PSXP IPO Preview July 2013

Phillips 66 Partners, LP (ticker PSXP) is currently out on its IPO roadshow and looking to raise $300 million by selling 15 million common units (before the over-allotment) at a mid-point price of $20 with an indicated mid-point yield of 4.25%. They expect to price the deal next Monday July 22.

IMPORTANT: PSXP will provide investors with a K-1 (instead of a 1099-DIV), which makes PSXP appropriate for taxable accounts. Here is the key language from the “Tax Risks” section of the Prospectus (page 39) telling you that it does not really belong in an IRA (or any tax advantaged account):

Tax-exempt entities and non-U.S. persons face unique tax issues from owning our common units that may result in adverse tax consequences to them.

Investment in common units by tax-exempt entities, such as employee benefit plans and individual retirement accounts (known as IRAs), and non-U.S. persons raises issues unique to them. For example, virtually all of our income allocated to organizations that are exempt from federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income and will be taxable to them. Distributions to non-U.S. persons will be reduced by withholding taxes at the highest applicable effective tax rate, and non-U.S. persons will be required to file federal income tax returns and pay tax on their share of our taxable income. If you are a tax-exempt entity or a non-U.S. person, you should consult a tax advisor before investing in our common units.

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About Philip Trinder

President of MLP Protocol, investor, trader, and proponent of Master Limited Partnerships.
This entry was posted in MLP IPO Review, Roadshow Slides and tagged , , , , , , , , , . Bookmark the permalink.

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