SRLP IPO Preview Oct 2013

Sprague Resources, LP (ticker SRLP) is currently out on its IPO roadshow and looking to raise $170 million by selling 8.5 million common units (before the over-allotment) at a mid-point price of $20 with an indicated mid-point yield of 8.25%. They expect to price the deal Thursday October 24.

SRLP is a Delaware limited partnership engaged in the purchase, storage,
distribution and sale of refined petroleum products and natural gas, and SRLP also provide storage and handling services for a broad range of materials. Its predecessor was founded in 1870 and has stored, distributed and marketed petroleum-based products for over 50 years. SRLP is one of the largest independent wholesale distributors of refined products in the Northeast United States based on aggregate terminal capacity. SRLP owns
and/or operates a network of 14 refined products and materials handling terminals
strategically located throughout the Northeast that have a combined storage
capacity of approximately 8.0 million barrels (which excludes approximately 1.3
million barrels of storage capacity in tanks not currently in service) for
refined products and other liquid materials, as well as approximately 1.5
million square feet of materials handling capacity. SRLP also has access to
approximately 50 third-party terminals in the Northeast through which it sells or
distributes refined products pursuant to rack, exchange and throughput
agreements.

IMPORTANT: SRLP will provide investors with a K-1 (instead of a 1099-DIV), which makes SRLP appropriate for taxable accounts. Here is the key language from the “Tax Risks to Common Unitholders” section of the Prospectus (page 46) 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 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, or 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 U.S. federal 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 your tax advisor before investing in our common units.

Monthly Analytics subscribers, please keep an eye on your inbox for full analytics on SRLP.

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.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s