SEC Company Response from USA Compression Partners, LP (USAC) (CIK 0001522727) (USAC) — Aug 5, 2011
USA Compression Partners, LP (USAC) (CIK 0001522727)
Date: Aug. 5, 2011 · CIK: 0001522727 · Accession: 0001104659-11-044388
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 333-174803
Referenced dates: July 7, 2011
Letter
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Attn:
Ronald E. Alper, Staff Attorney
Re:
USA Compression Partners, LP Registration Statement on Form S-1 File No. 333-174803 Filed June 9, 2011
Ladies and Gentlemen:
Set forth below are the responses of USA Compression Partners, LP, a Delaware limited partnership (the “Partnership”), to comments received from the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) by letter dated July 7, 2011 with respect to the Partnership’s Form S-1 initially filed with the Commission on June 9, 2011, File No. 333-174803 (the “Registration Statement”).
Concurrently with the submission of this letter, the Partnership has filed through EDGAR Amendment No. 1 to the Registration Statement (“Amendment No. 1”). For your convenience, four copies of this letter, as well as four copies of Amendment No. 1 marked to show all changes made since the initial filing of the Registration Statement, will be hand delivered to your offices.
For your convenience, each response is prefaced by the exact text of the Staff’s corresponding comment in bold text. All references to page numbers and captions correspond to Amendment No. 1, unless otherwise indicated. The responses in this letter are based on representations made by the Partnership to Latham & Watkins LLP for the purpose of preparing this letter.
Form S-1 Filed June 9, 2011
General
1. We note a number of blank spaces throughout your registration statement for information
that may not properly be excluded under Rule 430A of Regulation C. Provide all information required with respect to a bona fide offering price range, the number of common units and all other information left blank in your prospectus that you are not permitted to omit pursuant to Rule 430A as soon as practicable. Please allow us sufficient time to review your complete disclosure prior to any distribution of preliminary prospectuses.
Response: The Partnership acknowledges the Staff’s comment and will provide in future amendments all information in the Registration Statement that may not be excluded under Rule 430A of Regulation C. The Partnership will allow sufficient time for the Staff to review the complete disclosure and for the Partnership to respond to any comments that may result from the Staff’s review prior to the distribution of the preliminary prospectus.
2. Please update all information in the prospectus to the most recent practicable date.
Response: The Partnership acknowledges the Staff’s comment, and has updated all information in Amendment No. 1 as of the most recent practicable date.
3. Prior to the effectiveness of this registration statement, please have a representative of the Financial Industry Regulatory Authority confirm to us that they have completed their review, including their review regarding the underwriting compensation terms and arrangements pertaining to this offering.
Response: The Partnership acknowledges the Staff’s comment.
4. Please provide us with any gatefold information such as pictures, graphics or artwork that will be used in the prospectus.
Response: The Partnership acknowledges the Staff’s comment and will provide copies of all pictures, graphics or artwork the Partnership proposes to include in the prospectus prior to distribution of the preliminary prospectus.
5. Please disclose the underwriters for this offering. We will not continue to process the filing if the next amendment does not include such information.
Response: The Partnership has revised the cover page of the prospectus and the “Underwriting” section beginning on page 176 of Amendment No. 1 to identify the underwriters for this offering.
6. Please provide a description of the Amended and Restated Limited Liability Company Agreement of USA Compression GP, LLC, which is included as an exhibit.
Response: The Partnership has revised page 109 of Amendment No. 1 to include a description of the Amended and Restated Limited Liability Company Agreement of USA Compression GP, LLC.
7. Please provide a description, and include as an exhibit, the Amended and Restated Limited Liability Company Agreement of USA Compression Holdings, LLC.
Response: As set forth on page 8 of the Registration Statement, USA Compression Holdings,
LLC’s relationship to the Partnership following the closing of the offering will be limited to its ownership of common and subordinated units of the Partnership and its ownership of USA Compression GP, LLC, the Partnership’s General Partner. Accordingly, the Partnership does not believe that the Amended and Restated Limited Liability Company Agreement of USA Compression Holdings, LLC is a “material contract” within the meaning of Item 601(b)(10) of Regulation S-K, “articles” or “bylaws” within the meaning of Item 601(b)(3) of Regulation S-K or an “instrument defining the rights of security holders” within the meaning of Item 601(b)(4) of Regulation S-K, and has not filed it as an exhibit to the Registration Statement or summarized its terms therein.
8. In an appropriate place, please clarify whether USA Compression Holdings, LLC holds all of your limited partner interests; if not, please provide further disclosure regarding your current ownership structure.
Response: The Partnership has revised page 7 of Amendment No. 1 to clarify that, prior to completion of the offering, USA Compression Holdings, LLC holds all of the Partnership’s limited partner interests.
Summary, page 1
9. Please disclose the basis for your assertions about your or your affiliates’ competitive position within your industry. As examples only, and not an exhaustive list:
· You state on pages 1, 76 and 97 that you are “one of the largest independent providers of compression services in the U.S.”
· You refer on pages 76 and 77 to your operation “in some of the fastest growing U.S. natural gas shale plays.”
· You refer to your “superior service run times” on page 78.
If the statement is based on a study, article or report, please disclose the source of the information in your filing and provide copies of these documents to us supplementally, appropriately marked to highlight the sections relied upon. If you funded or were otherwise affiliated with any such study or report, please disclose this. Note that if any of this information was prepared by a third party for inclusion in this registration statement, you should file the consent of such party as an exhibit. Otherwise, please confirm that these sources are widely available to the public. If you do not have appropriate independent support for a statement, please revise the language to make clear that this is your belief based on your experience in the industry, if true.
Response: The Partnership has revised pages 1, 76, 78 and 97 of Amendment No. 1 to clarify that the assertions identified by the Staff were made on the basis of the Partnership’s belief.
The Partnership has also revised pages 2 and 76 of Amendment No. 1 to reference the U.S. Energy Information Administration report that is the basis of the referenced assertions.
10. Please provide citations to the relevant U.S. Energy Information Agency reports so that investors may refer to them. Please also provide us supplementally with such reports, appropriately marked to highlight the sections relied upon.
Response: The Partnership has revised pages 2, 3, 76, 77 and 97 of Amendment No. 1 to include citations to the relevant U.S. Energy Information Agency report. The Partnership will provide the Staff copies of the relevant U.S. Energy Information Agency report supplementally, marked to highlight the sections relied upon.
Business Strategies, page 3
Pursue accretive acquisition opportunities, page 3
11. Please indicate, here and elsewhere as appropriate, whether you have engaged in any discussions or otherwise identified any potential acquisition targets. We note that you indicate on page 23 that you have not actively pursued acquisitions previously.
Response: The Partnership has revised pages 4 and 23 of Amendment No. 1 in response to the Staff’s comment.
Competitive Strengths, page 4
12. If you choose to highlight your company’s competitive strengths in the summary, please balance that disclosure with a discussion of the principal competitive challenges facing the company.
Response: The Partnership has revised page 5 of Amendment No. 1 in response to the Staff’s comment.
Our Management, page 9
13. Please briefly describe and quantify the general partner’s and its affiliates’ fees and expenses that are paid prior to the distributions. Make similar disclosures elsewhere in the filing as applicable. Refer to Securities Act Release No. 33-6900.
Response: As disclosed on page 9 of Amendment No. 1, the Partnership’s general partner will not receive any management fee or other compensation in connection with the management of the Partnership’s business or the offering, but the Partnership’s general partner will be entitled to reimbursement of all direct and indirect expenses incurred on the Partnership’s behalf. The Partnership has revised page 9 of Amendment No. 1 to provide disclosure regarding an estimate of those expenses for the twelve months ending September 30, 2012 (with the actual estimate to be included in a subsequent amendment once determined).
Risk Factors, page 20
Risks Inherent in an Investment in Us, page 30
USA Compression Holdings may sell units..., page 36
14. You refer to a section entitled “Certain Relationships and Related Party Transactions – Agreements with Affiliates – Registration Rights Agreement,” however, we do not see the section. Please advise.
Response: The Partnership has revised page 36 of Amendment No. 1 to correct this cross-reference.
Our Cash Distribution Policy and Restrictions on Distributions, page 46
15. Please describe in greater detail the operating fees and expenses paid to the general partner and quantify these payments here and elsewhere in the filing as applicable. Refer to Securities Act Release No. 33-6900.
Response: The Partnership has revised “Our Cash Distribution Policy and Restrictions on Distributions—General—Limitations on cash distributions and our ability to change our cash distribution policy” on page 47 of Amendment No. 1 to clarify that the Partnership’s general partner will be entitled to reimbursement of all direct and indirect expenses incurred on the Partnership’s behalf, and to provide disclosure regarding an estimate of those expenses for the twelve months ending September 30, 2012 (with the actual estimate to be included in a subsequent amendment once determined).
Our Minimum Quarterly Distribution, page 47
16. You state that the actual amounts of distributions were based on the amount of cash you generate from your business as well as the amount of cash reserves your general partner established in accordance with the partnership agreement. Please tell us and disclose how much of the cash reserves you plan to establish and how they were determined here and elsewhere in the filing.
Response: The board of directors of the Partnership’s general partner is entitled to establish reserves on the Partnership’s behalf for the prudent conduct of its business and for future cash distributions to its unitholders. The Partnership has revised page 49 of Amendment No. 1 to clarify that the Partnership does not intend to establish cash reserves as of the closing of this offering or during the twelve months ending September 30, 2012.
Estimated Cash Available for Distribution for the Twelve Months Ending September 30, 2012, page 51
17. We note that the most recent historical and pro forma financial statements for the three months period ended March 31, 2011. In that regard, we are unclear why it is appropriate to present the forecasted estimated adjusted EBITDA as well as the estimated cash available for distribution for the twelve month periods ended September 30, 2012. We believe it is very difficult, if possible, to reasonably project financial information for any forecasted period more than twelve months from the most recent historical financial statements presented. As such, we believe you should consider revising the statement to cover the twelve months from the most recent historical financial statements presented such as presenting the statement for the period ended March 31, 2012 with respect to this filing as opposed to the same period ended September 30, 2012.
Response: The Partnership believes that providing an estimate of cash available for distribution for a twelve-month period that commences closer to the marketing and closing of the offering (currently estimated to occur in mid to late September 2011) provides more meaningful prospective information to potential investors than forecasting for an earlier period (i.e., for the twelve months ending June 30,
2012). In addition, given the long-term nature of the Partnership’s customer relationships, the amount of revenue currently under contract with existing customers and expected to be under contract through September 30, 2012, the Partnership’s history of maintaining high utilization rates, and the Partnership’s management’s substantial experience in the compression services industry, the Partnership believes that its ability to forecast financial information for the twelve months ending September 30, 2012 is not significantly different from its ability to forecast financial information for the twelve months ending June 30, 2012. Therefore, the Partnership believes that it is appropriate to present its estimate of cash available for distribution for a twelve-month period ending September 30, 2012.
18. We are unclear why you did not provide for cash reserves reduction to estimated adjusted EBITDA on page 53 to arrive at estimated cash available for distribution. Please advise us or revise.
Response: The Partnership does not anticipate creating or contributing to any cash reserves during the twelve months ending September 30, 2012.
19. Explain to us why you did not subtract principal re-payments in connection with your long-term debt for the period to arrive at the estimated cash available for distribution or revise.
Response: The Partnership’s long-term debt is comprised solely of a revolving credit facility with a maturity date of October 5, 2015. Until the maturity date, no principal repayments are required by the credit agreement governing this credit facility. As a result, the Partnership has not subtracted any principal repayments from the Partnership’s estimated cash available for distribution.
Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 76
Financial Results of Operations, page 83
Three months ended March 31, 2011 compared to the three months ended March 31, 2011, page 83
20. Refer to the table that summarizes the operating results for the periods presented. Please label the column headers as predecessor and successor and distinguish the two reporting periods with a heavy black line.
Response: The Partnership has revised pages 8
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CORRESP 1 filename1.htm 717 Texas Avenue, 16th floor Houston, TX 77002 Tel: +1.713.546.5400 Fax: +1.713.546.5401 www.lw.com FIRM / AFFILIATE OFFICES Abu Dhabi Moscow Barcelona Munich Beijing New Jersey Boston New York Brussels Orange County Chicago Paris Doha Riyadh Dubai Rome Frankfurt San Diego August 5, 2011 Hamburg San Francisco Hong Kong Shanghai Via EDGAR and Facsimile Houston Silicon Valley London Singapore Securities and Exchange Commission Los Angeles Tokyo Division of Corporation Finance Madrid Washington, D.C. 100 F Street, N.E. Milan Washington, D.C. 20549-4628 Attn: Ronald E. Alper, Staff Attorney Re: USA Compression Partners, LP Registration Statement on Form S-1 File No. 333-174803 Filed June 9, 2011 Ladies and Gentlemen: Set forth below are the responses of USA Compression Partners, LP, a Delaware limited partnership (the “Partnership”), to comments received from the staff of the Division of Corporation Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) by letter dated July 7, 2011 with respect to the Partnership’s Form S-1 initially filed with the Commission on June 9, 2011, File No. 333-174803 (the “Registration Statement”). Concurrently with the submission of this letter, the Partnership has filed through EDGAR Amendment No. 1 to the Registration Statement (“Amendment No. 1”). For your convenience, four copies of this letter, as well as four copies of Amendment No. 1 marked to show all changes made since the initial filing of the Registration Statement, will be hand delivered to your offices. For your convenience, each response is prefaced by the exact text of the Staff’s corresponding comment in bold text. All references to page numbers and captions correspond to Amendment No. 1, unless otherwise indicated. The responses in this letter are based on representations made by the Partnership to Latham & Watkins LLP for the purpose of preparing this letter. Form S-1 Filed June 9, 2011 General 1. We note a number of blank spaces throughout your registration statement for information that may not properly be excluded under Rule 430A of Regulation C. Provide all information required with respect to a bona fide offering price range, the number of common units and all other information left blank in your prospectus that you are not permitted to omit pursuant to Rule 430A as soon as practicable. Please allow us sufficient time to review your complete disclosure prior to any distribution of preliminary prospectuses. Response: The Partnership acknowledges the Staff’s comment and will provide in future amendments all information in the Registration Statement that may not be excluded under Rule 430A of Regulation C. The Partnership will allow sufficient time for the Staff to review the complete disclosure and for the Partnership to respond to any comments that may result from the Staff’s review prior to the distribution of the preliminary prospectus. 2. Please update all information in the prospectus to the most recent practicable date. Response: The Partnership acknowledges the Staff’s comment, and has updated all information in Amendment No. 1 as of the most recent practicable date. 3. Prior to the effectiveness of this registration statement, please have a representative of the Financial Industry Regulatory Authority confirm to us that they have completed their review, including their review regarding the underwriting compensation terms and arrangements pertaining to this offering. Response: The Partnership acknowledges the Staff’s comment. 4. Please provide us with any gatefold information such as pictures, graphics or artwork that will be used in the prospectus. Response: The Partnership acknowledges the Staff’s comment and will provide copies of all pictures, graphics or artwork the Partnership proposes to include in the prospectus prior to distribution of the preliminary prospectus. 5. Please disclose the underwriters for this offering. We will not continue to process the filing if the next amendment does not include such information. Response: The Partnership has revised the cover page of the prospectus and the “Underwriting” section beginning on page 176 of Amendment No. 1 to identify the underwriters for this offering. 6. Please provide a description of the Amended and Restated Limited Liability Company Agreement of USA Compression GP, LLC, which is included as an exhibit. Response: The Partnership has revised page 109 of Amendment No. 1 to include a description of the Amended and Restated Limited Liability Company Agreement of USA Compression GP, LLC. 7. Please provide a description, and include as an exhibit, the Amended and Restated Limited Liability Company Agreement of USA Compression Holdings, LLC. Response: As set forth on page 8 of the Registration Statement, USA Compression Holdings, 2 LLC’s relationship to the Partnership following the closing of the offering will be limited to its ownership of common and subordinated units of the Partnership and its ownership of USA Compression GP, LLC, the Partnership’s General Partner. Accordingly, the Partnership does not believe that the Amended and Restated Limited Liability Company Agreement of USA Compression Holdings, LLC is a “material contract” within the meaning of Item 601(b)(10) of Regulation S-K, “articles” or “bylaws” within the meaning of Item 601(b)(3) of Regulation S-K or an “instrument defining the rights of security holders” within the meaning of Item 601(b)(4) of Regulation S-K, and has not filed it as an exhibit to the Registration Statement or summarized its terms therein. 8. In an appropriate place, please clarify whether USA Compression Holdings, LLC holds all of your limited partner interests; if not, please provide further disclosure regarding your current ownership structure. Response: The Partnership has revised page 7 of Amendment No. 1 to clarify that, prior to completion of the offering, USA Compression Holdings, LLC holds all of the Partnership’s limited partner interests. Summary, page 1 9. Please disclose the basis for your assertions about your or your affiliates’ competitive position within your industry. As examples only, and not an exhaustive list: · You state on pages 1, 76 and 97 that you are “one of the largest independent providers of compression services in the U.S.” · You refer on pages 76 and 77 to your operation “in some of the fastest growing U.S. natural gas shale plays.” · You refer to your “superior service run times” on page 78. If the statement is based on a study, article or report, please disclose the source of the information in your filing and provide copies of these documents to us supplementally, appropriately marked to highlight the sections relied upon. If you funded or were otherwise affiliated with any such study or report, please disclose this. Note that if any of this information was prepared by a third party for inclusion in this registration statement, you should file the consent of such party as an exhibit. Otherwise, please confirm that these sources are widely available to the public. If you do not have appropriate independent support for a statement, please revise the language to make clear that this is your belief based on your experience in the industry, if true. Response: The Partnership has revised pages 1, 76, 78 and 97 of Amendment No. 1 to clarify that the assertions identified by the Staff were made on the basis of the Partnership’s belief. The Partnership has also revised pages 2 and 76 of Amendment No. 1 to reference the U.S. Energy Information Administration report that is the basis of the referenced assertions. 10. Please provide citations to the relevant U.S. Energy Information Agency reports so that investors may refer to them. Please also provide us supplementally with such reports, appropriately marked to highlight the sections relied upon. 3 Response: The Partnership has revised pages 2, 3, 76, 77 and 97 of Amendment No. 1 to include citations to the relevant U.S. Energy Information Agency report. The Partnership will provide the Staff copies of the relevant U.S. Energy Information Agency report supplementally, marked to highlight the sections relied upon. Business Strategies, page 3 Pursue accretive acquisition opportunities, page 3 11. Please indicate, here and elsewhere as appropriate, whether you have engaged in any discussions or otherwise identified any potential acquisition targets. We note that you indicate on page 23 that you have not actively pursued acquisitions previously. Response: The Partnership has revised pages 4 and 23 of Amendment No. 1 in response to the Staff’s comment. Competitive Strengths, page 4 12. If you choose to highlight your company’s competitive strengths in the summary, please balance that disclosure with a discussion of the principal competitive challenges facing the company. Response: The Partnership has revised page 5 of Amendment No. 1 in response to the Staff’s comment. Our Management, page 9 13. Please briefly describe and quantify the general partner’s and its affiliates’ fees and expenses that are paid prior to the distributions. Make similar disclosures elsewhere in the filing as applicable. Refer to Securities Act Release No. 33-6900. Response: As disclosed on page 9 of Amendment No. 1, the Partnership’s general partner will not receive any management fee or other compensation in connection with the management of the Partnership’s business or the offering, but the Partnership’s general partner will be entitled to reimbursement of all direct and indirect expenses incurred on the Partnership’s behalf. The Partnership has revised page 9 of Amendment No. 1 to provide disclosure regarding an estimate of those expenses for the twelve months ending September 30, 2012 (with the actual estimate to be included in a subsequent amendment once determined). Risk Factors, page 20 Risks Inherent in an Investment in Us, page 30 USA Compression Holdings may sell units..., page 36 14. You refer to a section entitled “Certain Relationships and Related Party Transactions – Agreements with Affiliates – Registration Rights Agreement,” however, we do not see the section. Please advise. 4 Response: The Partnership has revised page 36 of Amendment No. 1 to correct this cross-reference. Our Cash Distribution Policy and Restrictions on Distributions, page 46 15. Please describe in greater detail the operating fees and expenses paid to the general partner and quantify these payments here and elsewhere in the filing as applicable. Refer to Securities Act Release No. 33-6900. Response: The Partnership has revised “Our Cash Distribution Policy and Restrictions on Distributions—General—Limitations on cash distributions and our ability to change our cash distribution policy” on page 47 of Amendment No. 1 to clarify that the Partnership’s general partner will be entitled to reimbursement of all direct and indirect expenses incurred on the Partnership’s behalf, and to provide disclosure regarding an estimate of those expenses for the twelve months ending September 30, 2012 (with the actual estimate to be included in a subsequent amendment once determined). Our Minimum Quarterly Distribution, page 47 16. You state that the actual amounts of distributions were based on the amount of cash you generate from your business as well as the amount of cash reserves your general partner established in accordance with the partnership agreement. Please tell us and disclose how much of the cash reserves you plan to establish and how they were determined here and elsewhere in the filing. Response: The board of directors of the Partnership’s general partner is entitled to establish reserves on the Partnership’s behalf for the prudent conduct of its business and for future cash distributions to its unitholders. The Partnership has revised page 49 of Amendment No. 1 to clarify that the Partnership does not intend to establish cash reserves as of the closing of this offering or during the twelve months ending September 30, 2012. Estimated Cash Available for Distribution for the Twelve Months Ending September 30, 2012, page 51 17. We note that the most recent historical and pro forma financial statements for the three months period ended March 31, 2011. In that regard, we are unclear why it is appropriate to present the forecasted estimated adjusted EBITDA as well as the estimated cash available for distribution for the twelve month periods ended September 30, 2012. We believe it is very difficult, if possible, to reasonably project financial information for any forecasted period more than twelve months from the most recent historical financial statements presented. As such, we believe you should consider revising the statement to cover the twelve months from the most recent historical financial statements presented such as presenting the statement for the period ended March 31, 2012 with respect to this filing as opposed to the same period ended September 30, 2012. Response: The Partnership believes that providing an estimate of cash available for distribution for a twelve-month period that commences closer to the marketing and closing of the offering (currently estimated to occur in mid to late September 2011) provides more meaningful prospective information to potential investors than forecasting for an earlier period (i.e., for the twelve months ending June 30, 5 2012). In addition, given the long-term nature of the Partnership’s customer relationships, the amount of revenue currently under contract with existing customers and expected to be under contract through September 30, 2012, the Partnership’s history of maintaining high utilization rates, and the Partnership’s management’s substantial experience in the compression services industry, the Partnership believes that its ability to forecast financial information for the twelve months ending September 30, 2012 is not significantly different from its ability to forecast financial information for the twelve months ending June 30, 2012. Therefore, the Partnership believes that it is appropriate to present its estimate of cash available for distribution for a twelve-month period ending September 30, 2012. 18. We are unclear why you did not provide for cash reserves reduction to estimated adjusted EBITDA on page 53 to arrive at estimated cash available for distribution. Please advise us or revise. Response: The Partnership does not anticipate creating or contributing to any cash reserves during the twelve months ending September 30, 2012. 19. Explain to us why you did not subtract principal re-payments in connection with your long-term debt for the period to arrive at the estimated cash available for distribution or revise. Response: The Partnership’s long-term debt is comprised solely of a revolving credit facility with a maturity date of October 5, 2015. Until the maturity date, no principal repayments are required by the credit agreement governing this credit facility. As a result, the Partnership has not subtracted any principal repayments from the Partnership’s estimated cash available for distribution. Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 76 Financial Results of Operations, page 83 Three months ended March 31, 2011 compared to the three months ended March 31, 2011, page 83 20. Refer to the table that summarizes the operating results for the periods presented. Please label the column headers as predecessor and successor and distinguish the two reporting periods with a heavy black line. Response: The Partnership has revised pages 8