bkepp
bkepp
This "preferred" seems to be a strange bird. Quantumonline.com, my go to for this kind of question, begins its discussion by saying, "This is not a preferred stock." Later, it refers to it as a preferred stock. Unlike other preferreds, Quantum does not say if it is callable, nor does it say if the dividends are Qualified for tax purposes. I emailed the company, asking these two questions, but never got a response. Do you know the answers as they would determine whether to buy it in a regular acct or an ira? Thx.
Re: bkepp
BKEPP is not a preferred "stock". It is a preferred "unit". MLP's trade "units" not "stock".
The Company is a MLP, so unitholders do get a K-1. Taxable income is allocated to unitholders based on their share of the Company's taxable income, which is lower than the cash distributions, however the Company first allocates taxable income to the preferred unit holders to the extent of their cash distributions. So, if BlueKnight does generate taxable income, the preferred unitholders share may be equal to their cash distributions. You won't know until you get the K-1 what your taxable income is.
I don't recommend holding MLP units in an IRA because of the UBTI rules, but you can do it if you wish.
Below are cut from the BlueKnight annual report (10K)
Holders of our Preferred Units and common units have limited voting rights and are not entitled to elect our General Partner or its directors.
Unlike the holders of common stock in a corporation, unit holders have only limited voting rights on matters affecting our business and, therefore, limited ability to
influence management’s decisions regarding our business. Unit holders did not elect our General Partner or the Board and have no right to elect our General Partner or the
Board on an annual or other continuing basis. The Board is chosen by Ergon. Furthermore, if the unitholders are dissatisfied with the performance of our General Partner, they
have little ability to remove our General Partner. Amendments to our partnership agreement may be proposed only by or with the consent of our General Partner. As a result of
these limitations, the price at which the common units will trade could be diminished because of the absence or reduction of a takeover premium in the trading price.
Holders of our Preferred Units have a distribution preference and a liquidation preference, which may adversely impact the value of our common units.
The Preferred Units rank prior to our common units as to both distributions of available cash and distributions upon liquidation. Holders of our Preferred Units are
entitled to preferred quarterly distributions of $0.17875 per unit per quarter (or $0.715 per unit on an annual basis). If we fail to pay in full any distribution on our Preferred
Units, the amount of such unpaid distribution will accrue and accumulate from the last day of the quarter for which such distribution is due until paid in full. If we are
liquidated, we may not have sufficient funds remaining after payment of amounts to our creditors and to holders of our Preferred Units to make any distribution to holders of
our common units.
BlueKnight can call the preferred units
We have rights to require our preferred unitholders to convert their Preferred Units into common units, and we may exercise this mandatory conversion right at an
undesirable time.
We have the right in certain circumstances to force the conversion of all outstanding Preferred Units to common units. These circumstances include a situation in which
if the holders of a certain number of Preferred Units elect to convert the Preferred Units that they hold to common units, we could then force all remaining outstanding Preferred
Units to convert to common units. Ergon, the owner of our General Partner, owns enough Preferred Units such that if they were all converted to common units, we would be
able to exercise this mandatory conversion right. In addition, we also have the right to force the conversion of the outstanding Preferred Units at any time if (i) the daily
volume-weighted average trading price of our common units is greater than $8.45 for 20 out of the trailing 30 trading days ending two trading days before we furnish notice of
conversion and (ii) the average trading volume of our common units has exceeded 20,000 common units for 20 out of the trailing 30 trading days ending two trading days before
we furnish notice of conversion. In addition, the conversion provisions may be modified with the consent of a majority of the outstanding Preferred Units. As of March 23,
2020, Ergon owned 52.1% of our outstanding Preferred Units and has the ability to consent to amendments to such conversion provisions. As a result, our preferred
unitholders may be required to convert their Preferred Units at an undesirable time and may not receive their expected return on investment.
Ergon, as the holder of a majority of the outstanding Preferred Units, has the ability to consent to the amendments to the provisions of the Preferred Units.
The Preferred Units have voting rights that are identical to the voting rights of common units and vote with the common units as a single class, so that each Preferred
Unit is entitled to one vote for each common unit into which such Preferred Unit is convertible on each matter with respect to which each common unit is entitled to vote. In
addition, the approval of a majority of the Preferred Units, voting separately as a class, is necessary on any matter that adversely affects any of the rights of the Preferred Units
or amends or modifies the terms of the Preferred Units in any material respect or affects the holders of the Preferred Units disproportionately in relation to the holders of
common units, including, without limitation, any action that would (i) reduce the distribution amount to the Preferred Units or change the time or form of payment of
distributions, (ii) reduce the amount payable to the Preferred Units upon the liquidation of our partnership, (iii)modify the conditions relating to the conversion of the Preferred
Units or (iv) issue any equity security that, with respect to distributions or rights upon liquidation, ranks equal to orsenior to the Preferred Units or issue any additional
Preferred Units. As of March 23, 2020, Ergon owned 52.1% of our outstanding Preferred Units and has the ability to consent to amendments to the terms of the Preferred Units
without the consent of other unitholders.
Holders of the Preferred Units will not have rights to distributions as holders of common units until they acquire our common units.
Until our preferred unitholders acquire common units upon conversion of the Preferred Units, such preferred unitholders will have no rights with respect to distributions
on our common units. Upon conversion, our preferred unitholders will be entitled to exercise the rights of a holder of our common units only as to matters for which the record
date occurs after the date on which such Preferred Units were converted to our common units.
The Preferred Units are limited partner interests in our partnership and therefore are subordinate to any indebtedness.
The Preferred Units are limited partner interests in our partnership and do not constitute indebtedness. As such, the Preferred Units will rank junior to all indebtedness
and other non-equity claims on our partnership with respect to assets available to satisfy claims on our partnership, including in a liquidation of our partnership.
The Company is a MLP, so unitholders do get a K-1. Taxable income is allocated to unitholders based on their share of the Company's taxable income, which is lower than the cash distributions, however the Company first allocates taxable income to the preferred unit holders to the extent of their cash distributions. So, if BlueKnight does generate taxable income, the preferred unitholders share may be equal to their cash distributions. You won't know until you get the K-1 what your taxable income is.
I don't recommend holding MLP units in an IRA because of the UBTI rules, but you can do it if you wish.
Below are cut from the BlueKnight annual report (10K)
Holders of our Preferred Units and common units have limited voting rights and are not entitled to elect our General Partner or its directors.
Unlike the holders of common stock in a corporation, unit holders have only limited voting rights on matters affecting our business and, therefore, limited ability to
influence management’s decisions regarding our business. Unit holders did not elect our General Partner or the Board and have no right to elect our General Partner or the
Board on an annual or other continuing basis. The Board is chosen by Ergon. Furthermore, if the unitholders are dissatisfied with the performance of our General Partner, they
have little ability to remove our General Partner. Amendments to our partnership agreement may be proposed only by or with the consent of our General Partner. As a result of
these limitations, the price at which the common units will trade could be diminished because of the absence or reduction of a takeover premium in the trading price.
Holders of our Preferred Units have a distribution preference and a liquidation preference, which may adversely impact the value of our common units.
The Preferred Units rank prior to our common units as to both distributions of available cash and distributions upon liquidation. Holders of our Preferred Units are
entitled to preferred quarterly distributions of $0.17875 per unit per quarter (or $0.715 per unit on an annual basis). If we fail to pay in full any distribution on our Preferred
Units, the amount of such unpaid distribution will accrue and accumulate from the last day of the quarter for which such distribution is due until paid in full. If we are
liquidated, we may not have sufficient funds remaining after payment of amounts to our creditors and to holders of our Preferred Units to make any distribution to holders of
our common units.
BlueKnight can call the preferred units
We have rights to require our preferred unitholders to convert their Preferred Units into common units, and we may exercise this mandatory conversion right at an
undesirable time.
We have the right in certain circumstances to force the conversion of all outstanding Preferred Units to common units. These circumstances include a situation in which
if the holders of a certain number of Preferred Units elect to convert the Preferred Units that they hold to common units, we could then force all remaining outstanding Preferred
Units to convert to common units. Ergon, the owner of our General Partner, owns enough Preferred Units such that if they were all converted to common units, we would be
able to exercise this mandatory conversion right. In addition, we also have the right to force the conversion of the outstanding Preferred Units at any time if (i) the daily
volume-weighted average trading price of our common units is greater than $8.45 for 20 out of the trailing 30 trading days ending two trading days before we furnish notice of
conversion and (ii) the average trading volume of our common units has exceeded 20,000 common units for 20 out of the trailing 30 trading days ending two trading days before
we furnish notice of conversion. In addition, the conversion provisions may be modified with the consent of a majority of the outstanding Preferred Units. As of March 23,
2020, Ergon owned 52.1% of our outstanding Preferred Units and has the ability to consent to amendments to such conversion provisions. As a result, our preferred
unitholders may be required to convert their Preferred Units at an undesirable time and may not receive their expected return on investment.
Ergon, as the holder of a majority of the outstanding Preferred Units, has the ability to consent to the amendments to the provisions of the Preferred Units.
The Preferred Units have voting rights that are identical to the voting rights of common units and vote with the common units as a single class, so that each Preferred
Unit is entitled to one vote for each common unit into which such Preferred Unit is convertible on each matter with respect to which each common unit is entitled to vote. In
addition, the approval of a majority of the Preferred Units, voting separately as a class, is necessary on any matter that adversely affects any of the rights of the Preferred Units
or amends or modifies the terms of the Preferred Units in any material respect or affects the holders of the Preferred Units disproportionately in relation to the holders of
common units, including, without limitation, any action that would (i) reduce the distribution amount to the Preferred Units or change the time or form of payment of
distributions, (ii) reduce the amount payable to the Preferred Units upon the liquidation of our partnership, (iii)modify the conditions relating to the conversion of the Preferred
Units or (iv) issue any equity security that, with respect to distributions or rights upon liquidation, ranks equal to orsenior to the Preferred Units or issue any additional
Preferred Units. As of March 23, 2020, Ergon owned 52.1% of our outstanding Preferred Units and has the ability to consent to amendments to the terms of the Preferred Units
without the consent of other unitholders.
Holders of the Preferred Units will not have rights to distributions as holders of common units until they acquire our common units.
Until our preferred unitholders acquire common units upon conversion of the Preferred Units, such preferred unitholders will have no rights with respect to distributions
on our common units. Upon conversion, our preferred unitholders will be entitled to exercise the rights of a holder of our common units only as to matters for which the record
date occurs after the date on which such Preferred Units were converted to our common units.
The Preferred Units are limited partner interests in our partnership and therefore are subordinate to any indebtedness.
The Preferred Units are limited partner interests in our partnership and do not constitute indebtedness. As such, the Preferred Units will rank junior to all indebtedness
and other non-equity claims on our partnership with respect to assets available to satisfy claims on our partnership, including in a liquidation of our partnership.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: bkepp
Note that the preferred shares are convertible at the holders request. I think it only makes sense if the common units (BKEP) go over $8.00. Ergon holds over 50% of the preferred units (BKEPP) and I see no reason for them to convert to the common units.
What I like most about the preferred units are (a) their dividends are fixed at 10.5% annual yield, (b) the dividends on BKEPP must be fully paid up before any dividends can be paid to common unit holders and (c) they sit in front of the common units in the unlikely event that the company is forced to liquidate.
I was told by the Company a few years ago that the founder of Ergon took control of BlueKnight so he could drop down assets in to BlueKnight for cash and more units. He can then give units to his heirs, allowing them to benefit from the cash distributions and hold publicly traded units that can be easily valued at his death. Very smart estate planning.
Once the recently announced assets sales close this quarter, I expect Ergon to transfer more accretive assets into BlueKnight.
Ergon is a BIG company. See: https://ergonasphalt.com/about
I think this one is a real "gem" and why you pay me the "Big Bucks". I urge all of you to read my recent profile on the company and take the time to understand it. Darn good dividends and lots of upside on this one.
What I like most about the preferred units are (a) their dividends are fixed at 10.5% annual yield, (b) the dividends on BKEPP must be fully paid up before any dividends can be paid to common unit holders and (c) they sit in front of the common units in the unlikely event that the company is forced to liquidate.
I was told by the Company a few years ago that the founder of Ergon took control of BlueKnight so he could drop down assets in to BlueKnight for cash and more units. He can then give units to his heirs, allowing them to benefit from the cash distributions and hold publicly traded units that can be easily valued at his death. Very smart estate planning.
Once the recently announced assets sales close this quarter, I expect Ergon to transfer more accretive assets into BlueKnight.
Ergon is a BIG company. See: https://ergonasphalt.com/about
I think this one is a real "gem" and why you pay me the "Big Bucks". I urge all of you to read my recent profile on the company and take the time to understand it. Darn good dividends and lots of upside on this one.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group