Energy Transfer 2015 Annual Report Download - page 42

Table of Contents
to partners on account of their partnership interests and non-recourse liabilities are not counted for purposes of determining whether a distribution is
permitted. Delaware law provides that a limited partner who receives such a distribution and knew at the time of the distribution that the distribution violated
Delaware law, will be liable to the limited partnership for the distribution amount for three years from the distribution date. Under Delaware law, an assignee
who becomes a substituted limited partner of a limited partnership is liable for the obligations of the assignor to make contributions to the partnership.
However, such an assignee is not obligated for liabilities unknown to him at the time he or she became a limited partner if the liabilities could not be
determined from the partnership agreement.
We have a holding company structure in which our subsidiaries conduct our operations and own our operating assets.
We are a holding company, and our subsidiaries conduct all of our operations and own all of our operating assets. We do not have significant assets other
than the partnership interests and the equity in our subsidiaries. As a result, our ability to pay distributions to our Unitholders and to service our debt depends
on the performance of our subsidiaries and their ability to distribute funds to us. The ability of our subsidiaries to make distributions to us may be restricted
by, among other things, credit facilities and applicable state partnership laws and other laws and regulations. If we are unable to obtain funds from our
subsidiaries we may not be able to pay distributions to our Unitholders or to pay interest or principal on our debt when due.
We do not have the same flexibility as other types of organizations to accumulate cash, which may limit cash available to service our debt or to repay debt
at maturity.
Unlike a corporation, our partnership agreement requires us to distribute, on a quarterly basis, 100% of our Available Cash (as defined in our partnership
agreement) to our Unitholders of record and our General Partner. Available Cash is generally all of our cash on hand as of the end of a quarter, adjusted for
cash distributions and net changes to reserves. Our General Partner will determine the amount and timing of such distributions and has broad discretion to
establish and make additions to our reserves or the reserves of our operating subsidiaries in amounts it determines in its reasonable discretion to be necessary
or appropriate:
• to provide for the proper conduct of our business and the businesses of our operating subsidiaries (including reserves for future capital expenditures and
for our anticipated future credit needs);
• to provide funds for distributions to our Unitholders and our General Partner for any one or more of the next four calendar quarters; or
• to comply with applicable law or any of our loan or other agreements.
A downgrade of our credit ratings could impact our and our subsidiaries’ liquidity, access to capital and costs of doing business, and maintaining credit
ratings is under the control of independent third parties.
A downgrade of our credit ratings might increase our and our subsidiaries’ cost of borrowing and could require us to post collateral with third parties,
negatively impacting our available liquidity. Our and our subsidiaries’ ability to access capital markets could also be limited by a downgrade of our credit
ratings and other disruptions. Such disruptions could include:
• economic downturns;
• deteriorating capital market conditions;
• declining market prices for natural gas, NGLs and other commodities;
• terrorist attacks or threatened attacks on our facilities or those of other energy companies; and
• the overall health of the energy industry, including the bankruptcy or insolvency of other companies.
Credit rating agencies perform independent analysis when assigning credit ratings. The analysis includes a number of criteria including, but not limited to,
business composition, market and operational risks, as well as various financial tests. Credit rating agencies continue to review the criteria for industry sectors
and various debt ratings and may make changes to those criteria from time to time. Credit ratings are not recommendations to buy, sell or hold investments in
the rated entity. Ratings are subject to revision or withdrawal at any time by the rating agencies, and we cannot assure you that we will maintain our current
credit ratings.
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