Book of Jargon® – Master Limited Partnerships (MLPs)

An interactive glossary of MLP acronyms, slang, and terminology.

The Book of Jargon® – Master Limited Partnerships (MLPs) is one of a series of practice area-specific glossaries published by Latham & Watkins.

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The information contained is not legal advice and should not be construed as such.

The definitions contained in it are designed to provide an introduction to the applicable terms often encountered in master limited partnerships. These terms raise complex legal issues on which specific legal advice will be required. The terms are also subject to change as applicable laws and customary practice evolve.

As a general matter, the Book of Jargon® – MLPs is drafted from a US perspective.

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  • Accretive:
    an acquisition is “accretive” if it is expected to increase Distributable Cash Flow per Unit either immediately or over time after taking into account the cost of the acquisition
    Adjusted EBITDA or EBITDAX:
    EBITDA or EBITDAX on steroids. Refers to EBITDA or EBITDAX, as applicable, adjusted to eliminate the impact of certain unusual or non-cash items that the MLP believes are not indicative of the future performance of its business. For issuers that file reports with the SEC, disclosure of EBITDA, EBITDAX, Adjusted EBITDA, Adjusted EBITDAX and other “non-GAAP financial measures” must be done within the confines of Item 10 of Regulation S-K (in the case of certain public filings) and Regulation G of the SEC (in all cases). See EBITDA and EBITDAX.
    Adjusted Operating Surplus:
    Operating Surplus adjusted to reflect the ability of the MLP’s business to generate the cash needed for the MLP to pay the Minimum Quarterly Distribution. Adjusted Operating Surplus takes out the noise of Working Capital Borrowings and Cash Reserves to show whether the MLP is earning its distributions (as opposed to using Working Capital Borrowings or Cash Reserves to pay distributions). Adjusted Operating Surplus is the “earned” part of the “earned and paid” test used to determine the end of the Subordination Period.
    Adjusted Property:
    any Partnership property, the Carrying Value of which has been adjusted pursuant to a Book-Up Event or Book-Down Event in order to account for any Unrealized Gain/Loss on the property
    Agreed Value:
    the fair market value of Contributed Property or Adjusted Property at a specific point in time (i.e., at the time of the contribution of the Contributed Property or at the time of a Book-Up Event or Book-Down Event in the case of Adjusted Property) as determined by the General Partner
    a person to whom one or more Partner Interests have been transferred in a manner permitted under the Limited Partnership Agreement, but who has not been admitted as a Substituted Limited Partner
    a term used in MLP Partnership Agreements to distinguish certain types of related parties from actual “affiliates” or “indemnitees” of the Partnership and means, when used to indicate a relationship with any person, (a) any corporation or organization of which such person is a director, officer or partner or is, directly or indirectly, the owner of 20 percent or more of any class of voting stock or other voting interest; (b) any trust or other estate in which such person has at least a 20 percent beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity and (c) any relative or spouse of such person, or any relative of such spouse, who has the same principal residence as such person
    Available Cash:
    the MLP’s cash at the end of each quarter, which will be distributed to Unitholders. Technically, Available Cash is defined as all of the MLP’s cash on hand at the end of each fiscal quarter, less Cash Reserves, plus cash from Working Capital Borrowings made after the end of the quarter. MLPs are typically required by the terms of their Partnership Agreements (not by the tax laws) to pay out 100 percent of their Available Cash to the Limited Partners and the General Partner on a quarterly basis. However, the per-unit distribution amount is subject to the discretion of the General Partner. Some recent MLP IPOs do not have the concept of Available Cash or the requirement to distribute 100 percent of their available cash every quarter.

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