ARCX IPO Preview Nov 2013

Arc Logistics Partners, LP (ticker ARCX) is currently out on its IPO roadshow and looking to raise $120 million by selling 6 million common units (before the over-allotment) at a mid-point price of $20 with an indicated mid-point yield of 7.75%. They expect to price the deal Tuesday November 5.

ARCX is a fee-based, growth-oriented Delaware limited partnership formed by Lightfoot Capital Partners to own, operate, develop and acquire a diversified portfolio of complementary energy logistics assets. ARCX is principally engaged in the terminalling, storage, throughput and transloading of crude oil and petroleum products. They intend to use a portion of the proceeds from this offering to acquire the LNG Interest (part of a liquefied natural gas regasification and storage facility in Pascagoula, MS). ARCX is focused on growing its business through the optimization, organic development and acquisition of terminalling, storage, rail, pipeline and other energy logistics assets that generate stable cash flows.

IMPORTANT: ARCX will provide investors with a K-1 (instead of a 1099-DIV), which makes ARCX 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.

Investments 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 income tax returns and pay tax on their shares 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 ARCX.

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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