holders of Series B Preferred Units will ultimately be allocated taxable income during future periods equal to the Catch-Up Income Allocation plus the amount of distributions received in respect of Series B Preferred Units, if ENLK generates positive net income.
b.Series C Preferred Units

As of June 30, 2024 and December 31, 2023, there were 366,500 Series C Preferred Units issued and outstanding.

Distributions

Income is allocated to the Series C Preferred Units in an amount equal to the earned distribution for the respective reporting period. A summary of the distribution activity relating to the Series C Preferred Units is provided below:
Declaration period (1)Distribution rate (2)Cash distribution (in millions)Date paid/payable
2024
December 15, 2023 – March 14, 20249.749 %$9.0 March 15, 2024
March 15, 2024 – June 14, 20249.701 %$9.1 June 17, 2024
June 15, 2024 – September 14, 20249.716 %$9.0 September 16, 2024
2023
December 15, 2022 – March 14, 20238.846 %$8.4 March 15, 2023
March 15, 2023 – June 14, 20239.051 %$8.7 June 15, 2023
June 15, 2023 – September 14, 20239.618 %$9.3 September 15, 2023
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(1)Distributions on the Series C Preferred Units accrue quarterly in arrears on the 15th day of March, June, September, and December of each year, in each case, if and when declared by the General Partner out of legally available funds for such purpose.
(2)Distributions on the Series C Preferred Units accumulate for each distribution period at a percentage of the $1,000 liquidation preference per unit equal to the floating rate of the three-month LIBOR plus a spread of 4.11%. Starting on September 15, 2023, distributions on the Series C Preferred Units are based on the forward-looking term rate based on SOFR (“Term SOFR”), plus a Term SOFR spread adjustment of 0.26161%, plus a spread of 4.11%.