Item 1.01. Entry into a Material Definitive Agreement.
On January 9, 2020, Kimbell Royalty Partners, LP (the "Partnership") entered
into an Underwriting Agreement (the "Underwriting Agreement"), by and among the
Partnership, Kimbell Royalty GP, LLC (the "General Partner"), Kimbell Royalty
Operating, LLC (the "Operating Company" and collectively, the "Kimbell
Parties"), EIGF Aggregator III LLC ("EIGF"), TE Drilling Aggregator LLC
(together with EIGF, the "Selling Unitholders"), and Credit Suisse Securities
(USA) LLC, as representative of the several underwriters named in Schedule I
thereto (the "Underwriters"), providing for the offer and sale by the
Partnership (the "Offering"), and the purchase by the Underwriters, of 5,000,000
common units representing limited partner interests in the Partnership ("Common
Units") at a price to the public of $15.50 per Common Unit. Pursuant to the
Underwriting Agreement, the Selling Unitholders also granted the Underwriters an
option for a period of 30 days to purchase up to an additional 750,000 Common
Units on the same terms. The Partnership will not receive any of the proceeds
from the sale of Common Units to be offered by the Selling Unitholders. The
Offering is registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a shelf registration statement on Form S-3 (File
No. 333-230986), which was declared effective by the Securities and Exchange
Commission on May 23, 2019.
The Underwriting Agreement contains customary representations, warranties and
agreements of the parties, and customary conditions to closing, obligations of
the parties and termination provisions. The Kimbell Parties and the Selling
Unitholders have each agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect of those
liabilities.
The Offering is expected to close on January 14, 2020, subject to customary
closing conditions. The Partnership will receive proceeds (net of the
underwriting discount and offering expenses) from the Offering of approximately
$73.3 million. The Partnership intends to contribute the net proceeds from the
Offering to the Operating Company in exchange for 5,000,000 common units in the
Operating Company. The Operating Company will use the net proceeds from the
Offering to fund a portion of the cash purchase price of the previously
disclosed acquisition of all of the issued and outstanding limited liability
company interests in Springbok Energy Partners, LLC and Springbok Energy
Partners II, LLC (the "Springbok Acquisition") and to pay fees and expenses
related to the Springbok Acquisition. The Offering is not conditioned on the
consummation of the Springbok Acquisition. Pending the closing of the Springbok
Acquisition, the Operating Company intends to use the net proceeds from the
Offering to repay a portion of the outstanding borrowings under the
Partnership's revolving credit facility.
Each of Credit Suisse Securities (USA) LLC, RBC Capital Markets, LLC and Wells
Fargo Securities, LLC (the "Conflicted Underwriters"), each an Underwriter in
the Offering, are lenders under the Partnership's revolving credit facility that
will be repaid, in part, by the net proceeds of the Offering. Therefore, the
Conflicted Underwriters were each deemed to have a conflict of interest within
the meaning of Rule 5121 of the Financial Industry Regulatory Authority, Inc.
("FINRA"). Accordingly, the Offering was conducted in compliance with the
applicable provisions FINRA Rule 5121. The appointment of a "qualified
independent underwriter" was not
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required in connection with the Offering as a "bona fide public market," as
defined in FINRA Rule 5121, exists for the Common Units. To comply with FINRA
Rule 5121, the Conflicted Underwriters did not confirm sales to any account over
which they exercised discretionary authority without the specific written
approval of the account holder.
Further, the Underwriters and their respective affiliates are full service
financial institutions engaged in various activities, which may include
securities trading, commercial and investment banking, financial advisory,
investment management, investment research, principal investment, hedging,
financing and brokerage activities. Certain of the Underwriters and their
respective affiliates have, from time to time, performed, and may in the future
perform, various financial advisory and investment banking services for the
Partnership and its affiliates, for which they received or will receive
customary fees and expenses.
The foregoing description of the Underwriting Agreement is not complete and is
qualified in its entirety by reference to the full text of the Underwriting
Agreement, which is filed as Exhibit 1.1 to this Current Report on Form 8-K and
incorporated into this Item 1.01 by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Number Description
1.1 Underwriting Agreement, dated as of
January 9, 2020.
5.1 Opinion of Baker Botts L.L.P. as to
the legality of the securities being
registered.
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