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Boardwalk Pipeline Partners, LP – IPO: ‘424B1’ on 11/9/05

On:  Wednesday, 11/9/05, at 11:02am ET   ·   Accession #:  1193125-5-220978   ·   File #:  333-127578

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

11/09/05  Boardwalk Pipeline Partners, LP   424B1                  1:4.4M                                   RR Donnelley/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 424B1       Final Prospectus Dated November 8, 2005             HTML   3.36M 

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Filed pursuant to Rule 424(b)(1)
Registration No. 333-127578

PROSPECTUS

We are a limited partnership recently formed by a subsidiary of Loews Corporation. This is the initial public offering of our common units. Prior to this offering, there has been no public market for our common units. Our common units have been approved for listing on the New York Stock Exchange under the symbol “BWP.”

Investing in our common units involves risks. See “ Risk Factors” beginning on page 21.

These risks include the following:

In order to comply with applicable FERC rate-making policies, we require an owner of our units to be an Eligible Holder. Eligible Holders are individuals or entities subject to United States federal income taxation on our income or entities not subject to such taxation so long as all of the entity’s owners are subject to such taxation. If you are not an Eligible Holder, you will not be entitled to receive distributions or allocations of income or loss on your common units and your common units will be subject to redemption.

We have granted the underwriters a 30-day option to purchase up to an additional 2,250,000 common units from us on the same terms and conditions as set forth above if the underwriters sell more than 15,000,000 common units in this offering.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the common units on or about November 15, 2005.

November 8, 2005

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You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition and results of operations may have changed since that date.

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SUMMARY

This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including the historical and pro forma financial statements and the notes to those financial statements. The information presented in this prospectus assumes that the underwriters’ option to purchase additional common units is not exercised, unless otherwise noted. You should read “Risk Factors” for information about important risks that you should consider before buying our common units.

References in this prospectus to “Boardwalk Pipeline Partners, LP,” “we,” “our,” “us” or like terms when used in a historical context refer to the business of Boardwalk Pipelines, LLC and its subsidiaries, which is being contributed to Boardwalk Pipeline Partners, LP in connection with this offering. When used in the present tense or prospectively, those terms refer to Boardwalk Pipeline Partners, LP and its subsidiaries. References in this prospectus to our “general partner” refer to Boardwalk GP, LP and/or Boardwalk GP, LLC, the general partner of Boardwalk GP, LP, as appropriate. All references to “Loews” refer to Loews Corporation, the ultimate parent company of our general partner. We include a glossary of some of the terms used in this prospectus as Appendix D.

Boardwalk Pipeline Partners, LP

We are a limited partnership recently formed by a subsidiary of Loews Corporation and are engaged in the interstate transportation, gathering and storage of natural gas. This is the initial public offering of our common units. Our common units are entitled to receive minimum quarterly distributions of $0.35 per unit, or $1.40 per unit on an annualized basis, before any distribution is paid on our subordinated units.

We own and operate two interstate natural gas pipeline systems, with approximately 13,470 miles of pipeline, directly serving customers in 11 states and indirectly serving customers throughout the northeastern and southeastern United States through numerous interconnections with unaffiliated pipelines. In 2004, our pipeline systems transported approximately 1,380 Bcf of gas. Average daily throughput on our pipeline systems during 2004 was approximately 3.8 Bcf. Our natural gas storage facilities are comprised of 11 underground storage fields located in four states with aggregate certificated working gas capacity of approximately 135 Bcf.

We conduct all of our operations through two subsidiaries:

We transport and store natural gas for a broad mix of customers, including local gas distribution companies (“LDCs”), municipalities, interstate and intrastate pipelines, direct industrial users, electric power generators, marketers and producers. In addition to serving directly connected markets, our pipeline systems have access to customers in the northeastern and southeastern United States through numerous interconnections with unaffiliated pipelines. Our maximum transportation and gathering rates are established by and subject to review and revision by the Federal Energy Regulatory Commission (“FERC”). Our maximum transportation and gathering rates are designed to allow us an opportunity to recover our costs and earn a reasonable return on equity, provided market circumstances so permit. Our storage rates for Texas Gas are cost-based while our storage rates for Gulf South are market-based.

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We provide a significant portion of our pipeline transportation and storage services under firm contracts under which our customers pay monthly capacity reservation charges (which are charges owed to us regardless of actual pipeline or storage capacity utilization) as well as other charges based on utilization. For the nine months ended September 30, 2005, approximately 64% of our revenues were derived from capacity reservation charges under firm contracts, approximately 19% of our revenues were derived from other charges based on actual utilization under firm contracts and approximately 17% of our revenues were derived from interruptible transportation and storage services and other services. See “Business—Nature of Contracts.” As of September 30, 2005, our firm transportation and storage contracts had an average remaining life of approximately three years. Our portfolio of firm contracts mitigates the risk to us of revenue fluctuations due to changes in weather or supply and demand conditions and provides us with greater stability of cash flows.

Please read “—Summary Historical Financial and Operating Data” and “—Unaudited Pro Forma Consolidated Financial Data” for information regarding our financial and operating results.

Business Strategy

Our objective is to increase distributable cash flow per common and subordinated unit. The key elements of our business strategy are as follows:

Competitive Strengths

We believe we are well positioned to execute our business strategy because:

Recent Developments

In late August and September 2005, Hurricanes Katrina and Rita and related storm activity, such as windstorms, storm surges, floods and tornadoes, caused extensive and catastrophic physical damage in and to the offshore, coastal and inland areas located in the Gulf Coast region of the United States, specifically parts of Louisiana, Mississippi and Alabama. A substantial portion of our Gulf South pipeline assets and a smaller portion of our Texas Gas pipeline assets are located in the area directly impacted by the hurricanes.

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Our Gulf South system experienced damage to its gas metering facilities, cathodic protection devices, communication devices, rights of way and other above ground facilities such as office buildings and signage. Our Texas Gas system experienced only minimal damage. Our pipelines continued to operate throughout the hurricanes and thereafter and the vast majority of service to customers was not interrupted. We do not expect the cost of damages to exceed $13.0 million, which reflects anticipated replacement costs based upon current estimates. While we anticipate coverage for costs by our insurance carriers after meeting certain deductibles, we have not recorded any anticipated insurance recovery to date as the claims process is in its early stage and has not met applicable accounting standards to record such anticipated receipts. However, after a complete assessment of the extent of the damages caused by and the repairs, cleanup, lost gas and other storm related expenditures relating to the hurricanes, including the possible relocation of pipeline facilities, the total cost of damages could be higher than our current estimates.

The following hurricane related costs are reflected in or may impact our Condensed Consolidated Statements of Financial Position as of September 30, 2005:

The following hurricane related costs are reflected in our Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2005:

The effects of Hurricanes Katrina and Rita have impacted or may impact our business in a number of other ways as well:

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Although we do not currently anticipate that the overall impact of Hurricanes Katrina and Rita will have a material adverse effect upon our future business, financial condition, results of operations or cash flows, in light of the magnitude of the damage caused by the hurricanes and the enormity of the relief and reconstruction effort, substantial uncertainty remains as to the ultimate impact on our business, financial condition and results of operations in the near or long term. The reconstruction of the Gulf Coast region is in the early planning stages and the implementation and success of these plans are outside of our control, as are many of the other factors described above. Please read “Risk Factors—Risks Inherent in Our Business—The impact of Hurricanes Katrina and Rita could have a material adverse effect on our business, financial condition and results of operations.”

Summary of Risk Factors

An investment in our common units involves risks associated with our business, our partnership structure and the tax characteristics of our common units. Those risks are described under the caption “Risk Factors” beginning on page 21 and include, among others:

Risks Inherent in Our Business

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Risks Inherent in an Investment in Us

Tax Risks

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The Transactions

General

We are a Delaware limited partnership recently formed by a subsidiary of Loews Corporation to own and operate the business that has been conducted by Boardwalk Pipelines, LLC and its subsidiaries, Texas Gas and Gulf South.

In connection with the closing of this offering, the following will occur:

Management and Ownership

Our general partner, Boardwalk GP, LP, a Delaware limited partnership (“Boardwalk GP”), will manage our operations and activities. As a limited partnership, Boardwalk GP does not have a board of directors and is managed by its general partner, Boardwalk GP, LLC, a Delaware limited liability company (“BGL”). BGL will have a board of directors (the “Board of Directors” or “Board”). Loews indirectly owns 100% of the equity interests in BGL and Boardwalk GP. For information about the executive officers and directors of BGL, please read “Management—Directors and Executive Officers of Boardwalk GP, LLC.” Our general partner and its affiliates will be entitled to be reimbursed for all direct and indirect expenses incurred on our behalf, including overhead allocated to us by Loews consistent with accounting and cost allocation methodologies generally permitted by FERC for rate-making purposes and past business practices. Our general partner will also be entitled to distributions on its general partner interest and, if specified requirements are met, on its incentive distribution rights. Please read “Certain Relationships and Related Party Transactions” and “Management—Executive Compensation.”

Unlike shareholders in a publicly traded corporation, our unitholders will not be entitled to elect our general partner or its directors.

Principal Executive Offices and Internet Address

Our principal executive offices are located at 3800 Frederica Street, Owensboro, Kentucky, 42301, and our phone number is (270) 926-8686. Our website is located at http://www.boardwalkpipelines.com. We expect to make our periodic reports and other information filed with or furnished to the Securities and Exchange Commission (the “SEC”) available, free of charge, through our website, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information on our website or any other website is not incorporated by reference into this prospectus and does not constitute a part of this prospectus.

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Organizational Chart

The following diagram depicts our organizational structure after giving effect to this offering and the related transactions.

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Summary of Conflicts of Interest and Fiduciary Duties

Boardwalk GP, our general partner, has a legal duty to manage us in a manner beneficial to our unitholders. This legal duty originates in statutes and judicial decisions and is commonly referred to as a “fiduciary duty.” However, because our general partner is indirectly owned by Loews, the officers and directors of BGL have fiduciary duties to manage the business of Boardwalk GP and BGL in a manner beneficial to Loews. As a result of this relationship, conflicts of interest may arise in the future between us and our unitholders, on the one hand, and our general partner and its affiliates, on the other hand. For a more detailed description of the conflicts of interest and fiduciary duties of our general partner, please read “Risk Factors—Risks Inherent in an Investment in Us” and “Conflicts of Interest and Fiduciary Duties.”

Our partnership agreement limits the liability and reduces the fiduciary duties of our general partner to our unitholders. Our partnership agreement also restricts the remedies available to unitholders for actions that might otherwise constitute breaches of our general partner’s fiduciary duty. By purchasing a common unit, you are treated as having consented to various actions contemplated in our partnership agreement and conflicts of interest that might otherwise be considered a breach of fiduciary or other duties under applicable law. Please read “Conflicts of Interest and Fiduciary Duties—Fiduciary Duties” for a description of the fiduciary duties imposed on our general partner by Delaware law, the material modifications of these duties contained in our partnership agreement and certain legal rights and remedies available to unitholders.

For a description of our other relationships with our affiliates, please read “Certain Relationships and Related Party Transactions.”

Restrictions on Ownership of Common Units

In order to comply with certain FERC rate-making policies applicable to entities like us that pass-through their taxable income to their owners, we have adopted requirements regarding our owners. Our partnership agreement requires that a transferee of common units, including the underwriters and those who purchase common units from the underwriters, properly complete and deliver to us a transfer application containing a certification as to a number of matters, including the status of the transferee, or all its owners, as being subject to United States federal income taxation on the income generated by us. In addition, our general partner may require any owner of our units to recertify its status as being subject to United States federal income taxation on the income generated by us. The form or forms used for any such recertification will be specified by our general partner and may be changed in any manner our general partner determines necessary or appropriate. If a transferee does not properly complete the transfer application or recertification, for any reason, the transferee will have no right to receive any distributions or allocations of income or loss on its common units or to vote its units on any matter and we have the right to redeem such units at a price which is equal to the lower of the transferee’s purchase price or the then-current market price of such units. The redemption price will be paid in cash or by delivery of a promissory note, as determined by our general partner. See “Description of the Common Units—Transfer of Common Units” and “The Partnership Agreement—Non-Taxpaying Assignees; Redemption.”

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The Offering

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Summary Historical Financial and Operating Data

The following table presents summary historical financial and operating data for our predecessor, Boardwalk Pipelines, and its predecessor, Texas Gas, as of the dates and for the periods indicated. Boardwalk Pipelines was formed in April 2003 to acquire all of the outstanding capital stock of Texas Gas, the acquisition of which was completed on May 16, 2003. Because Boardwalk Pipelines had no assets or operations prior to its acquisition of Texas Gas, we refer to Texas Gas as the predecessor of both Boardwalk Pipelines and us. The summary historical financial and operating data is derived from the historical consolidated financial statements of Boardwalk Pipelines and the historical financial statements of Texas Gas included elsewhere in this prospectus.

The acquisition of Texas Gas was accounted for using the purchase method of accounting and, accordingly, the post-acquisition financial information included below reflects the allocation of the purchase price resulting from the acquisition. As a result, the financial statements of Texas Gas for the periods prior to May 16, 2003 are not directly comparable to our financial statements subsequent to that date. The consolidated financial and operating data have been separated by a bold vertical line separating Texas Gas predecessor financial data from Boardwalk Pipelines since its inception.

The acquisition of Gulf South by Boardwalk Pipelines in December 2004 was also accounted for using the purchase method of accounting. Accordingly, the post-acquisition financial information included below reflects the purchase. Because the acquisition occurred in December 2004, the accounting effect of the acquisition had its greatest impact on our statement of financial position as of December 31, 2004. As a result, our results of operations for the nine months ended September 30, 2004 are not readily comparable with our results of operations for the nine months ended September 30, 2005.

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The following table presents a non-GAAP financial measure, Adjusted EBITDA, which we use in our business. As used herein, Adjusted EBITDA means earnings before interest, income taxes, depreciation, amortization and miscellaneous other income. We believe the adjustments for miscellaneous other income, primarily all of which are either non-cash or non-recurring items, are similar in nature to the traditional adjustments to net income used to calculate EBITDA and adjustment for these items results in an appropriate representation of this financial measure. This measure is not calculated or presented in accordance with generally accepted accounting principles (“GAAP”). We explain this measure below and reconcile it to its most directly comparable financial measures calculated and presented in accordance with GAAP in “—Non-GAAP Financial Measure” below. The financial data should be read in conjunction with the financial statements and the notes thereto included in this prospectus.

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Non-GAAP Financial Measure

Adjusted EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors, commercial banks, research analysts and rating agencies, to assess:

Adjusted EBITDA should not be considered an alternative to net income, operating income, cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as historic costs of depreciable assets. We have included information concerning Adjusted EBITDA because Adjusted EBITDA provides additional information as to our ability to meet our fixed charges and is presented solely as a supplemental measure. However, viewing Adjusted EBITDA as an indicator of our ability to make cash distributions on our common units should be done with caution, as we might be required to conserve funds or to allocate funds to business or legal purposes other than making distributions. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income or cash flow as determined in accordance with generally accepted accounting principles or as an indicator of our operating performance or liquidity. Adjusted EBITDA is not necessarily comparable to a similarly titled measure of another company.

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The following table presents a reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measures, on a historical basis, as applicable, for each of the periods presented below: