The master limited partnership, a specialized structure in which a publicly held partnership receives an exemption from corporate taxes in return for periodically distributing all its available cash to investors, has been a fixture in the domestic oil and gas industry since 1981. But London-based oil terminal operator VTTI was the first MLP with most of its assets fixed outside North America to go public in the United States.
Prior to VTTI’s $422 million IPO, there had been fewer than 10 non-U.S. MLPs, and all of them were of shipping companies with long-term contracts that produced a steady cash flow. To achieve the best possible valuation in the public markets, Sean Wheeler of Latham & Watkins devised a contract structure that included a multiyear estimated minimum quarterly distribution, guaranteed by the MLP’s sponsor. He also worked with VTTI’s tax advisers in London and Amsterdam to resolve cross-border tax issues. In all, the process takes six to 12 months, Wheeler says.
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