TEPPCO
Partners, L.P.
1100
Louisiana, Suite 1600
Houston,
Texas 77002
December
1, 2008
Mr. H.
Christopher Owings
Assistant
Director
Division
of Corporation Finance
United
States Securities and Exchange Commission
100 F
Street, N.E.
Washington,
D.C. 20549-0404
Re: TEPPCO
Partners, L.P. (the “Registrant”)
Form 10-K for the Fiscal Year Ended
December 31, 2007
Filed February 28, 2008
File No. 1-10403
Dear Mr.
Owings:
In this letter, we are setting forth
the response of the Registrant to the comments contained in the letter from the
staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”)
dated November 4, 2008 (the “Comment Letter”), with respect to the above
captioned filing. For your convenience, we have repeated the Staff’s
comments as set forth in the Comment Letter. The Registrant’s
response to each comment is set forth immediately below the text of the
applicable comment.
Unless the context requires otherwise,
references to “we,” “us,” “our,” the “Partnership” or “TEPPCO” are intended to
mean the business and operations of TEPPCO Partners, L.P. and its consolidated
subsidiaries.
References to “TEPPCO GP” or “General
Partner” refer to Texas Eastern Products Pipeline Company, LLC, which is the
general partner of TEPPCO.
Components of Executive
Officer Compensation and Compensation Decisions, page 95
1. We
note your response to comment two in our letter dated September 12,
2008. In future filings please provide similar information in your
disclosure and identify the name of the survey/report in which you
participate.
Division of Corporation
Finance
December 1, 2008
Page 2
Response
We note your comment and will revise
our annual disclosures prospectively to incorporate information in our previous
response letter, and we will identify the name of the survey/report in which we
participate.
Financial Statements of
TEPPCO Partners, L.P. for the Year Ended December 31, 2007
Note 1. Partnership
Organization, page F-9
2. We
have reviewed your response to comment 4 in our letter dated September 12,
2008. We note that you applied the guidance in Chapter 7, Section B
of ARB 43 in accounting for the 14,091,275 limited partner units issued to your
general partner in consideration for elimination of the 50% IDR tier, and that
this issuance of LP units to the GP unitholder had no impact on your financial
statements. It remains unclear to us that the amendment of the IDR
agreement would have no impact on your financial statements, and it remains
unclear to us how you considered reflecting the difference between the fair
value of the LP units and the calculated fair value of the eliminated IDR
distributions as a deemed preferential dividend to or a capital contribution
from the GP unitholders such that it would reduce the income allocable to your
public LP unitholders. Please tell us how you considered this and any
other alternative accounting in concluding that your current accounting for this
transaction was appropriate.
Response
We concur that, in the event the fair
value of the limited partner (“LP”) units received in the December 2006 exchange
exceeded the fair value of the eliminated 50% incentive distribution right
(“IDR”) tier, we would have been required to reflect that difference as a deemed
preferential dividend to the GP unitholders that would have reduced income
allocable to public LP unitholders. In connection with the December
2006 exchange transaction, we contemporaneously performed a valuation to compare
the fair value of the eliminated 50% IDR tier with the fair value of the
additional LP units received. We confirm to the Staff that the
estimated fair value of the 14,091,275 LP units issued to our general partner in
December 2006 was equal to the estimated fair value of the 50% IDR tier
eliminated at the time of the exchange transaction. Therefore, there
was no differential in fair values that could be considered a preferential
dividend to or a capital contribution from the GP unitholders to the public LP
unitholders.
The LP units issued to the general
partner yielded the same quarterly cash distributions as the eliminated 50% IDR
tier at the time of the transaction. As is typical for master limited
partnerships (“MLPs”), we are required to distribute available cash each
quarterly period. Therefore, in orderly and
Division of Corporation
Finance
December 1, 2008
Page 3
active
markets, the fair value of the publicly-traded LP units is directly related to
the cash distribution levels attributed to the LPs after the IDR distribution to
the general partner. We note that the publicly-traded price of our LP
units did not materially change in the days before or after the approved
exchange transaction, supporting our position that the exchange was neutral as
to fair value and expected cash distributions or net income. We also
note that the exchange of IDR rights for LP units was approved by the existing
limited partners and no cash was exchanged among any partners in this
transaction. The table below illustrates that the issuance of the new
LP units had no impact on total distributions paid to the partners or to the
allocation of distributions to the publicly-traded LP unit holders at the
quarterly distribution rate in effect at the time of the transaction (in
thousands, except per unit amounts).
|
No
Change
|
With
Issuance
of
Units and
IDR
Reduction
|
|||||||
|
Cash
distributions paid to LP unitholders:
|
||||||||
|
LP
units outstanding in December
2006
|
75,714 | 75,714 | ||||||
|
Distribution
rate per LP
unit
|
$ | 0.675 | $ | 0.675 | ||||
|
Cash
distributions paid to LP
unitholders
|
$ | 51,107 | $ | 51,107 | ||||
|
Cash
distributions paid to GP interest holder:
|
||||||||
|
For
2% GP interest and IDR tiers prior to IDR reduction
|
$ | 21,282 | $ | -- | ||||
|
For
2% GP interest and IDR tiers with IDR reduction
|
$ | -- | $ | 11,771 | ||||
|
Cash
distributions paid for newly-issued LP units:
|
||||||||
|
Issuance
of 14,091,275 LP
units
|
-- | 14,091 | ||||||
|
Distribution
rate per LP
unit
|
$ | -- | $ | 0.675 | ||||
|
Cash
distributions paid to GP for LP
units
|
$ | -- | $ | 9,511 | ||||
|
Total
cash distributions
paid
|
$ | 72,389 | $ | 72,389 | ||||
Additionally, the issuance of these
14,091,275 LP units had no impact on the net income allocation per unit to the
LP unitholders; earnings per LP unit for 2006 would have been the same amount
per LP unit as it would have been had the LP units not been issued and the 50%
IDR tier reduction not occurred as illustrated in the table below (in thousands,
except per unit amounts).
|
No
Change
|
With
Issuance
of
Units and
IDR
Reduction
|
|||||||
|
Net
income for year ended December 31, 2006
|
$ | 202,051 | $ | 202,051 | ||||
|
LP
percentage interest in net
income
|
70.5999% | 71.4279% | ||||||
|
Net
income allocated to LP
unitholders
|
$ | 142,648 | $ | 144,321 | ||||
|
Weighted
average units
outstanding
|
72,769 | 73,657 | ||||||
|
Earnings
per LP unit for the year ended December 31, 2006
|
$ | 1.96 | $ | 1.96 | ||||
Since it was determined that the fair
value of the LP units issued was equal to the calculated fair value of the
eliminated 50% IDR tier distributions and the amount of net income applicable to
the public LPs was unchanged, we believe the accounting treatment and related
disclosures in our filings for the
Division of Corporation
Finance
December 1, 2008
Page 4
subject
exchange transaction comply with all applicable accounting pronouncements, are
representative of the business purpose and appropriate to assist the reader in
understanding the approved transaction.
* * * * *
In connection
with responding to the Staff’s comments, the Registrant acknowledges
that:
|
§
|
it
is responsible for the adequacy and accuracy of disclosures in its
filings;
|
|
§
|
Staff
comments or changes to disclosures in response to Staff comments do not
foreclose the Commission from taking any action with respect to its
filings; and
|
|
§
|
it
may not assert Staff comments as a defense in any proceeding initiated by
the Commission or any person under the federal securities laws of the
United States.
|
Please
direct any questions that you have with respect to the foregoing responses to
the undersigned at (713) 381-3999 (direct line) or (713) 803-2716
(fax).
Regards,
/s/ William G.
Manias
60;_____________________________________
Name: William
G. Manias
Title: Vice
President and Chief Financial Officer
60;
Texas
Eastern Products Pipeline Company,
60; LLC, as
General Partner
cc: Jerry
E. Thompson
Patricia Totten
Virginia
Krobot
Michael
Hanson
Phil Neisel
Paul Perea (Baker Botts)
Michael J. Knesek