PROSPECTUS
SUPPLEMENT
|
|
(to
Prospectus dated October 1, 2008)
|
Per
Common Unit
|
Total
|
|||||||
Public
offering price
|
$ | 8.85 | $ | 51,330,000 | ||||
Underwriting
discount
|
$ | 0.43 | $ | 2,494,000 | ||||
Proceeds
to us (before expenses)
|
$ | 8.42 | $ | 48,836,000 |
Joint
Book-Running Managers
|
|
UBS
Investment Bank
|
Citi
|
Senior
Manager
|
|
Barclays Capital | |
Co-Managers
|
|
Oppenheimer
& Co.
|
Stifel
Nicolaus
|
Where
you can find more information
|
S-1
|
Incorporation
of documents by reference
|
S-1
|
Forward-looking
statements
|
S-2
|
Summary
|
S-5
|
Risk
factors
|
S-9
|
Use
of proceeds
|
S-12
|
Capitalization
|
S-13
|
Price
range of common units and distributions
|
S-14
|
Material
U.S. federal income tax considerations
|
S-15
|
Underwriting
|
S-22
|
Legal
matters
|
S-27
|
Experts
|
S-27
|
Expenses
|
S-28
|
Capital
Product Partners L.P.
|
1
|
Where
you can find more information
|
2
|
Forward-looking
statements
|
4
|
Risk
factors
|
6
|
Use
of proceeds
|
31
|
Price
range of common units
|
32
|
Description
of the common units
|
33
|
Description
of the subordinated units
|
35
|
Cash
distributions
|
37
|
Material
U.S. federal income tax considerations
|
40
|
Environmental
and other regulations
|
48
|
Profit
sharing arrangements
|
49
|
Selling
unitholder
|
50
|
Plan
of distribution
|
51
|
Service
of process and enforcement of civil liabilities
|
53
|
Legal
matters
|
53
|
Experts
|
53
|
Expenses
|
54
|
Ø
|
our
Annual Report on Form 20-F for the fiscal year ended December 31,
2009;
|
Ø
|
all
subsequent Annual Reports on Form 20-F filed prior to the termination of
this offering;
|
Ø
|
our
Current Report on Form 6-K filed with the SEC on February 22, 2010
containing the audited balance sheets of our general partner, Capital GP
L.L.C.;
|
Ø
|
all
subsequent Current Reports on Form 6-K filed prior to the termination of
this offering that we identify in such reports as being incorporated by
reference into the registration statement of which this prospectus is a
part; and
|
Ø
|
the
description of our common units contained in our Registration Statement on
Form 8-A filed on March 20, 2007, including any subsequent amendments or
reports filed for the purpose of updating such
description.
|
Ø
|
These
reports contain important information about us, our financial condition
and our results of operations.
|
Ø
|
should
not in all instances be treated as categorical statements of fact, but
rather as a way of allocating the risk to one of the parties if those
statements prove to be inaccurate;
|
Ø
|
have
been qualified by disclosures that may have been made to the other party
in connection with the negotiation of the applicable agreement, which
disclosures are not necessarily reflected in the
agreement;
|
Ø
|
may
apply standards of materiality in a way that is different from what may be
viewed as material to you or other investors;
and
|
Ø
|
were
made only as of the date of the applicable agreement (or such other date
or dates as may be specified in the agreement) and are subject to more
recent developments.
|
Ø
|
expectations
of our ability to make cash distributions on the
units;
|
Ø
|
our
future financial condition or results of operations and our future
revenues and expenses, including revenues from profit sharing arrangements
and required levels of reserves;
|
Ø
|
future
levels of operating surplus and levels of distributions as well as our
future cash distribution policy;
|
Ø
|
the
potential results of the early termination of the subordination
period;
|
Ø
|
tanker
market conditions and fundamentals, including the balance of supply and
demand in those markets;
|
Ø
|
future
charter hire rates and vessel
values;
|
Ø
|
anticipated
future acquisition of vessels from Capital Maritime & Trading Corp.
(“Capital Maritime”) or from third
parties;
|
Ø
|
anticipated
chartering arrangements with Capital Maritime in the
future;
|
Ø
|
our
anticipated growth strategies;
|
Ø
|
our
ability to access debt, credit and equity
markets;
|
Ø
|
the
repayment of debt and settling of interest rate swaps, if
any;
|
Ø
|
the
effectiveness of our risk management policies and procedures and the
ability of counterparties to own derivative contracts to fulfill their
contractual obligations;
|
Ø
|
future
refined product and crude oil prices and
production;
|
Ø
|
planned
capital expenditures and availability of capital resources to fund capital
expenditures;
|
Ø
|
future
supply of, and demand for, refined products and crude
oil;
|
Ø
|
increases
in domestic or worldwide oil
consumption;
|
Ø
|
changes
in interest rates;
|
Ø
|
our
ability to maintain long-term relationships with major refined product
importers and exporters, major crude oil companies, and major commodity
traders;
|
Ø
|
our
ability to maximize the use of our vessels, including the re-deployment or
disposition of vessels no longer under long-term time
charter;
|
Ø
|
our
ability to leverage to our advantage Capital Maritime’s relationships and
reputation in the shipping
industry;
|
Ø
|
our
continued ability to enter into long-term, fixed-rate time charters with
our tanker charterers and to re-charter our vessels as their existing
charters expire;
|
Ø
|
obtaining
tanker projects that we or Capital Maritime bid
on;
|
Ø
|
changes
in the supply of tanker vessels, including newbuildings or lower than
anticipated scrapping of older
vessels;
|
Ø
|
our
ability to compete successfully for future chartering and newbuilding
opportunities;
|
Ø
|
the
expected changes to the regulatory requirements applicable to the oil
transportation industry, including, without limitation, requirements
adopted by international organizations or by individual countries or
charterers and actions taken by regulatory authorities and governing such
areas as safety and environmental
compliance;
|
Ø
|
the
expected cost of, and our ability to comply with, governmental regulations
and maritime self-regulatory organization standards, as well as standard
regulations imposed by our charterers applicable to our
business;
|
Ø
|
our
anticipated general and administrative expenses and our expenses under the
management agreement and the administrative services agreement with
Capital Ship Management Corp., a subsidiary of Capital Maritime (“Capital
Ship Management”), and for reimbursement for fees and costs of our general
partner;
|
Ø
|
increases
in costs and expenses including but not limited to: crew wages, insurance,
provisions, lube oil, bunkers, repairs, maintenance and general and
administrative expenses;
|
Ø
|
the
adequacy of our insurance
arrangements;
|
Ø
|
the
expected impact of heightened environmental and quality concerns of
insurance underwriters, regulators and
charterers;
|
Ø
|
the
anticipated taxation of our partnership and distributions to our
unitholders;
|
Ø
|
estimated
future maintenance and replacement capital
expenditures;
|
Ø
|
expected
demand in the shipping sectors in which we operate in general and the
demand for our medium range vessels in
particular;
|
Ø
|
the
expected lifespan of our vessels;
|
Ø
|
our
ability to employ and retain key
employees;
|
Ø
|
customers’
increasing emphasis on environmental and safety
concerns;
|
Ø
|
expected
financial flexibility to pursue acquisitions and other expansion
opportunities;
|
Ø
|
anticipated
funds for liquidity needs and the sufficiency of cash
flows;
|
Ø
|
our
ability to increase our distributions over
time;
|
Ø
|
future
sales of our units in the public market;
and
|
Ø
|
our
business strategy and other plans and objectives for future
operations.
|
Summary
This summary highlights
information contained elsewhere or incorporated by reference in this
prospectus. You should carefully read the entire prospectus and the
documents incorporated by reference to understand fully our business and
the terms of our common units, as well as other considerations that may be
important to you in making your investment decision. You should pay
special attention to the “Risk Factors” beginning on page S-9 of this prospectus supplement
and page 6 of the accompanying prospectus for more information about
important risks that you should consider carefully before buying our
common units.
Unless
we otherwise specify, when used in this prospectus, the terms “we,” “our,”
“us,” the “Company” or similar terms refer to Capital Product Partners
L.P. or any one or more of its subsidiaries, or to all of such entities.
References in this prospectus to “Capital Maritime” refer, depending on
the context, to Capital Maritime &Trading Corp. and/or any one or more
of its subsidiaries, including Capital Ship Management Corp. (an affiliate
of our general partner). Capital Ship Management Corp. manages the
commercial and technical operation of our fleet pursuant to a management
agreement and provides administrative services to us pursuant to an
administrative services agreement. References in this prospectus to
“Capital Ship Management” are to Capital Ship Management Corp. Unless
otherwise indicated, all references to “dollars” and “$” in this
prospectus are to, and amounts are presented in, U.S.
Dollars.
OVERVIEW
We
are an international owner of product tankers formed by Capital Maritime,
an international shipping company with a long history of operating and
investing in the shipping market. We completed our initial public offering
(the “IPO”) in April 2007. Our fleet currently consists of 18 double-hull
tankers with an average age of approximately 3.5 years as of December 31,
2009. Our 18 vessels trade on a worldwide basis and are capable of
carrying crude oil, refined oil products, such as gasoline, diesel, fuel
oil and jet fuel, as well as edible oils and certain chemicals such as
ethanol. We currently charter 17 of our 18 vessels under medium to
long-term time and bareboat charters (for a period of two to 10 years,
with a revenue weighted average remaining term of approximately 3.7 years
as of December 31, 2009) to large charterers such as BP Shipping Limited,
Morgan Stanley Capital Group Inc., Shell International Trading &
Shipping Company Ltd. and subsidiaries of Overseas Shipholding
Group Inc. All our time and bareboat charters provide for the receipt
of a fixed base rate for the life of the charter. In addition, 10 of our
11 time charters also provide for profit sharing arrangements in excess of
the base rate. Capital Maritime owns a 46.6% interest in us,
including 11,304,651 common units and a 2% interest in us through its
ownership of our general partner.
RECENT
DEVELOPMENTS
Acquisition
of the M/T Atrotos
On
February 22, 2010, we entered into a share purchase agreement with Capital
Maritime, pursuant to which we will purchase all of the outstanding
capital stock of the subsidiary that holds the beneficial ownership of the
M/T Atrotos (the “Atrotos Subsidiary”), a 47,786 dwt, Ice Class 1A,
chemical/product tanker built in 2007, for a total consideration of $43
million. Under the terms of the share purchase agreement, all assets and
liabilities of the Atrotos Subsidiary, except the vessel, necessary
permits, the finance lease agreement and the trust agreements described
below, will be retained by Capital Maritime. We intend to use the net
proceeds from this offering to finance the purchase price of the shares
and the closing of the acquisition is subject to the successful completion
of this offering.
We
originally acquired the M/T Atrotos from Capital Maritime in May 2007,
when it was chartered to Morgan Stanley under a time charter scheduled to
expire in April 2010. We exchanged the vessel in April 2009 for another
vessel in Capital Maritime’s fleet, the M/T Ayrton II, which has been
chartered to BP Shipping Limited under a time charter with expected
expiration in March 2011. Following the exchange, the Atrotos Subsidiary
leased the vessel to Arrendadora Ocean Mexicana, S.A. de C.V.
(“Arrendadora”) pursuant to a finance lease agreement. In accordance with
the finance lease agreement, Arrendadora has renamed
the M/T Atrotos as M/T El Pipila and registered the vessel under
Mexican flag. The vessel was subsequently delivered by Arrendadora to
Petroleos Mexicanos (“Pemex”), the state-owned Mexican petroleum company,
under a bareboat charter agreement expected to expire in March 2014. The
rental payment under the finance lease agreement is $16,825 per day. The
net base rate under the charter is $19,900 per day.
In
accordance with the terms of the finance lease agreement, and in order to
mitigate any counterparty performance risk, all Arrendadora’s rights to
collect payments under its agreement with Pemex have been assigned to The
Bank of New York Mellon, S.A., Institucion de Bance Multiple (“BONY”),
acting as trustee. Pursuant to the finance lease agreement, the Atrotos
Subsidiary entered into an administration trust agreement with, among
others, BONY and Arrendadora in January 2010, pursuant to which the
trustee will collect payments under the bareboat charter from Pemex and,
in turn, pay the agreed rental payment under the finance lease agreement
to the Atrotos Subsidiary. In addition, the Atrotos Subsidiary entered
into a guarantee trust agreement with, among others, BONY, in December
2009, pursuant to which title to the M/T Atrotos has been transferred to
BONY, acting as trustee, and the beneficial ownership of the vessel has
been retained by the Atrotos Subsidiary, enabling the Atrotos Subsidiary
to offer the vessel as security under any loan
agreement.
|
Arrendadora
has retained Capital Ship Management for the technical management of the
vessel under a technical management agreement, pursuant to which the
vessel’s operating expenses have been fixed until the expiration of the
charter at a daily rate of $3,075. We will retain Capital Ship Management,
pursuant to an amendment to our general management agreement with Capital
Ship Management, to provide management services in connection with the M/T
Atrotos at a fixed daily rate of $500.
The
proposed transaction has been approved by our board of directors following
approval by the conflicts committee of independent directors. The
conflicts committee retained outside legal and financial advisors to
assist in evaluating the proposed transaction and the purchase
price.
Distribution
Guidance
On
January 29, 2010, we announced that based on the challenging economic
environment and specifically the much lower charter rates in the market,
we believe we should reduce our targeted future annual distribution level
to below our previous distributions. In particular, our management noted
the direct impact that the low charter rate environment will have on our
partnership as eight of our vessels are coming off charter in 2010 and an
additional three vessels in 2011. As a result, our board of directors
agreed with management’s guidance that a target annual distribution level
of $0.90 per unit paid equally over four quarters is more prudent for the
partnership under current conditions. We believe that the
cash generated from our operations should cover the distribution in 2010
and also provide a cash reserve which would be available for distribution
in 2011. If charter rates remain at their current historically low levels
and we are unable to make acquisitions that are materially accretive to
our cash flow, then we expect that the cash generated from our operations
will be less than the cash required to pay our targeted distributions in
2011 and beyond. Based on the information currently available to us, we
believe that the expected cash reserve in 2010, together with the cash
expected to be generated from our operations in 2011, would allow us to
cover our target distributions in 2011. Our ability to continue to pay
distributions could be adversely impacted if we fail to meet the covenants
in our credit facilities, are unable to correct any breach of such
covenants or fail to receive a waiver on a timely basis. Although we are
currently in compliance with the covenants in our credit facilities,
factors that are not within our control, including further declines in the
values of our vessels, could result in a breach of our loan
covenants. We believe the new annual distribution level will
provide us with a number of advantages, including greater financial
flexibility and liquidity, assisting us in pursuing our long-term business
strategy of accretive acquisitions, and the ability to take advantage of
growth opportunities. The tanker shipping market is cyclical and we would
be looking at factors, such as improved oil product demand, the expected
implementation of the single-hull tankers phase out, the availability of
shipping finance and further delays and cancellations that are likely to
reduce the number of new tanker vessel deliveries, in order to assess a
potential market recovery in 2010/2011. We will monitor these factors
closely and if they improve we will consider revisiting our distribution
guidance.
BUSINESS
STRATEGIES
Our
primary business objective is to pay a sustainable quarterly distribution
per unit and to increase our distributions over time by executing the
following business strategies:
Ø Maintain
medium to long-term fixed charters. We believe that the medium to
long-term, fixed-rate nature of our charters, our profit sharing
arrangements, and our agreement with Capital Ship Management for the
commercial and technical management of our vessels provide a stable base
of revenue and predictable expenses that will result in stable cash flows
in the medium to long-term. As our vessels come up for rechartering we
will seek to redeploy them under contracts that reflect our expectations
of the market conditions prevailing at the time. We believe that the age
of our fleet, which is one of the youngest in the industry, the high
specifications of our vessels and our manager’s ability to meet the
rigorous vetting requirements of some of the world’s most selective major
international oil companies position us well to recharter our
vessels.
Ø Expand our
fleet through accretive acquisitions. We intend to continue to
evaluate potential acquisitions of additional vessels and to take
advantage of our unique relationship with Capital Maritime to make
strategic acquisitions in the medium to long term in a prudent manner that
is accretive to our unitholders and to long-term distribution growth. We
will continue to evaluate opportunities to acquire both newbuildings and
second-hand vessels, if and when they are chartered for more than two
years, from Capital Maritime and from third parties as we seek to grow our
fleet in a way that is accretive to our
distributions.
Ø Capitalize
on our relationship with Capital Maritime and expand our charters with
recognized charterers. We believe that we can
leverage our relationship with Capital Maritime and its ability to meet
the rigorous vetting processes of leading oil companies in order to
attract new customers. We also plan to increase the number of vessels we
charter to our existing charterers as well as enter into charter
agreements with new customers in order to maintain a portfolio of charters
that is diverse from a customer, geography and maturity
perspective.
|
Ø
Maintain
and build on our ability to meet rigorous industry and regulatory safety
standards. Capital Ship Management, has an excellent vessel safety
record, is capable of complying with rigorous health, safety and
environmental protection standards, and is committed to providing our
customers with a high level of customer service and support. We believe
that in order for us to be successful in growing our business in the
future, we will need to maintain our excellent vessel safety record and
maintain and build on our high level of customer service and
support.
PARTNERSHIP
INFORMATION
We
are a master limited partnership formed as Capital Product Partners L.P.
under the laws of the Marshall Islands on January 16, 2007. We
maintain our principal executive headquarters at 3 Iassonos Street,
Piraeus, 18537 Greece and our telephone number is +30 210 4584
950.
|
The offering | |||
Issuer
|
Capital
Product Partners L.P.
|
||
Common
units offered by us
|
5,800,000 common
units.
6,670,000 common
units if the underwriters exercise in full their option to purchase up to
an additional 870,000 common units to cover
over-allotments.
|
||
Total
common units outstanding after this offering
|
30,617,151 common
units, assuming no exercise of the over-allotment option; or
31,487,151 common
units, assuming full exercise of the over-allotment
option.
|
||
Use
of proceeds
|
We
intend to use the net proceeds from this offering (including our general
partner’s related capital contribution to maintain its 2% general partner
interest in us) to fully fund the $43 million purchase price
of
the Atrotos Subsidiary from Capital Maritime. Any remaining proceeds will
be used for general partnership purposes. See “Use of Proceeds” on
page S-12 of this prospectus supplement.
|
||
Cash
distributions
|
We
intend to make quarterly distributions to the extent we have sufficient
cash from operations after establishment of cash reserves and payment of
fees and expenses, including payments to our general partner. In general,
we will pay any cash distributions we make each quarter in the following
manner. First, 98% to all unitholders, pro rata, and 2.0% to our general
partner, until each unit has received an aggregate distribution
of
$0.3750. If cash distributions exceed $0.4313 per unit in a quarter, our
general partner will receive increasing percentages, up to 50% (including
its 2.0% general partner interest), of the cash we distribute in excess of
that
amount. We refer to these distributions as “incentive distributions.” We
must distribute all of our cash on hand at the end of each quarter, less
reserves established by our general partner to provide for the proper
conduct of our business, to comply with any applicable debt instruments or
to provide funds for future distributions. See “—Recent
Developments—Distribution Guidance” for a discussion on our recently
announced target annual distribution.
|
||
Risk
factors
|
See
“Risk Factors” on page S-9 of this prospectus supplement and page 6 of the
accompanying prospectus, and other information included or incorporated by
reference in this prospectus, for a discussion of factors you should
carefully consider before investing in our common units.
|
||
The
Nasdaq Global Market symbol for our common units
|
“CPLP”.
|
||
Ø
|
our
ability to obtain additional financing, if necessary, for working capital,
capital expenditures, acquisitions or other purposes may be impaired, or
such financing may not be available on favorable
terms;
|
Ø
|
we
will need a substantial portion of our cash flow to make interest payments
and, following the end of the relevant non-amortizing periods, principal
payments on our debt, reducing the funds that would otherwise be available
for operations, future business opportunities and distributions to
unitholders;
|
Ø
|
our
debt level will make us more vulnerable to competitive pressures, or to a
downturn in our business or in the economy in general, than our
competitors with less debt; and
|
Ø
|
our
debt level may limit our flexibility in responding to changing business
and economic conditions.
|
Ø
|
incur
or guarantee indebtedness;
|
Ø
|
charge,
pledge or encumber the vessels;
|
Ø
|
change
the flag, class, management or ownership of our
vessels;
|
Ø
|
change
the commercial and technical management of our
vessels;
|
Ø
|
sell
or change the beneficial ownership or control of our vessels;
and
|
Ø
|
subordinate
our obligations thereunder to any general and administrative costs
relating to the vessels, including the fixed daily fee payable under the
management agreement.
|
Ø
|
maintain
minimum free consolidated liquidity (50% of which may be in the form of
undrawn commitments under the relevant credit facility) of at least
$500,000 per financed vessel;
|
Ø
|
maintain
a ratio of EBITDA (as defined in each credit facility) to interest expense
of at least 2.00 to 1.00 on a trailing four-quarter basis;
and
|
Ø
|
maintain,
effective for a three year period from the end of June 2009 to the end of
June 2012, a ratio of net Total Indebtedness to the aggregate Fair
Market Value (as defined in each credit facility) of our total fleet,
current or future, of no more than 0.80 (the leverage
ratio).
|
Ø
|
our
historical capitalization as of December 31, 2009;
and
|
Ø
|
our
capitalization as of December 31, 2009, on an as adjusted basis to reflect
the offering described herein (including our general partner’s related
capital contribution to maintain its 2% general partner interest in us)
and the application of the estimated net proceeds therefrom as described
in “Use of Proceeds”.
|
December
31, 2009
|
||||||||
Actual
|
As Adjusted
|
|||||||
(in
thousands)
|
||||||||
Debt
|
||||||||
Long-term
Debt (borrowings under revolving credit facilities)
|
$ | 474,000 | $ | 474,000 | ||||
Derivative
instruments (interest rate swaps)
|
36,931 | 36,931 | ||||||
Total
debt
|
$ | 510,931 | $ | 510,931 | ||||
Partners’
capital
|
||||||||
Held
by public
|
||||||||
Common
units
|
$ | 101,542 | $ | 149,920 | ||||
Held by general partner and its affiliates(1)
|
||||||||
General
partner interest
|
3,803 | 4,841 | ||||||
Common
units
|
84,951 | 84,951 | ||||||
Accumulated
other comprehensive loss
|
(33,168 | ) | (33,168 | ) | ||||
Total
equity
|
$ | 157,128 | $ | 206,544 | ||||
Total
capitalization
|
$ | 668,059 | $ | 717,475 |
(1)
|
In connection with the offering, our general partner will make a capital contribution of $1,047,548 to us in exchange for the issuance of 118,367 general partner units in order for our general partner to maintain its 2% general partner interest in us. |
High
|
Low
|
Quarterly
Cash Distributions
|
||||||||||
Year
Ended: December 31,
|
||||||||||||
2009
|
$ | 11.49 | $ | 5.21 | ||||||||
2008
|
24.93 | 5.51 | ||||||||||
2007
|
32.50 | 20.80 | ||||||||||
Quarter
Ended:
|
||||||||||||
March
31, 2010(1)
|
10.06 | 7.69 | ||||||||||
December
31, 2009
|
10.49 | 7.36 | $ | 0.410 | ||||||||
September
30, 2009
|
11.49 | 7.40 | 0.410 | |||||||||
June
30, 2009
|
10.49 | 6.36 | 0.410 | |||||||||
March
31, 2009
|
10.79 | 5.21 | 0.410 | |||||||||
December
31, 2008
|
11.90 | 5.52 | 1.050 | (2) | ||||||||
September
30, 2008
|
20.50 | 5.51 | 0.410 | |||||||||
June
30, 2008
|
22.07 | 18.40 | 0.410 | |||||||||
March
31, 2008
|
24.93 | 16.35 | 0.400 | |||||||||
Month
Ended:
|
||||||||||||
February
28, 2010(3)
|
9.53 | 7.69 | ||||||||||
January
31, 2010
|
10.06 | 8.18 | ||||||||||
December
31, 2009
|
9.23 | 7.46 | ||||||||||
November
30, 2009
|
9.25 | 7.36 | ||||||||||
October
31, 2009
|
10.49 | 8.77 | ||||||||||
September
30, 2009
|
9.30 | 7.50 | ||||||||||
August
31, 2009
|
10.25 | 7.40 |
(1) |
For the period from January 1,
2010 to February 22,
2010.
|
||
(2) |
Exceptional
non-recurring cash distribution of $1.05 per unit for the fourth quarter
of 2008, which brought annual distributions to unitholders to $2.27 per
unit for the year ended December 31, 2008, a level which under the terms
of our partnership agreement resulted in the early termination of the
subordination period and the automatic conversion of the subordinated
units into common units; the total amount of distribution declared for the
quarter ended December 31, 2008 included $12.7 million with respect to
incentive distribution rights held by our general partner in accordance
with the terms of our partnership agreement.
|
||
(3) |
For the period from February 1,
2010 to February 22,
2010.
|
Ø
|
We
are organized in a jurisdiction outside the United States that grants an
equivalent exemption from tax to corporations organized in the United
States (an “Equivalent Exemption”);
|
Ø
|
We
satisfy the “Publicly Traded Test” (as described below);
and
|
Ø
|
We
meet certain substantiation, reporting and other
requirements.
|
Ø
|
at
least 75.0% of our gross income (including the gross income of our
vessel-owning subsidiaries) for such taxable year consists of passive
income (e.g., dividends, interest, capital gains and rents derived other
than in the active conduct of a rental business),
or
|
Ø
|
at
least 50.0% of the average value of the assets held by us (including the
assets of our vessel-owning subsidiaries) during such taxable year
produce, or are held for the production of, passive
income.
|
Ø
|
the
excess distribution or gain would be allocated ratably over the
Non-Electing Holder’s aggregate holding period for the
units;
|
Ø
|
the
amount allocated to the current taxable year and any year prior to the
year we were first treated as a PFIC with respect to the Non-Electing
Holder would be taxed as ordinary income;
and
|
Ø
|
the
amount allocated to each of the other taxable years would be subject to
tax at the highest rate of tax in effect for the applicable class of
taxpayer for that year, and an interest charge for the deemed deferral
benefit would be imposed with respect to the resulting tax attributable to
each such other taxable year.
|
Ø
|
fails
to provide an accurate taxpayer identification
number;
|
Ø
|
is
notified by the IRS that he has failed to report all interest or corporate
distributions required to be shown on its U.S. federal income tax returns;
or
|
Ø
|
in
certain circumstances, fails to comply with applicable certification
requirements.
|
Name
of Underwriter
|
Number
of Common Units
|
|||
UBS
Securities LLC
|
1,769,000
|
|||
Citigroup
Global Markets Inc.
|
1,769,000
|
|||
Barclays
Capital Inc.
|
1,038,200 | |||
Oppenheimer
& Co. Inc.
|
611,900 | |||
Stifel,
Nicolaus & Company, Incorporated
|
611,900 | |||
5,800,000
|
Paid
by Us
|
||||||||
No
Exercise
|
Full
Exercise
|
|||||||
Per
common unit
|
$ | 0.43 | $ | 0.43 | ||||
Total
|
$ | 2,494,000 | $ | 2,868,100 |
Ø
|
Stabilizing
transactions permit bids to purchase the underlying security so long as
the stabilizing bids do not exceed a specified
maximum.
|
Ø
|
Over-allotment
transactions involve sales by the underwriters of the common units in
excess of the number of units the underwriters are obligated to purchase,
which creates a syndicate short position. The short position may be either
a covered short position or a naked short position. In a covered short
position, the number of units over-allotted by the underwriters is not
greater than the number of units they may purchase in the over-allotment
option. In a naked short position, the number of units involved is greater
than the number of units in the over-allotment option. The underwriters
may close out any short position by either exercising their over-allotment
option and/or purchasing common units in the open
market.
|
Ø
|
Syndicate
covering transactions involve purchases of the common units in the open
market after the distribution has been completed in order to cover
syndicate short positions. In determining the source of the common units
to close out the short position, the underwriters will consider, among
other things, the price of common units available for purchase in the open
market as compared to the price at which they may purchase common units
through the over-allotment option. If the underwriters sell more common
units than could be covered by the over-allotment option, a naked short
position, the position can only be closed out by buying common units in
the open market. A naked short position is more likely to be created if
the underwriters are concerned that there could be downward pressure on
the price of the common units in the pen market after pricing that could
adversely affect investors who purchase in the
offering.
|
Ø
|
Penalty
bids permit the underwriters to reclaim a selling concession from a
syndicate member when the common units originally sold by the syndicate
member are purchased in a stabilizing or syndicate covering transaction to
cover syndicate short positions.
|
Financial
Industry Regulatory Authority filing fee
|
$ | 47,785 | |||
Legal
fees and expenses
|
200,000
|
||||
Accounting
fees and expenses
|
50,000 | ||||
Printing
and engraving costs
|
10,000 | ||||
Transfer
agent fees and other
|
10,000 | ||||
Miscellaneous
|
200,000 | ||||
Total
|
$ | 517,785 |
Ø
|
common
units of an aggregate principal amount of up to $300.0 million
representing limited partner interests in Capital Product Partners L.P.;
and
|
Ø
|
up
to 11,304,651 common units (including 8,805,522 common units issuable upon
conversion of subordinated units into common units) and 8,805,522
subordinated units, each representing limited partner interests in Capital
Product Partners L.P., offered by the selling
unitholder.
|
Capital
Product Partners L.P.
|
1
|
Where
you can find more information
|
2
|
Forward-looking
statements
|
4
|
Risk
factors
|
6
|
Use
of proceeds
|
31
|
Price
range of common units
|
32
|
Description
of the common units
|
33
|
Description
of the subordinated units
|
35
|
Cash
distributions
|
37
|
Material
U.S. federal income tax considerations
|
40
|
Environmental
and other regulations
|
48
|
Profit
sharing arrangements
|
49
|
Selling
unitholder
|
50
|
Plan
of distribution
|
51
|
Service
of process and enforcement of civil liabilities
|
53
|
Legal
matters
|
53
|
Experts
|
53
|
Expenses
|
54
|
Ø
|
our
Annual Report on Form 20-F for the fiscal year ended December 31, 2007
(the “Annual Report”);
|
Ø
|
our
Current Report on Form 6-K furnished to the SEC on April 30, 2008
containing a press release in which we announced financial results and an
increase in the quarterly distribution to be paid by the Company for the
quarter ended March 31, 2008;
|
Ø
|
our
Current Report on Form 6-K furnished to the SEC on April 30, 2008
containing a press release in which we announced the delivery of the M/T
Aristofanis;
|
Ø
|
our
Current Report on Form 6-K furnished to the SEC on June 17, 2008
containing a press release in which we announced the delivery of the M/T
Aristotelis II;
|
Ø
|
our
Current Report on Form 6-K furnished to the SEC on July 28, 2008
containing a press release in which we announced an increase in the
quarterly distribution for the quarter ended June 30, 2008 to be paid by
the Company;
|
Ø
|
our
Current Report on Form 6-K furnished to the SEC on July 31, 2008
containing a press release in which we announced financial results for the
quarter ended June 30, 2008;
|
Ø
|
our
Current Report on Form 6-K furnished to the SEC on August 20, 2008
containing a press release in which we announced the delivery of the M/T
Aris II;
|
Ø
|
our
Current Report on Form 6-K furnished to the SEC on August 29,
2008 containing our supplemental consolidated and predecessor combined
financial statements for the years ended December 31, 2007, 2006 and 2005,
selected financial data and operating and financial review and
prospects;
|
Ø
|
our
Current Report on Form 6-K furnished to the SEC on September 10, 2008 in
which we announced the extension of two of our time charters;
and
|
Ø
|
all
subsequent Current Reports on Form 6-K filed prior to the termination of
this offering that we identify in such reports as being incorporated by
reference into the registration statement of which this prospectus is a
part.
|
Ø
|
anticipated
future acquisition of vessels from Capital
Maritime;
|
Ø
|
our
anticipated growth strategies;
|
Ø
|
future
charter hire rates and vessel
values;
|
Ø
|
our
ability to make cash distributions on the
units;
|
Ø
|
our
future financial condition or results of operations and our future
revenues and expenses, including revenues from profit sharing
arrangements;
|
Ø
|
the
repayment of debt and settling of interest rate
swaps;
|
Ø
|
our
ability to access debt, credit and equity
markets;
|
Ø
|
future
refined product and crude oil prices and
production;
|
Ø
|
planned
capital expenditures and availability of capital resources to fund capital
expenditures;
|
Ø
|
future
supply of, and demand for, refined products and crude
oil;
|
Ø
|
increases
in domestic oil consumption;
|
Ø
|
changes
in interest rates;
|
Ø
|
our
ability to maintain long-term relationships with major refined product
importers and exporters, major crude oil companies, and major commodity
traders;
|
Ø
|
our
ability to leverage to our advantage Capital Maritime’s relationships and
reputation in the shipping
industry;
|
Ø
|
our
continued ability to enter into long-term, fixed-rate time charters with
our tanker charterers;
|
Ø
|
obtaining
tanker projects that we or Capital Maritime bid
on;
|
Ø
|
our
ability to maximize the use of our vessels, including the re-deployment or
disposition of vessels no longer under long-term time
charter;
|
Ø
|
timely
purchases and deliveries of newbuilding
vessels;
|
Ø
|
our
ability to compete successfully for future chartering and newbuilding
opportunities;
|
Ø
|
the
expected cost of, and our ability to comply with, governmental regulations
and maritime self-regulatory organization standards, as well as standard
regulations imposed by our charterers applicable to our
business;
|
Ø
|
our
anticipated general and administrative expenses and our expenses under the
management agreement and the administrative services agreement with
Capital Ship Management and for reimbursement for fees and costs of our
general partner;
|
Ø
|
the
expected impact of heightened environmental and quality concerns of
insurance underwriters, regulators and
charterers;
|
Ø
|
the
anticipated taxation of our partnership and distributions to our
unitholders;
|
Ø
|
estimated
future maintenance and replacement capital
expenditures;
|
Ø
|
expected
demand in the refined product shipping sector in general and the demand
for our medium range vessels in
particular;
|
Ø
|
our
ability to retain key employees;
|
Ø
|
customers’
increasing emphasis on environmental and safety
concerns;
|
Ø
|
future
sales of our units in the public market;
and
|
Ø
|
our
business strategy and other plans and objectives for future
operations.
|
Ø
|
the
rates we obtain from our charters;
|
Ø
|
the
level of additional revenues we generate from our profit sharing
arrangements, if any;
|
Ø
|
the
level of our operating costs, such as the cost of crews and insurance,
following the expiration of our management agreement pursuant to which we
pay a fixed daily fee for an initial term of approximately five years from
the time we take delivery of each vessel, which includes the expenses for
its next scheduled special or intermediate survey, as applicable, and
related drydocking;
|
Ø
|
the
number of unscheduled off-hire days for our fleet and the timing of, and
number of days required for, scheduled drydocking of our
vessels;
|
Ø
|
delays
in the delivery of newbuildings and the beginning of payments under
charters relating to those vessels;
|
Ø
|
demand
for seaborne transportation of refined oil products and crude
oil;
|
Ø
|
supply
of product and crude oil tankers and specifically the number of
newbuildings entering the world tanker fleet each
year;
|
Ø
|
prevailing
global and regional economic and political conditions;
and
|
Ø
|
the
effect of governmental regulations and maritime self-regulatory
organization standards on the conduct of our
business.
|
Ø
|
the
level of capital expenditures we make, including for maintaining vessels,
building new vessels, acquiring existing vessels and complying with
regulations;
|
Ø
|
our
debt service requirements and restrictions on distributions contained in
our debt instruments;
|
Ø
|
interest
rate fluctuations;
|
Ø
|
the
cost of acquisitions, if any;
|
Ø
|
fluctuations
in our working capital needs;
|
Ø
|
our
ability to make working capital borrowings, including to pay distributions
to unitholders; and
|
Ø
|
the
amount of any cash reserves, including reserves for future maintenance and
replacement capital expenditures, working capital and other matters,
established by our board of directors in its
discretion.
|
Ø
|
prevailing
economic conditions in the market in which the vessel
trades;
|
Ø
|
regulatory
change;
|
Ø
|
lower
levels of demand for the seaborne transportation of refined products and
crude oil;
|
Ø
|
increases
in the supply of vessel capacity;
and
|
Ø
|
the
cost of retrofitting or modifying existing ships, as a result of
technological advances in vessel design or equipment, changes in
applicable environmental or other regulations or standards, or
otherwise.
|
Ø
|
the
cost of our labor and materials;
|
Ø
|
the
cost and replacement life of suitable replacement
vessels;
|
Ø
|
customer/market
requirements;
|
Ø
|
increases
in the size of our fleet;
|
Ø
|
the
age of the vessels in our fleet;
|
Ø
|
charter
rates in the market; and
|
Ø
|
governmental
regulations, industry and maritime self-regulatory organization standards
relating to safety, security or the
environment.
|
Ø
|
our
ability to obtain additional financing, if necessary, for working capital,
capital expenditures, acquisitions or other purposes may be impaired, or
such financing may not be available on favorable
terms;
|
Ø
|
we
will need a substantial portion of our cash flow to make interest payments
and, following the end of the relevant non-amortizing periods, principal
payments on our debt, reducing the funds that would otherwise be available
for operations, future business opportunities and distributions to
unitholders;
|
Ø
|
our
debt level will make us more vulnerable to competitive pressures, or to a
downturn in our business or in the economy in general, than our
competitors with less debt; and
|
Ø
|
our
debt level may limit our flexibility in responding to changing business
and economic conditions.
|
Ø
|
incur
or guarantee indebtedness;
|
Ø
|
charge,
pledge or encumber the vessels;
|
Ø
|
change
the flag, class, management or ownership of our
vessels;
|
Ø
|
change
the commercial and technical management of our
vessels;
|
Ø
|
sell
or change the beneficial ownership or control of our vessels;
and
|
Ø
|
subordinate
our obligations thereunder to any general and administrative costs
relating to the vessels, including the fixed daily fee payable under the
management agreement.
|
Ø
|
maintain
minimum free consolidated liquidity (50% of which may be in the form of
undrawn commitments under the relevant credit facility) of at least
$500,000 per financed vessel;
|
Ø
|
maintain
a ratio of EBITDA (as defined in each credit facility) to interest expense
of at least 2.00 to 1.00 on a trailing four-quarter basis;
and
|
Ø
|
maintain
a ratio of net Total Indebtedness to the aggregate Fair Market Value (as
defined in each credit facility) of our total fleet, current or future, of
no more than 0.725 to 1.00.
|
Ø
|
failure
to pay principal or interest when
due;
|
Ø
|
breach
of certain undertakings, negative covenants and financial covenants
contained in the credit facility, any related security document or
guarantee or the interest rate swap agreements, including failure to
maintain unencumbered title to any of the vessel owning subsidiaries or
any of the assets of the vessel owning subsidiaries and failure to
maintain proper insurance;
|
Ø
|
any
breach of the credit facility, any related security document or guarantee
or the interest rate swap agreements (other than breaches described in the
preceding two bullet points) if, in the opinion of the lenders, such
default is capable of remedy and continues unremedied for 20 days after
written notice of the lenders;
|
Ø
|
any
representation, warranty or statement made by us in the credit facility or
any drawdown notice thereunder or related security document or guarantee
or the interest rate swap agreements is untrue or misleading when
made;
|
Ø
|
a
cross default of our other indebtedness of $5.0 million or greater or of
the indebtedness of our subsidiaries of $750,000 or
greater;
|
Ø
|
we
become, in the reasonable opinion of the lenders, unable to pay our debts
when due;
|
Ø
|
any
of our or our subsidiaries’ assets are subject to any form of execution,
attachment, arrest, sequestration or distress in respect of a sum of $1.0
million or more that is not discharged within 10 business
days;
|
Ø
|
an
event of insolvency or bankruptcy;
|
Ø
|
cessation
or suspension of our business or of a material part
thereof;
|
Ø
|
unlawfulness,
non-effectiveness or repudiation of any material provision of our credit
facility, of any of the related finance and guarantee documents or of our
interest rate swap agreements;
|
Ø
|
failure
of effectiveness of security documents or
guarantee;
|
Ø
|
the
common units cease to be listed on the Nasdaq Global Market or on any
other recognized securities
exchange;
|
Ø
|
any
breach under any provisions contained in our interest rate swap
agreements;
|
Ø
|
termination
of our interest rate swap agreements or an event of default thereunder
that is not remedied within five business
days;
|
Ø
|
invalidity
of a security document in any material respect or if any security document
ceases to provide a perfected first priority security interest;
or
|
Ø
|
any
other event that occurs or circumstance that arises in light of which the
lenders reasonably consider that there is a significant risk that we will
be unable to discharge our liabilities under the credit facility, related
security and guarantee documents or interest rate swap
agreements.
|
Ø
|
the
customer fails to make charter payments because of its financial
inability, disagreements with us or
otherwise;
|
Ø
|
the
customer exercises certain rights to terminate the charter or purchase the
vessel;
|
Ø
|
the
customer terminates the charter because we fail to deliver the vessel
within a fixed period of time, the vessel is lost or damaged beyond
repair, there are serious deficiencies in the vessel or prolonged periods
of off-hire, or we default under the charter;
or
|
Ø
|
a
prolonged force majeure event affecting the customer, including damage to
or destruction of relevant production facilities, war or political unrest
prevents us from performing services for that
customer.
|
Ø
|
quality
or engineering problems;
|
Ø
|
changes
in governmental regulations or maritime self-regulatory organization
standards;
|
Ø
|
work
stoppages or other labor disturbances at the
shipyard;
|
Ø
|
bankruptcy
or other financial crisis of the
shipbuilder;
|
Ø
|
a
backlog of orders at the shipyard;
|
Ø
|
political
or economic disturbances in the country or region where the vessel is
being built;
|
Ø
|
weather
interference or catastrophic event, such as a major earthquake or
fire;
|
Ø
|
the
shipbuilder failing to deliver the vessel in accordance with our vessel
specifications;
|
Ø
|
our
requests for changes to the original vessel
specifications;
|
Ø
|
shortages
of or delays in the receipt of necessary construction materials, such as
steel;
|
Ø
|
our
inability to finance the purchase of the
vessel;
|
Ø
|
a
deterioration in Capital Maritime’s relations with the relevant
shipbuilder; or
|
Ø
|
our
inability to obtain requisite permits or
approvals.
|
Ø
|
renew
existing charters upon their
expiration;
|
Ø
|
obtain
new charters;
|
Ø
|
successfully
interact with shipyards during periods of shipyard construction
constraints;
|
Ø
|
obtain
financing on commercially acceptable terms;
or
|
Ø
|
maintain
satisfactory relationships with suppliers and other third
parties.
|
Ø
|
fluctuations
in the actual or projected price of refined products and crude
oil;
|
Ø
|
refining
capacity and its geographical
location;
|
Ø
|
increases
in the production of oil in areas linked by pipelines to consuming areas,
the extension of existing, or the development of new, pipeline systems in
markets we may serve, or the conversion of existing non-oil pipelines to
oil pipelines in those markets;
|
Ø
|
decreases
in the consumption of oil due to increases in its price relative to other
energy sources, other factors making consumption of oil less attractive or
energy conservation measures;
|
Ø
|
availability
of new, alternative energy sources;
and
|
Ø
|
negative
or deteriorating global or regional economic or political conditions,
particularly in oil consuming regions, which could reduce energy
consumption or its growth.
|
Ø
|
office
assessments of the vessel operator, including extensive annual office
audits;
|
Ø
|
the
operator’s environmental, health and safety
record;
|
Ø
|
compliance
with the standards of the International Maritime Organization (IMO), a
United Nations agency that issues international trade standards for
shipping;
|
Ø
|
compliance
with heightened industry standards that have been set by some energy
companies;
|
Ø
|
shipping
industry relationships, reputation for customer service, technical and
operating expertise;
|
Ø
|
shipping
experience and quality of ship operations, including
cost-effectiveness;
|
Ø
|
quality,
experience and technical capability of
crews;
|
Ø
|
the
ability to finance vessels at competitive rates and overall financial
stability;
|
Ø
|
relationships
with shipyards and the ability to obtain suitable
berths;
|
Ø
|
construction
management experience, including the ability to procure on-time delivery
of new vessels according to customer
specifications;
|
Ø
|
willingness
to accept operational risks pursuant to the charter, such as allowing
termination of the charter for force majeure events;
and
|
Ø
|
competitiveness
of the bid in terms of overall
price.
|
Ø
|
fail
to realize anticipated benefits, such as new customer relationships,
cost-savings or cash flow
enhancements;
|
Ø
|
be
unable to hire, train or retain qualified shore and seafaring personnel to
manage and operate our growing business and
fleet;
|
Ø
|
decrease
our liquidity by using a significant portion of our available cash or
borrowing capacity to finance
acquisitions;
|
Ø
|
significantly
increase our interest expense or financial leverage if we incur additional
debt to finance acquisitions;
|
Ø
|
incur
or assume unanticipated liabilities, losses or costs associated with the
business or vessels acquired; or
|
Ø
|
incur
other significant charges, such as impairment of goodwill or other
intangible assets, asset devaluation or restructuring
charges.
|
Ø
|
marine
disasters;
|
Ø
|
bad
weather;
|
Ø
|
mechanical
failures;
|
Ø
|
grounding,
fire, explosions and collisions;
|
Ø
|
piracy;
|
Ø
|
human
error; and
|
Ø
|
war
and terrorism.
|
Ø
|
environmental
damage, including potential liabilities or costs to recover any spilled
oil or other petroleum products and to restore the eco-system where the
spill occurred;
|
Ø
|
death
or injury to persons, loss of
property;
|
Ø
|
delays
in the delivery of cargo;
|
Ø
|
loss
of revenues from or termination of charter
contracts;
|
Ø
|
governmental
fines, penalties or restrictions on conducting
business;
|
Ø
|
higher
insurance rates; and
|
Ø
|
damage
to our reputation and customer relationships
generally.
|
Ø
|
neither
our partnership agreement nor any other agreement requires our general
partner or Capital Maritime or its affiliates to pursue a business
strategy that favors us or utilizes our assets, and Capital Maritime’s
officers and directors have a fiduciary duty to make decisions in the best
interests of the unitholders of Capital Maritime, which may be contrary to
our interests;
|
Ø
|
the
executive officers of our general partner and three of our directors also
serve as executive officers and/or directors of Capital
Maritime;
|
Ø
|
our
general partner and our board of directors are allowed to take into
account the interests of parties other than us, such as Capital Maritime,
in resolving conflicts of interest, which has the effect of limiting their
fiduciary duties to our
unitholders;
|
Ø
|
our
general partner and our directors have limited their liabilities and
reduced their fiduciary duties under the laws of the Marshall Islands,
while also restricting the remedies available to our unitholders, and, as
a result of purchasing common units or subordinated units, unitholders are
treated as having agreed to the modified standard of fiduciary duties and
to certain actions that may be taken by our general partner and our
directors, all as set forth in the partnership
agreement;
|
Ø
|
our
general partner and our board of directors will be involved in determining
the amount and timing of our asset purchases and sales, capital
expenditures, borrowings, and issuances of additional partnership
securities and reserves, each of which can affect the amount of cash that
is available for distribution to our
unitholders;
|
Ø
|
our
general partner may have substantial influence over our board of
directors’ decision to cause us to borrow funds in order to permit the
payment of cash distributions, even if the purpose or effect of the
borrowing is to make a distribution on the subordinated units or to make
incentive distributions or to accelerate the expiration of the
subordination period;
|
Ø
|
our
general partner is entitled to reimbursement of all reasonable costs
incurred by it and its affiliates for our
benefit;
|
Ø
|
our
partnership agreement does not restrict us from paying our general partner
or its affiliates for any services rendered to us on terms that are fair
and reasonable or entering into additional contractual arrangements with
any of these entities on our behalf;
and
|
Ø
|
our
general partner may exercise its right to call and purchase our common
units or subordinated units if it and its affiliates own more than 80% of
our common units or subordinated
units.
|
Ø
|
permits
our general partner to make a number of decisions in its individual
capacity, as opposed to in its capacity as our general partner. Where our
partnership agreement permits, our general partner may consider only the
interests and factors that it desires, and in such cases it has no duty or
obligation to give any consideration to any interest of, or factors
affecting us, our affiliates or our unitholders. Decisions made by our
general partner in its individual capacity will be made by its sole owner,
Capital Maritime. Specifically, pursuant to our partnership agreement, our
general partner will be considered to be acting in its individual capacity
if it exercises its call right, pre-emptive rights or registration rights,
consents or withholds consent to any merger or consolidation of the
partnership, appoints any directors or votes for the election of any
director, votes or refrains from voting on amendments to our partnership
agreement that require a vote of the outstanding units, voluntarily
withdraws from the partnership, transfers (to the extent permitted under
our partnership agreement) or refrains from transferring its units,
general partner interest or incentive distribution rights or votes upon
the dissolution of the partnership;
|
Ø
|
provides
that our general partner and our directors are entitled to make other
decisions in “good faith” if they reasonably believe that the decision is
in our best interests;
|
Ø
|
generally
provides that affiliated transactions and resolutions of conflicts of
interest not approved by the conflicts committee of our board of directors
and not involving a vote of unitholders must be on terms no less favorable
to us than those generally being provided to or available from unrelated
third parties or be “fair and reasonable” to us and that, in determining
whether a transaction or resolution is “fair and reasonable,” our board of
directors may consider the totality of the relationships between the
parties involved, including other transactions that may be particularly
advantageous or beneficial to us;
and
|
Ø
|
provides
that neither our general partner and its officers nor our directors will
be liable for monetary damages to us, our limited partners or assignees
for any acts or omissions unless there has been a final and non-appealable
judgment entered by a court of competent jurisdiction determining that our
general partner or directors or its officers or directors or those other
persons engaged in actual fraud or willful
misconduct.
|
Ø
|
The
unitholders will be unable to remove our general partner without its
consent because our general partner and its affiliates own sufficient
units to be able to prevent its removal. The vote of the holders of at
least 66 2/3% of all outstanding units voting together as a single class
and a majority vote of our board of directors is required to remove the
general partner. As of August 20, 2008 Capital Maritime owned a 46.6%
interest in us, including a 2% interest through its ownership of our
general partner.
|
Ø
|
If
our general partner is removed without “cause” during the subordination
period and units held by our general partner and Capital Maritime are not
voted in favor of that removal, all remaining subordinated units will
automatically convert into common units and any existing arrearages on the
common units will be extinguished. A removal of our general partner under
these circumstances would adversely affect the common units by prematurely
eliminating their distribution and liquidation preference over the
subordinated units, which would otherwise have continued until we had met
certain distribution and performance tests. “Cause” is narrowly defined to
mean that a court of competent jurisdiction has entered a final,
non-appealable judgment finding our general partner liable for actual
fraud or willful or wanton misconduct in its capacity as our general
partner. Cause does not include most cases of charges of poor management
of the business, so the removal of our general partner because of the
unitholders’ dissatisfaction with the general partner’s performance in
managing our partnership will most likely result in the termination of the
subordination period.
|
Ø
|
Common
unitholders elect only four of the seven members of our board of
directors. Our general partner in its sole discretion has the right to
appoint the remaining three directors. Subordinated unitholders do not
elect any directors.
|
Ø
|
Election
of the four directors elected by common unitholders is staggered, meaning
that the members of only one of three classes of our elected directors are
selected each year. In addition, the directors appointed by our general
partner will serve for terms determined by our general
partner.
|
Ø
|
Our
partnership agreement contains provisions limiting the ability of
unitholders to call meetings of unitholders, to nominate directors and to
acquire information about our operations as well as other provisions
limiting the unitholders’ ability to influence the manner or direction of
management.
|
Ø
|
Unitholders’
voting rights are further restricted by the partnership agreement
provision providing that if any person or group, other than our general
partner, its affiliates, their transferees, and persons who acquired such
units with the prior approval of our board of directors, owns beneficially
5% or more of any class of units then outstanding, any such units owned by
that person or group in excess of 4.9% may not be voted on any matter and
will not be considered to be outstanding when sending notices of a meeting
of unitholders, calculating required votes, except for purposes of
nominating a person for election to our board, determining the presence of
a quorum or for other similar purposes, unless required by law. The voting
rights of any such unitholders in excess of 4.9% will be redistributed pro
rata among the other common unitholders holding less than 4.9% of the
voting power of all classes of units entitled to
vote.
|
Ø
|
We
have substantial latitude in issuing equity securities without unitholder
approval.
|
Ø
|
our
unitholders’ proportionate ownership interest in us will
decrease;
|
Ø
|
the
amount of cash available for distribution on each unit may
decrease;
|
Ø
|
because
a lower percentage of total outstanding units will be subordinated units
if we issue additional common units, the risk that a shortfall in the
payment of the quarterly distribution will be borne by our common
unitholders will increase;
|
Ø
|
the
relative voting strength of each previously outstanding unit may be
diminished; and
|
Ø
|
the
market price of the units may
decline.
|
Ø
|
acquisitions;
|
Ø
|
paying
or refinancing all or a portion of our indebtedness outstanding at the
time; and
|
Ø
|
funding
working capital or capital
expenditures.
|
High
|
Low
|
|||||||
Year
Ended:
|
||||||||
December
31, 2007*
|
$32.50 | $20.80 | ||||||
Quarter
Ended:
|
||||||||
September
30, 2008
|
20.50 | 5.51 | ||||||
June
30, 2008
|
22.07 | 18.40 | ||||||
March
31, 2008
|
24.93 | 16.35 | ||||||
December
31, 2007
|
27.75 | 20.80 | ||||||
Month
Ended:
|
||||||||
September
30, 2008
|
16.33 | 5.51 | ||||||
August
31, 2008
|
17.94 | 14.78 | ||||||
July
31, 2008
|
20.50 | 15.68 | ||||||
June
30, 2008
|
21.00 | 18.40 | ||||||
May
31, 2008
|
22.07 | 19.50 | ||||||
April
30, 2008
|
21.03 | 18.54 |
Ø
|
surety
bond premiums to replace lost or stolen certificates, taxes and other
governmental charges;
|
Ø
|
special
charges for services requested by a holder of a common unit;
and
|
Ø
|
other
similar fees or charges.
|
Ø
|
represents
that the transferee has the capacity, power and authority to become bound
by our partnership agreement;
|
Ø
|
automatically
agrees to be bound by the terms and conditions of, and is deemed to have
executed, our partnership
agreement;
|
Ø
|
gives
the consents and approvals contained in our partnership agreement, such as
the approval of all transactions and agreements we are entering into in
connection with our formation and this
offering.
|
Ø
|
distributions
of available cash from operating surplus on each of the outstanding common
units and subordinated units equaled or exceeded the minimum quarterly
distribution for each of the three consecutive, non-overlapping
four-quarter periods immediately preceding that
date;
|
Ø
|
the
adjusted operating surplus (as defined in our partnership agreement)
generated during each of the three consecutive, non-overlapping
four-quarter periods immediately preceding that date equaled or exceeded
the sum of the minimum quarterly distributions on all of the outstanding
common units and subordinated units during those periods on a fully
diluted basis and the related distribution on the 2.0% general partner
interest during those periods; and
|
Ø
|
there
are no arrearages in payment of the minimum quarterly distribution on the
common units.
|
Ø
|
distributions
of available cash from operating surplus (as defined in our partnership
agreement) on each of the outstanding common units, subordinated units and
general partner units equaled or exceeded $2.25 (150.0% of the annualized
minimum quarterly distribution) for the four-quarter period immediately
preceding the date of determination;
and
|
Ø
|
the
adjusted operating surplus (as defined in our partnership agreement)
generated during the four-quarter period immediately preceding the date of
determination equaled or exceeded the sum of a distribution of $2.25 per
unit (150.0% of the annualized minimum quarterly distribution) on all of
the outstanding common units, subordinated units and general partner units
on a fully diluted basis; and
|
Ø
|
there
are not arrearages in payment of the minimum quarterly distribution on the
common units.
|
Ø
|
the
subordination period will end and each subordinated unit will immediately
convert into one common unit;
|
Ø
|
any
existing arrearages in payment of the minimum quarterly distribution on
the common units will be extinguished;
and
|
Ø
|
our
general partner will have the right to convert its general partner
interest and, if any, its incentive distribution rights into common units
or to receive cash in exchange for those
interests.
|
Ø
|
first,
98% to the common unitholders, pro rata, and 2.0% to our general partner,
until we distribute for each outstanding common unit an amount equal to
the minimum quarterly distribution for that
quarter;
|
Ø
|
second,
98% to the common unitholders, pro rata, and 2.0% to our general partner,
until we distribute for each outstanding common unit an amount equal to
any arrearages in payment of the minimum quarterly distribution on the
common units for any prior quarters during the subordination
period;
|
Ø
|
third,
98% to the subordinated unitholders, pro rata, and 2.0% to our general
partner, until we distribute for each subordinated unit an amount equal to
the minimum quarterly distribution for that quarter;
and
|
Ø
|
thereafter,
in the manner described in “Cash Distributions—Incentive Distribution
Rights” and “—Percentage Allocations of Available Cash From Operating
Surplus.”
|
Ø
|
Our
unitholders have no contractual or other legal right to receive
distributions other than the obligation under our partnership agreement to
distribute available cash on a quarterly basis, which is subject to the
broad discretion of our board of directors to establish reserves and other
limitations.
|
Ø
|
While
our partnership agreement requires us to distribute all of our available
cash, our partnership agreement, including provisions requiring us to make
cash distributions contained therein, may be amended. Although during the
subordination period, with certain exceptions, our partnership agreement
may not be amended without the approval of non-affiliated common
unitholders, our partnership agreement can be amended with the approval of
a majority of the outstanding common units after the subordination period
has ended.
|
Ø
|
Even
if our cash distribution policy is not modified or revoked, the amount of
distributions we pay under our cash distribution policy and the decision
to make any distribution is determined by our board of directors, taking
into consideration the terms of our partnership agreement and the
establishment of any reserves for the prudent conduct of our
business.
|
Ø
|
Under
Section 51 of the Marshall Islands Limited Partnership Act, we may not
make a distribution if the distribution would cause our liabilities to
exceed the fair value of our
assets.
|
Ø
|
We
may lack sufficient cash to pay distributions to our unitholders due to
decreases in net revenues or increases in operating expenses, principal
and interest payments on outstanding debt, tax expenses, working capital
requirements, maintenance and replacement capital expenditures or
anticipated cash needs.
|
Ø
|
Our
distribution policy will be affected by restrictions on distributions
under our revolving credit facilities which contain material financial
tests and covenants that must be satisfied. Should we be unable to satisfy
these restrictions included in our credit facilities or if we are
otherwise in default under the credit agreements, our ability to make cash
distributions to our unitholders, notwithstanding our stated cash
distribution policy, would be materially adversely
affected.
|
Ø
|
If
we make distributions out of capital surplus, as opposed to operating
surplus, such distributions will constitute a return of capital and will
result in a reduction in the quarterly distribution and the target
distribution levels. We do not anticipate that we will make any
distributions from capital surplus.
|
Ø
|
If
the ability of our subsidiaries to make any distribution to us is
restricted by, among other things, the provisions of existing and future
indebtedness, applicable partnership and limited liability company laws or
any other laws and regulations, our ability to make distributions to our
unitholders may be restricted.
|
Distributions
for Quarter Ended
|
Amount
of Cash Distributions
|
Cash
Distributions per Unit
|
Jun.
30, 2007*
|
$8.3
million
|
$0.3626
per unit
|
Sep.
30, 2007
|
$8.8
million
|
$0.385
per unit
|
Dec.
31, 2007
|
$9.0
million
|
$0.395
per unit
|
Mar.
31, 2008
|
$10.1
million
|
$0.400
per unit
|
Jun.
30, 2008
|
$
10.4 million
|
$0.410
per unit
|
Marginal
Percentage Interest in Distributions
|
||||||||||||
Total
Quarterly Distribution Target Amount
|
Unitholders
|
General
Partner
|
||||||||||
Minimum
Quarterly Distribution
|
$0.3750 | 98 | % | 2 | % | |||||||
First
Target Distribution
|
up
to $0.4313
|
98 | % | 2 | % | |||||||
Second
Target Distribution
|
above
$0.4313 up to $0.4688
|
85 | % | 15 | % | |||||||
Third
Target Distribution
|
above
$0.4688 up to $0.5625
|
75 | % | 25 | % | |||||||
Thereafter
|
above
$0.5625
|
50 | % | 50 | % |
Ø
|
We
are organized in a jurisdiction outside the United States that grants an
equivalent exemption from tax to corporations organized in the United
States (an “Equivalent Exemption”);
|
Ø
|
We
satisfy the “Publicly Traded Test” (as described below);
and
|
Ø
|
We
meet certain substantiation, reporting and other
requirements.
|
Ø
|
is
an individual U.S. citizen or resident (as determined for U.S. federal
income tax purposes), a corporation or other entity organized under the
laws of the United States or its political subdivisions and classified as
a corporation for U.S. federal income tax purposes, an estate the income
of which is subject to U.S. federal income taxation regardless of its
source, or a trust if a court within the United States is able to exercise
primary jurisdiction over the administration of the trust and one or more
U.S. persons have the authority to control all substantial decisions of
the trust;
|
Ø
|
owns
the units as a capital asset, generally, for investment purposes,
and
|
Ø
|
owns
less than 10% of our units for United States federal income tax
purposes.
|
Ø
|
at
least 75.0% of our gross income (including the gross income of our
vessel-owning subsidiaries) for such taxable year consists of passive
income (e.g., dividends, interest, capital gains and rents derived other
than in the active conduct of a rental business),
or
|
Ø
|
at
least 50.0% of the average value of the assets held by us (including the
assets of our vessel-owning subsidiaries) during such taxable year
produce, or are held for the production of, passive
income.
|
Ø
|
the
excess distribution or gain would be allocated ratably over the
Non-Electing Holder’s aggregate holding period for the
units;
|
Ø
|
the
amount allocated to the current taxable year and any year prior to the
year we were first treated as a PFIC with respect to the Non-Electing
Holder would be taxed as ordinary income;
and
|
Ø
|
the
amount allocated to each of the other taxable years would be subject to
tax at the highest rate of tax in effect for the applicable class of
taxpayer for that year, and an interest charge for the deemed deferral
benefit would be imposed with respect to the resulting tax attributable to
each such other taxable year.
|
Ø
|
fails
to provide an accurate taxpayer identification
number;
|
Ø
|
is
notified by the IRS that he has failed to report all interest or corporate
distributions required to be shown on its U.S. federal income tax returns;
or
|
Ø
|
in
certain circumstances, fails to comply with applicable certification
requirements.
|
Name
of Selling Unitholder
|
Number
of Common Units Owned
|
Number
of Subordinated Units Owned
|
||
Capital
Maritime
|
2,499,129
|
8,805,522
|
Ø
|
the
nature of the material relationship that the selling unitholder will have
had within the prior three years with us or any of our affiliates, if not
already described in our Annual Report, in the prospectus included in our
registration statement on Form F-1 filed with the SEC on March 19, 2007
and incorporated by reference in our Annual Report, or
herein;
|
Ø
|
the
number of subordinated units and common units, if any, owned by the
selling unitholder prior to the
offering;
|
Ø
|
the
number of subordinated units and common units, if any, to be offered for
the selling unitholder’s account;
and
|
Ø
|
the
number and the percentage of the outstanding subordinated units and common
units to be owned by the selling unitholder after the completion of the
offering.
|
Ø
|
through
underwriters or dealers;
|
Ø
|
through
agents;
|
Ø
|
directly
to purchasers; or
|
Ø
|
through
a combination of any such methods of
sale.
|
Ø
|
the
offering terms, including the name or names of any underwriters, dealers
or agents;
|
Ø
|
the
purchase price of the securities and the proceeds to us from such
sale;
|
Ø
|
any
underwriting discounts, concessions, commissions and other items
constituting compensation to underwriters, dealers or
agents;
|
Ø
|
any
initial public offering price;
|
Ø
|
any
discounts or concessions allowed or reallowed or paid by underwriters or
dealers to other dealers;
|
Ø
|
at
a fixed price or prices that may be
changed;
|
Ø
|
at
market prices prevailing at the time of
sale;
|
Ø
|
at
prices related to such prevailing market prices;
or
|
Ø
|
at
negotiated prices.
|
U.S.
Securities and Exchange Commission registration fee
|
$ | 18,583 | ||
Financial
Industry Regulatory Authority filing fee
|
* | |||
The
Nasdaq Global Market listing fee
|
* | |||
Legal
fees and expenses
|
* | |||
Accounting
fees and expenses
|
* | |||
Printing
and engraving costs
|
* | |||
Transfer
agent fees and other
|
* | |||
Miscellaneous
|
* | |||
Total
|
$ | 18,583 |