SEC Info

Home

Search

My Interests

Help

Sign In

Please Sign In

  As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

 1/05/04  K-Sea Transportation Partners LP  S-1/A                 13:569                                    Merrill Corp/New/- FA

Document/Exhibit                   Description                      Pages   Size 

 1: S-1/A       Pre-Effective Amendment to Registration Statement   HTML  2,075K 
                          (General Form)                                         
 2: EX-3.4      Articles of Incorporation/Organization or By-Laws   HTML    331K 
 3: EX-3.7      Articles of Incorporation/Organization or By-Laws   HTML      9K 
 4: EX-3.8      Articles of Incorporation/Organization or By-Laws   HTML    238K 
 5: EX-4.1-2    Instrument Defining the Rights of Security Holders  HTML     72K 
 6: EX-10.1     Material Contract                                   HTML    738K 
 7: EX-10.2     Material Contract                                   HTML    139K 
 8: EX-10.3     Material Contract                                   HTML     86K 
 9: EX-10.4-2   Material Contract                                   HTML     58K 
10: EX-10.5     Material Contract                                   HTML     90K 
11: EX-10.6     Material Contract                                   HTML     82K 
12: EX-10.16    Material Contract                                   HTML    111K 
13: EX-23.1     Consent of Experts or Counsel                       HTML      8K 

As filed with the Securities and Exchange Commission on January 5, 2004.

Registration No. 333-107084

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 5
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

K-SEA TRANSPORTATION PARTNERS L.P.
(Exact name of registrant as specified in its charter)

3245 RICHMOND TERRACE
STATEN ISLAND, NEW YORK 10303
(718) 720-9306
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

TIMOTHY J. CASEY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
K-SEA GENERAL PARTNER GP LLC
3245 RICHMOND TERRACE
STATEN ISLAND, NEW YORK 10303
(718) 720-9306
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.

        If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: o

        If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o 

        If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o 

        If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

        If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: o

CALCULATION OF REGISTRATION FEE

(1)

Includes common units issuable upon exercise of the underwriters' over-allotment option.

(2)

Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933.

(3)

An aggregate of $7,489.32 of the registration fee was previously paid with the filings of the Registration Statement on July 16, 2003 and November 13, 2003.

                The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the SEC, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

K-Sea Transportation Partners L.P.

3,500,000 Common Units
Representing Limited Partner Interests

We are a partnership recently formed to provide refined petroleum product marine transportation, distribution and logistics services in the northeastern United States and the Gulf of Mexico. This is the initial public offering of our common units. We expect the initial public offering price to be between $21.50 and $23.50 per common unit. Holders of common units are entitled to receive distributions of available cash of $0.50 per quarter, or $2.00 on an annualized basis, before any distributions are paid on our subordinated units, 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. The common units have been approved for listing on the New York Stock Exchange, subject to official notice of issuance, under the symbol "KSP."

We believe that conducting our operations through a publicly traded limited partnership will offer access to the public equity and debt capital markets, a lower cost of capital for further expansions and acquisitions, an enhanced ability to use our equity securities as consideration in future acquisitions and an overall lower effective income tax rate to our unitholders.

Investing in our common units involves risk. Please read "Risk Factors" beginning on page 18.

These risks include the following:

•

We may not have sufficient cash from operations to enable us to pay the minimum quarterly distribution following establishment of cash reserves and payment of fees and expenses, including payments to our general partner.



•

Our business would be adversely affected if we failed to comply with the Jones Act provisions on coastwise trade, or if those provisions were modified or repealed.



•

We must make substantial expenditures to maintain the operating capacity of our fleet, which will reduce our cash available for distribution.



•

A decline in demand for, and the level of consumption of, refined petroleum products, particularly in the East Coast and Gulf Coast regions, could cause demand for tank vessel capacity and charter rates to decline, which would decrease our revenues and profitability.



•

K-Sea General Partner L.P. and its affiliates have conflicts of interests and limited fiduciary duties, which may permit them to favor their own interests to the detriment of our unitholders.



•

Even if unitholders are dissatisfied, they cannot remove our general partner without its consent.



•

You will experience immediate and substantial dilution of $7.22 per common unit.



•

Our partnership agreement currently limits the ownership of our partnership interests by individuals or entities that are not U.S. citizens. This restriction could limit the liquidity of our common units.



•

You may be required to pay taxes on income from us even if you do not receive any cash distributions from us.

(1)

Includes structuring fees of an aggregate of $            .

We have granted the underwriters a 30-day option to purchase up to 525,000 common units on the same terms and conditions as set forth above to cover over-allotments of common units, if any. The net proceeds from any exercise of the underwriters' over-allotment option will be used to redeem an equal number of common units from an affiliate of our general partner.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Lehman Brothers, on behalf of the underwriters, expects to deliver the common units on or about            , 2004.

LEHMAN BROTHERS                               UBS INVESTMENT BANK

                         , 2004

   
TABLE OF CONTENTS

i

ii

iii

iv

v

vi

        Until            , 2004 (25 days after the date of this prospectus), all dealers that buy, sell or trade our common units, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

vii

   
PROSPECTUS 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 (1) an initial public offering price of $22.50 per common unit and (2) that the underwriters' over-allotment option is not exercised. You should read "—Summary of Risk Factors" beginning on page 3 and "Risk Factors" beginning on page 18 for information about important factors that you should consider before buying the common units. We include a glossary of some of the terms used in this prospectus in Appendix C.

   
K-Sea Transportation Partners L.P.

        We are a leading provider of refined petroleum product marine transportation, distribution and logistics services in the northeastern United States. Our fleet of 35 tank barges, 3 tankers and 18 tugboats serves a wide range of customers, including major oil companies, oil traders and refiners. With over two million barrels of capacity, we believe we own and operate the third-largest ocean-going tank barge fleet in the United States as measured by barrel-carrying capacity.

        Tank vessels, which include tank barges and tankers, are a critical link in the refined petroleum product distribution chain. Tank vessels transport gasoline, diesel fuel, heating oil, asphalt and other products from refineries and storage facilities to a variety of destinations, including other refineries, distribution terminals, power plants and ships. Although pipelines are a key component in the distribution chain, they do not reach all markets, may lack sufficient capacity to meet demand and are not capable of transporting all refined petroleum products. Trucks and rail cars are generally a less cost-effective means of transportation than tank vessels. Many areas along the East Coast have access to refined petroleum products only by using marine transportation as a link in their distribution chain.

        For the fiscal year ended June 30, 2003, our fleet transported approximately 100 million barrels of refined petroleum products for our customers, including BP, ChevronTexaco, ConocoPhillips and ExxonMobil. Our six largest customers in fiscal 2003 have been doing business with us for over 10 years on average. We do not assume ownership of any of the products we transport. During fiscal 2003 and the first quarter of fiscal 2004, we derived approximately 70% of our revenue from longer-term contracts that are generally for periods of one year or more.

        We have a high-quality, well-maintained fleet. Approximately 53% of our barrel-carrying capacity is double-hulled, as compared to an industry average of approximately 30% for all U.S.-flag coastwise and ocean-going tank vessels. By December 2004, we expect that approximately 72% of our barrel-carrying capacity will be double-hulled, after giving effect to the delivery of a new tank barge presently under construction, the completion of two current tank barge modification projects and the phase-out of three single-hull tank barges. Furthermore, after December 2004, we will be permitted to continue to operate our remaining single-hull tank vessels until January 1, 2015 in compliance with the Oil Pollution Act of 1990, or OPA 90, which mandates the phase-out of all single-hull tank vessels transporting petroleum and petroleum products in U.S. waters. All of our vessels operate under the U.S. flag, and all but three are qualified to transport cargo between U.S. ports under the Jones Act, the federal statutes that restrict foreign owners from operating in the U.S. marine transportation industry.

        We believe the following industry trends create a positive outlook for us:

•

Refined petroleum product consumption is rising. The Energy Information Administration projects that refined petroleum product consumption in the East Coast region of the United States will increase by an average of approximately 1.7% per year from 2004 to 2025. The demand for refined petroleum products in the East Coast region is currently higher than in any other region

1

of the United States. In 2002, the East Coast region consumed 5.9 million barrels of refined petroleum products per day, or 29.7% of the total average daily consumption in the United States.

•

OPA 90 is expected to reduce the domestic supply of tank vessels. Under OPA 90, approximately 27% of the current barrel-carrying capacity of the domestic tank vessel fleet must be retired or retrofitted between January 1, 2004 and January 1, 2007, and an additional approximately 38% must be retired or retrofitted at varying times between then and January 1, 2015. In the aggregate, OPA 90 mandates the retirement or retrofitting of approximately 17.9 million barrels of capacity between January 1, 2004 and January 1, 2007 and approximately 25.5 million barrels of capacity at varying times between then and January 1, 2015. At the present time, we believe approximately 8.4 million barrels of newbuild capacity are currently under contract for construction. We believe it takes approximately 12 to 24 months to design, contract for and construct a new tank vessel.



•

The domestic tank vessel industry is consolidating. Over the past decade, the domestic tank vessel industry has undergone meaningful consolidation through acquisitions and other arrangements among tank vessel owners. In addition, major integrated oil and gas companies, which comprise the majority of our customer base, continue to increase their focus on their core competencies, divesting tank vessel assets and outsourcing petroleum product transportation operations. The continuation of these trends would provide us with opportunities to acquire additional assets and add customers.



•

Customers are placing greater emphasis on environmental and safety concerns. Our customers are increasingly selective in their choice of tank vessel operators and place particular emphasis on strong environmental and safety records and operating performance.

        Since the founding of our predecessor company in 1959, we have played an increasingly significant role in the transportation of refined petroleum products in the northeastern United States. In April 1999, our predecessor company was acquired from its founders by members of its senior management team and a private equity investment group. Since April 1999, when the company ceased being a family-owned business, we have acquired 18 tank vessels in 9 separate transactions, significantly increased our market share and improved operating and financial performance. During the period from April 30, 1999 to September 30, 2003, we increased the total barrel-carrying capacity of our fleet, net of vessel sales and retirements, from approximately 1.1 million barrels to approximately 2.3 million barrels, while improving our cost structure and increasing the net utilization of the tank vessels we operate from 75% to 88%. For selected financial information regarding the period from April 30, 1999 to September 30, 2003, please read "Selected Historical and Pro Forma Financial and Operating Data" beginning on page 55.

        For the fiscal year ended June 30, 2003 and the three months ended September 30, 2003, on a pro forma basis for the initial public offering and related transactions, we generated total revenues of $87.7 million and $23.4 million, respectively, net income of $11.6 million and $3.0 million, respectively, and earnings before interest, taxes, depreciation, amortization and net (gain) loss on reduction of debt, or EBITDA, of $30.3 million and $7.7 million, respectively. Please read "—Summary Historical and Pro Forma Financial and Operating Data—Non-GAAP Financial Measures" beginning on page 16 for an explanation of EBITDA and a reconciliation of EBITDA to net income and net cash provided by operating activities.

2

Business Strategies

        Our primary business objective is to increase distributable cash flow per unit by executing the following strategies:

•

maintain safe, low-cost and efficient operations;



•

balance our fleet deployment between longer-term contracts and shorter-term business in an effort to provide stable cash flows through business cycles, while preserving flexibility to respond to changing market conditions;



•

maximize fleet utilization and improve productivity;



•

attract and maintain customers by adhering to high standards of performance, reliability and safety; and



•

expand our fleet through newbuildings and accretive and strategic acquisitions.

Competitive Strengths

        We believe we are well positioned to execute our business strategies successfully because of the following competitive strengths:

•

a large, versatile fleet that enables us to maximize utilization and provide comprehensive customer service;



•

a significant percentage of double-hull tank vessels in relation to the industry average, which should benefit us given the projected decrease in tank vessel capacity due to OPA 90;



•

a reputation for high standards of performance, reliability and safety, which fosters long-term customer relationships with major oil companies, oil traders and refiners;



•

a proven track record of successfully acquiring and integrating vessels and businesses;



•

the financial flexibility to pursue acquisitions and other expansion opportunities through the issuance of additional common units and borrowings under our new credit agreement; and



•

a management team with an average of over 20 years experience in the maritime transportation industry.

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 18 and include:

Risks Inherent in Our Business

•

We may not have sufficient cash from operations to enable us to pay the minimum quarterly distribution following establishment of cash reserves and payment of fees and expenses, including payments to our general partner.



•

The assumptions underlying the financial forecast we include in "Cash Available for Distribution—Forecasted Available Cash from Operating Surplus" are inherently uncertain and are subject to significant business, economic, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those forecasted.



•

Our business would be adversely affected if we failed to comply with the Jones Act provisions on coastwise trade, or if those provisions were modified or repealed.

3

•

We must make substantial expenditures to maintain the operating capacity of our fleet, which will reduce our cash available for distribution.



•

Our general partner is required to deduct from operating surplus each quarter estimated maintenance expenditures, which may result in less cash available to unitholders than if actual maintenance capital expenditures were deducted.



•

Capital expenditures and other costs necessary to operate and maintain a vessel vary depending on the age of the vessel and changes in governmental regulations, safety or other equipment standards.



•

A decline in demand for, and level of consumption of, refined petroleum products, particularly in the East Coast and Gulf Coast regions, could cause demand for tank vessel capacity and charter rates to decline, which would decrease our revenues and profitability.



•

Marine transportation is an inherently risky business.



•

Our insurance may not be adequate to cover our losses.



•

We rely on a limited number of customers for a significant portion of our revenues. The loss of any of these customers could adversely affect our business and operating results.

Risks Inherent in an Investment in Us

•

K-Sea General Partner L.P. and its affiliates have conflicts of interest and limited fiduciary duties, which may permit them to favor their own interests to the detriment of our unitholders.



•

Even if unitholders are dissatisfied, they cannot remove our general partner without its consent.



•

Our general partner's discretion in establishing cash reserves may reduce the amount of cash available for distribution to you.



•

You will experience immediate and substantial dilution of $7.22 per common unit.



•

We may issue additional common units without your approval, which would dilute your ownership interests.



•

Our partnership agreement currently limits the ownership of our partnership interests by individuals or entities that are not U.S. citizens. This restriction could limit the liquidity of our common units.

Tax Risks

•

The IRS could treat us as a corporation for tax purposes, which would substantially reduce cash available for distribution to unitholders.



•

A successful IRS contest of the federal income tax positions we take may adversely impact the market for our common units, and the costs of any contest will be borne by us and, therefore, indirectly by our unitholders and our general partner.



•

You may be required to pay taxes on income from us even if you do not receive any cash distributions from us.



•

Tax gain or loss on the disposition of our common units could be different than expected.

4

   
The Transactions

General

        We have recently been formed as a Delaware limited partnership to own and operate the refined petroleum product marine transportation, distribution and logistics business currently conducted by K-Sea Transportation LLC, EW Holding Corp. and K-Sea Transportation Corp. At the closing of this offering, the following transactions will occur:

•

K-Sea Transportation LLC, EW Holding Corp. and K-Sea Transportation Corp. will contribute substantially all of their assets and liabilities to us or our subsidiaries in exchange for 665,000 common units and 4,165,000 subordinated units representing an aggregate 56.8% limited partner interest in us, a 2% general partner interest in us, and all of our incentive distribution rights, which entitle the general partner to increasing percentages of the cash we distribute in excess of $0.55 per unit per quarter.



•

We will issue 3,500,000 common units to the public in this offering, representing a 41.2% limited partner interest in us, and will use the proceeds to repay debt.



•

All of the employees of K-Sea Transportation LLC, EW Holding Corp. and K-Sea Transportation Corp. will become employees of K-Sea Transportation Inc., one of our subsidiaries.



•

K-Sea Operating Partnership L.P., one of our subsidiaries, will enter into a new $47.0 million senior secured credit agreement, consisting of a $10.0 million working capital facility, a $30.0 million acquisition facility and a $7.0 million letter of credit facility. K-Sea Operating Partnership L.P. will also assume all of K-Sea Transportation LLC's and EW Holding Corp.'s obligations under the $39.8 million in bonds issued under Title XI of the Merchant Marine Act of 1936. Although the Title XI borrowings currently prohibit the payment of distributions except in very limited circumstances, we expect to restructure this indebtedness at or prior to the closing of this offering as described in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Title XI Borrowings" beginning on page 70.



•

K-Sea Investors L.P. and certain of its controlled affiliates will agree not to compete with us and to indemnify us for certain pre-closing liabilities.

        We believe that conducting our operations through a publicly traded limited partnership will offer us the following advantages:

•

access to the public equity and debt capital markets;



•

a lower cost of capital for further expansions and acquisitions;



•

an enhanced ability to use equity securities as consideration in future acquisitions; and



•

an overall lower effective income tax rate to our unitholders.

        References in this prospectus to "K-Sea Transportation Partners L.P.," "we," "our," "us" or like terms when used in a historical context refer to the assets of K-Sea Transportation LLC and its subsidiaries that are being contributed to K-Sea Transportation Partners L.P. and its subsidiaries in connection with the offering. When used in the present tense or prospectively, those terms refer to K-Sea Transportation Partners L.P.

5

Holding Company Structure

        As is common with publicly traded limited partnerships and in order to maximize operational flexibility, we will conduct our operations through subsidiaries. We will have three subsidiaries initially: K-Sea Operating Partnership L.P., a limited partnership that will conduct all of our operations that generate qualifying income for federal income tax purposes; K-Sea OLP GP LLC, its general partner; and K-Sea Transportation Inc., a corporation that will conduct operations that do not generate qualifying income for federal income tax purposes. In order to be treated as a partnership for federal income tax purposes, we must generate at least 90% of our gross income from certain qualifying sources, such as the transportation and processing of crude oil, natural gas and products thereof. Activities that do not generate qualifying income can be placed in a corporate subsidiary. Revenue from activities conducted by our corporate subsidiary will be taxed at the applicable corporate tax rate. Dividends received from a corporate subsidiary are qualifying income. For a more complete description of this qualifying income requirement, please read "Material Tax Consequences—Partnership Status" beginning on page 142.

Organizational Charts Before and After the Transactions

        The following diagrams depict our current organizational structure and our organizational structure after giving effect to the transactions.

6

   
Organizational Structure Before the Transactions

7

   
Organizational Structure After the Transactions

8

Management and Ownership Before and After the Transactions

        K-Sea General Partner GP LLC, as the general partner of our general partner, will manage our operations and activities. The executive officers and directors of K-Sea General Partner GP LLC, other than Mr. Brian P. Friedman, currently serve as executive officers and directors of K-Sea Transportation LLC. For more information about these individuals, including Mr. Friedman, please read "Management—Directors and Executive Officers of K-Sea General Partner GP LLC" beginning on page 106.

        Neither our general partner nor the board of directors of K-Sea General Partner GP LLC will be elected by our unitholders. Unlike shareholders in a publicly traded corporation, our unitholders will not be entitled to elect the directors of K-Sea General Partner GP LLC. None of our directors, other than Mr. Friedman, has been a director of a publicly traded company. Furthermore, none of our executive officers has any experience managing and operating a publicly traded company.

        Our general partner will not receive any management fee or other compensation in connection with its management of our business but will be entitled to be reimbursed for all direct and indirect expenses incurred on our behalf. Our general partner is also 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 Transactions" beginning on page 113.

        K-Sea Investors L.P. indirectly owns a 91% economic interest in K-Sea Transportation LLC. After the transactions, K-Sea Investors L.P. will own a 90% economic interest in K-Sea General Partner GP LLC. K-Sea Investors L.P. is owned by individual investors and funds managed by FS Private Investments LLC d/b/a Jefferies Capital Partners. Jefferies Capital Partners, together with its affiliates, is a private investment firm with more than $600 million in committed equity capital. The general partner of K-Sea Investors L.P., Park Avenue Transportation Inc., is owned by Mr. Friedman and Mr. James Luikart, who are the managing members of Jefferies Capital Partners.

Principal Executive Offices and Internet Address

        Our principal executive offices are located at 3245 Richmond Terrace, Staten Island, New York 10303, and our phone number is (718) 720-9306. Our website is located at http://www.k-sea.com. We expect to make our periodic reports and other information filed with or furnished to 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.

   
Summary of Conflicts of Interest and Fiduciary Duties

        K-Sea General Partner L.P., 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 K-Sea General Partner GP LLC, the general partner of our general partner, is owned by management and K-Sea Investors L.P., the officers and directors of K-Sea General Partner GP LLC who manage and operate our general partner have fiduciary duties to manage the business of K-Sea General Partner GP LLC in a manner beneficial to management and K-Sea Investors L.P. 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 "Conflicts of Interest and Fiduciary Duties" beginning on page 116.

9

        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 the partnership agreement and conflicts of interest that might otherwise be considered a breach of fiduciary or other duties under applicable state law.

        For a description of our other relationships with our affiliates, please read "Certain Relationships and Related Transactions" beginning on page 113.

10

   
The Offering

11

12

13

   
Summary Historical and Pro Forma Financial and Operating Data

        The following table presents summary historical financial and operating data of our predecessor, K-Sea Transportation LLC, and pro forma financial data of K-Sea Transportation Partners L.P., in each case for the periods and as of the dates indicated. The summary historical financial data of K-Sea Transportation LLC as of September 30, 2003 and for the three months ended September 30, 2002 and 2003 are derived from the unaudited consolidated financial statements of K-Sea Transportation LLC. The summary historical financial data for K-Sea Transportation LLC as of and for the fiscal years ended June 30, 2001, 2002 and 2003 are derived from the audited consolidated financial statements of K-Sea Transportation LLC.

        The unaudited pro forma consolidated financial statements of K-Sea Transportation Partners L.P. give pro forma effect to the contribution of substantially all of the assets and liabilities of K-Sea Transportation LLC and its subsidiaries to K-Sea Operating Partnership L.P., the completion of this offering and the use of the net proceeds of the offering to retire indebtedness. The summary pro forma financial data presented as of and for the fiscal year ended June 30, 2003 and as of and for the three months ended September 30, 2003 are derived from our unaudited pro forma consolidated financial statements. The pro forma balance sheet data assumes the offering and related transactions occurred as of September 30, 2003. The pro forma income statement data for the fiscal year ended June 30, 2003 and for the three months ended September 30, 2003 assumes the offering and related transactions occurred on July 1, 2002 and July 1, 2003, respectively. A more complete explanation of the pro forma data can be found in our unaudited pro forma consolidated financial statements.

        The following table presents two financial measures, net voyage revenue and EBITDA, which we use in our business. These financial measures are not calculated or presented in accordance with generally accepted accounting principles, or GAAP. We explain these measures below and reconcile them to their most directly comparable financial measures calculated and presented in accordance with GAAP in "—Non-GAAP Financial Measures" beginning on page 16.

        We define maintenance capital expenditures as capital expenditures required to maintain, over the long term, the operating capacity of our fleet, and expansion capital expenditures as those capital expenditures that increase, over the long term, the operating capacity of our fleet. Examples of maintenance capital expenditures include costs related to drydocking a vessel, retrofitting an existing vessel or acquiring a new vessel to the extent such expenditures maintain the operating capacity of our fleet. If, however, capital expenditures associated with retrofitting an existing vessel or acquiring a new vessel increase the operating capacity of our fleet over the long term, whether through increasing our aggregate barrel-carrying capacity, improving the operational performance of a vessel or otherwise, those capital expenditures would be classified as expansion capital expenditures.

        Drydocking expenditures are more extensive in nature than normal routine maintenance and, therefore, are capitalized and amortized over three years. For more information regarding our accounting treatment of drydocking expenditures, please read "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Amortization of Drydocking Expenditures" beginning on page 76.

        The following table should be read together with, and is qualified in its entirety by reference to, the historical and unaudited pro forma consolidated financial statements and the accompanying notes included elsewhere in this prospectus. The table should be read together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" beginning on page 58.

14

(1)

The fiscal year ended June 30, 2002 includes a $572 gain on reduction of subordinated debt (and related accrued interest) owed to the seller of a vessel we purchased in 1999. This reduction

15

resulted from a customer's exercise of an option to purchase the vessel, which was provided for in the 1999 purchase contract. The fiscal year ended June 30, 2003 also includes $195 in prepayment fees resulting from repayment of debt related to certain vessels that were sold during the year.

(2)

The fiscal year ended June 30, 2001 includes a deferred tax benefit of $2,575 resulting from a re-evaluation of our deferred tax liabilities resulting from a change in our approach to the allocation of income to the applicable tax jurisdictions.

(3)

The fourth quarter of fiscal 2002 includes $39.1 million of new Title XI borrowings and the investment of those funds into short-term U.S. government obligations pending delivery of newbuild tank barges.

(4)

"Net utilization" is a percentage equal to the total number of days actually worked by a tank vessel or group of tank vessels during a defined period, divided by the number of calendar days in the period multiplied by the total number of tank vessels operating or in drydock during that period.

(5)

"Average daily rate" equals the net voyage revenue earned by a tank vessel or group of tank vessels during a defined period, divided by the total number of days actually worked by that tank vessel or group of tank vessels during that period.

Non-GAAP Financial Measures

        We derive our voyage revenue from time charters, contracts of affreightment and voyage charters, which are described in more detail beginning on page 58. One of the principal distinctions among these types of contracts is whether the vessel operator or the customer pays for voyage expenses, which include fuel, port charges, pilot fees, tank cleaning costs and canal tolls. Some voyage expenses are fixed, and the remainder can be estimated. If we, as the vessel operator, pay the voyage expenses, we typically pass these expenses on to our customers by charging higher rates under the contract or re-billing such expenses to them. As a result, although voyage revenue from different types of contracts may vary, the net revenue that remains after subtracting voyage expenses, which we call net voyage revenue, is comparable across the different types of contracts. Therefore, we principally use net voyage revenue, rather than voyage revenue, when comparing performance in different periods.

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

•

the financial performance of our assets without regard to financing methods, capital structures or historical cost basis;



•

the ability of our assets to generate cash sufficient to pay interest on our indebtedness and to make distributions to our partners;



•

our operating performance and return on invested capital as compared to those of other companies in the marine transportation business, without regard to financing methods and capital structure; and



•

our compliance with certain financial covenants included in our debt agreements.

        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. EBITDA excludes some, but not all, items that affect net income and operating income, and these measures may vary among other companies. Therefore, EBITDA as presented below may not be comparable to similarly titled measures of other companies.

16

        The following table presents a reconciliation of the non-GAAP financial measures of net voyage revenue and EBITDA to the most directly comparable GAAP financial measures, on a historical basis and pro forma basis, as applicable, for each of the periods indicated.

17

   
RISK FACTORS

        Limited partner interests are inherently different from the capital stock of a corporation, although many of the business risks to which we are subject are similar to those that would be faced by a corporation engaged in a similar business. You should carefully consider the following risk factors together with all of the other information included in this prospectus when evaluating an investment in our common units.

        If any of the following risks were actually to occur, our business, financial condition or results of operations could be materially adversely affected. In that case, we might not be able to pay distributions on our common units, the trading price of our common units could decline, and you could lose all or part of your investment.

Risks Inherent in Our Business

We may not have sufficient cash from operations to enable us to pay the minimum quarterly distribution following establishment of cash reserves and payment of fees and expenses, including payments to our general partner.

        We may not have sufficient available cash each quarter to pay the minimum quarterly distribution. The amount of cash we can distribute on our common units principally depends upon the amount of cash we generate from our operations, which will fluctuate from quarter to quarter based on, among other things:

•

the level of consumption of refined petroleum products in the markets in which we operate;



•

the prices we obtain for our services;



•

the level of our operating costs, including payments to our general partner; and



•

prevailing economic conditions.

        In addition, the actual amount of cash we will have available for distribution will depend on other factors such as:

•

the level of capital expenditures we make, including for acquisitions, retrofitting of vessels and compliance with new regulations;



•

the restrictions contained in our debt instruments and our debt service requirements;



•

fluctuations in our working capital needs;



•

our ability to make working capital borrowings; and



•

the amount, if any, of reserves, including reserves for future capital expenditures and other matters, established by our general partner in its discretion.

        The amount of cash we have available for distribution depends primarily on our cash flow, including cash flow from financial reserves and working capital borrowings, and not solely on profitability, which will be affected by non-cash items. As a result, we may make cash distributions during periods when we record losses and may not make cash distributions during periods when we record net income.

The assumptions underlying the financial forecast we include in "Cash Available for Distribution—Forecasted Available Cash from Operating Surplus" are inherently uncertain and are subject to significant business, economic, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those forecasted.

        The financial forecast set forth in "Cash Available for Distribution—Forecasted Available Cash from Operating Surplus" beginning on page 47 includes our forecast of results of operations and cash flows for the twelve months ending December 31, 2004. The financial forecast has been prepared by

18

management and we have not received an opinion or report on it from any independent accountants. In addition, our financial forecast includes a calculation of available cash from operating surplus based on the financial forecast. The assumptions underlying the financial forecast are inherently uncertain and are subject to significant business, economic, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those forecasted. If the forecasted results are not achieved, we may not be able to pay the full minimum quarterly distribution or any amount on the common units or subordinated units, in which event the market price of the common units may decline materially.

Our business would be adversely affected if we failed to comply with the Jones Act provisions on coastwise trade, or if those provisions were modified or repealed.

        We are subject to the Jones Act and other federal laws that restrict maritime transportation between points in the United States to vessels built and registered in the United States and owned and manned by U.S. citizens. We are responsible for monitoring the ownership of our common units and other partnership interests. If we do not comply with these restrictions, we would be prohibited from operating our vessels in U.S. coastwise trade, and under certain circumstances we would be deemed to have undertaken an unapproved foreign transfer, resulting in severe penalties, including permanent loss of U.S. coastwise trading rights for our vessels, fines or forfeiture of the vessels. For information about the Jones Act and other maritime laws, please read "Business—Regulation—Coastwise Laws" beginning on page 102. For information about provisions in our partnership agreement relating to these laws, please read "The Partnership Agreement—Foreign Ownership" beginning on page 126.

        During the past several years, interest groups have lobbied Congress to repeal the Jones Act to facilitate foreign flag competition for trades and cargoes currently reserved for U.S.-flag vessels under the Jones Act and cargo preference laws. We believe that continued efforts will be made to modify or repeal the Jones Act and cargo preference laws currently benefiting U.S.-flag vessels. If these efforts are successful, it could result in increased competition, which could reduce our revenues and cash available for distribution.

We must make substantial expenditures to maintain the operating capacity of our fleet, which will reduce our cash available for distribution.

        We must make substantial capital expenditures, including drydocking expenses and the replacement or retrofitting of our single-hull vessels under OPA 90, to maintain the operating capacity of our fleet. We currently expect to spend approximately $8.6 million per year on drydocking expenses and other expenses to maintain the operating capacity of our fleet. Furthermore, we expect to spend approximately $26.1 million during the remaining three quarters of fiscal 2004 for:

•

the retrofit of the KTC 155 to a double-hull tank vessel;



•

the completion of the newbuild DBL 102;



•

the modification of the DBL 105 for petroleum transportation; and



•

certain other projects.

        Prior to January 1, 2015, we intend to retire or retrofit 16 single-hull vessels, which will represent approximately 28% of our barrel-carrying capacity after giving effect to the delivery of the DBL 102, the completion of the KTC 155 and DBL 105 projects described above, and the phase-out of three single-hull tank barges. We estimate that the current cost to replace the 28% of our operating capacity of those tank vessels with newbuildings and retrofits would range from $43.0 million to $50.0 million. At the time we make these expenditures, the actual cost could be higher due to inflation and other factors.

19

Our general partner is required to deduct from operating surplus each quarter estimated maintenance expenditures, which may result in less cash available to unitholders than if actual maintenance capital expenditures were deducted.

        Our partnership agreement requires our general partner to deduct from operating surplus each quarter estimated maintenance capital expenditures as opposed to actual maintenance capital expenditures in order to reduce disparities in operating surplus caused by fluctuating maintenance capital expenditures, such as retrofitting or drydocking. Because of the substantial capital expenditures we intend to make by January 1, 2015, our initial annual estimated maintenance capital expenditures for purposes of calculating operating surplus will include $1.0 million to reduce the fluctuation in operating surplus that would otherwise be caused by the required expenditures. The amount of estimated maintenance capital expenditures deducted from operating surplus is subject to review and change by the conflicts committee. In years when estimated maintenance capital expenditures are higher than actual maintenance capital expenditures, as we expect will be the case in some years until we actually make expenditures for the OPA 90 replacements and retrofitting, the amount of cash available for distribution to unitholders will be lower than if actual maintenance capital expenditures were deducted from operating surplus.

Capital expenditures and other costs necessary to operate and maintain a vessel vary depending on the age of the vessel and changes in governmental regulations, safety or other equipment standards.

        Capital expenditures and other costs necessary to operate and maintain a vessel increase with the age of the vessel. In addition, changes in governmental regulations, safety or other equipment standards, as well as compliance with standards imposed by maritime self-regulatory organizations and customer requirements or competition, may require us to make additional expenditures. For example, we may be required to make significant expenditures for alterations or the addition of new equipment to satisfy requirements of the U.S. Coast Guard and the American Bureau of Shipping. In addition, we may be required to take our vessels out of service for extended periods of time, with corresponding losses of revenues, in order to make such alterations or to add such equipment. In the future, market conditions may not justify these expenditures or enable us to operate our older vessels profitably during the remainder of their economic lives.

        In order to fund these capital expenditures, we will either incur borrowings or raise capital through the sale of debt or equity securities. Our ability to access the capital markets for future offerings may be limited by our financial condition at the time as well as by adverse market conditions resulting from, among other things, general economic conditions and contingencies and uncertainties that are beyond our control. Our failure to obtain the funds for necessary future capital expenditures would limit our ability to continue to operate some of our vessels and could have a material adverse effect on our business and on our ability to make distributions to unitholders.

A decline in demand for, and level of consumption of, refined petroleum products, particularly in the East Coast and Gulf Coast regions, could cause demand for tank vessel capacity and charter rates to decline, which would decrease our revenues and profitability.

        The demand for tank vessel capacity is influenced by the demand for refined petroleum products and other factors including:

•

global and regional economic and political conditions;



•

developments in international trade;



•

changes in seaborne and other transportation patterns, including changes in the distances that cargoes are transported;



•

environmental concerns; and

20

•

competition from alternative sources of energy, such as natural gas, and alternate transportation methods.

Any of these factors could adversely affect the demand for tank vessel capacity and charter rates. Any decrease in demand for tank vessel capacity or decrease in charter rates could adversely affect our business, financial condition and results of operations.

        In addition, we operate our tank vessels in the East Coast and Gulf Coast regions, markets that have historically exhibited seasonal variations in demand and, as a result, in charter rates. Movements of certain clean oil products, such as motor fuels, generally increase during the summer driving season. Movements of black oil products and certain clean oil products, such as heating oil, generally increase during the winter months, while movements of asphalt products generally increase in the spring through fall months. Unseasonably mild winters, such as the winter of 2001, result in significantly lower demand for heating oil in the northeastern United States, which is a significant market for our tank barge services. In addition, unpredictable weather patterns and variations in oil reserves disrupt vessel scheduling. Seasonality could materially affect our business, financial condition and results of operations in the future.

Marine transportation is an inherently risky business.

        Our vessels and their cargoes are at risk of being damaged or lost because of events such as:

•

marine disasters;



•

bad weather;



•

mechanical failures;



•

grounding, fire, explosions and collisions;



•

human error; and



•

war and terrorism.

All of these hazards can result in death or injury to persons, loss of property, environmental damages, delays or rerouting. If one of our vessels were involved in an accident, with the potential risk of environmental contamination, the resulting media coverage could have a material adverse effect on our business, financial condition and results of operations.

        K-Sea Transportation LLC and its predecessors were named, together with a large number of other companies, as a co-defendant in 37 civil actions by various parties, including current and former employees, alleging unspecified damages from past exposure to asbestos and second-hand smoke aboard some of the vessels that it will contribute to us in connection with this offering. K-Sea Transportation LLC and its predecessors were dismissed from those lawsuits in the first half of 2003 for an aggregate sum of approximately $46,000. We may be subject to litigation in the future from the plaintiffs in the 37 previously dismissed lawsuits and others alleging claims for exposure to asbestos due to alleged failure to properly encapsulate or remove friable asbestos on our vessels, as well as for exposure to second-hand smoke and other matters. Please read "Business—Legal Proceedings" beginning on page 104 and "Business—Insurance Program" beginning on page 96 for a discussion of these claims and other related matters.

Our insurance may not be adequate to cover our losses.

        We may not be adequately insured to cover losses from our operational risks, which could have a material adverse effect on our operations. For example, a catastrophic oil spill or other disaster could exceed our insurance coverage. In addition, K-Sea Transportation LLC and its predecessors may not have insurance coverage prior to March 1986. If we were subject to claims related to that period, including claims from current or former employees, K-Sea Transportation LLC may not have insurance

21

to pay the liabilities, if any, that could be imposed on us. If we had to pay claims solely out of our own funds, it could have a material adverse effect on our financial condition. Furthermore, any claims covered by insurance would be subject to deductibles, and since it is possible that a large number of claims could be brought, the aggregate amount of these deductibles could be material.

        We may not be able to procure adequate insurance coverage at commercially reasonable rates in the future, and some claims may not be paid. In the past, stricter environmental regulations have led to higher costs for insurance covering environmental damage or pollution, and new regulations could lead to similar increases or even make this type of insurance unavailable. In addition, our insurance may be voidable by the insurers as a result of certain actions of ours.

We rely on a limited number of customers for a significant portion of our revenues. The loss of any of these customers could adversely affect our business and operating results.

        Our customers consist primarily of major oil companies, oil traders and refineries. The portion of our revenues attributable to any single customer changes over time, depending on the level of relevant activity by the customer, our ability to meet the customer's needs and other factors, many of which are beyond our control. Three customers each accounted for more than 10% of our consolidated revenues for fiscal 2003, and four customers each accounted for more than 10% of our consolidated revenues for the first quarter of fiscal 2004. If we were to lose any of these customers or if any of these customers significantly reduced its use of our services, our business and operating results could be adversely affected.

Because we obtain some of our insurance through protection and indemnity associations, we also may be subject to calls, or premiums, in amounts based not only on our own claim records, but also the claim records of all other members of the protection and indemnity associations.

        We may be subject to calls, or premiums, in amounts based not only on our own claim records but also the claim records of all other members of the protection and indemnity associations through which we receive insurance coverage for tort liability, including pollution-related liability. Our payment of these calls could result in significant expenses to us, which could reduce our profits or cause losses. Moreover, the protection and indemnity clubs and other insurance providers reserve the right to make changes in insurance coverage with little or no advance notice.

We may not be able to renew time charters, consecutive voyage charters, contracts of affreightment and bareboat charters when they expire.

        We received approximately 70% of our revenue from time charters, consecutive voyage charters, contracts of affreightment and bareboat charters during fiscal 2003 and the first quarter of fiscal 2004. These arrangements, which are generally for periods of one year or more, may not be renewed, or if renewed, may not be renewed at similar rates. If we are unable to obtain new charters at rates equivalent to those received under the old charters, our profitability may be adversely affected.

Voyage charters may not be available at rates that will allow us to operate our vessels profitably.

        During fiscal 2003 and the first quarter of fiscal 2004, we derived approximately 30% of our revenue from single voyage charters. Voyage charter rates fluctuate significantly based on tank vessel availability, the demand for refined petroleum products and other factors. Increased dependence on the voyage charter market by us could result in a lower utilization of our vessels and decreased profitability. Future voyage charters may not be available at rates that will allow us to operate our vessels profitably.

22

Our purchase of existing vessels carries risks associated with the quality of those vessels.

        Our fleet renewal and expansion strategy includes the acquisition of existing vessels as well as the ordering of newbuildings. Unlike newbuildings, existing vessels typically do not carry warranties with respect to their condition. While we generally inspect any existing vessel prior to purchase, such an inspection would normally not provide us with as much knowledge of its condition as we would possess if the vessel had been built for us and operated by us during its life. Repairs and maintenance costs for existing vessels are difficult to predict and may be more substantial than for vessels we have operated since they were built. These costs could decrease our profits and reduce our liquidity.

We are subject to complex laws and regulations, including environmental regulations, that can adversely affect the cost, manner or feasibility of doing business.

        Increasingly stringent federal, state and local laws and regulations governing worker health and safety and the manning, construction and operation of vessels significantly affect our operations. Many aspects of the marine industry are subject to extensive governmental regulation by the U.S. Coast Guard, the National Transportation Safety Board, the U.S. Customs Service and the U.S. Maritime Administration, and to regulation by private industry organizations such as the American Bureau of Shipping. The U.S. Coast Guard and the National Transportation Safety Board set safety standards and are authorized to investigate vessel accidents and recommend improved safety standards. The U.S. Coast Guard is authorized to inspect vessels at will.

        Our operations are also subject to federal, state, local and international laws and regulations that control the discharge of pollutants into the environment or otherwise relate to environmental protection. Compliance with such laws, regulations and standards may require installation of costly equipment or operational changes. Failure to comply with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of our operations. Some environmental laws often impose strict liability for remediation of spills and releases of oil and hazardous substances, which could subject us to liability without regard to whether we were negligent or at fault. Under OPA 90, owners, operators and bareboat charterers are jointly and severally strictly liable for the discharge of oil within the 200-mile exclusive economic zone around the United States. Additionally, an oil spill could result in significant liability, including fines, penalties, criminal liability and costs for natural resource damages. The potential for these releases could increase as we increase our fleet capacity. Most states bordering on a navigable waterway have enacted legislation providing for potentially unlimited liability for the discharge of pollutants within their waters. For more information, please read "Business—Regulation" beginning on page 98.

Terrorist attacks have resulted in increased costs and have disrupted our business. Continued hostilities in the Middle East or other sustained military campaigns may adversely impact our results of operations.

        After the terrorist attacks of September 11, 2001, New York Harbor was shut down temporarily, resulting in the suspension of our local operations in the New York City area for four days and the loss of revenue related to these operations. The long-term impact that terrorist attacks and the threat of terrorist attacks may have on the petroleum industry in general, and on us in particular, is not known at this time. Uncertainty surrounding continued hostilities in the Middle East or other sustained military campaigns may affect our operations in unpredictable ways, including disruptions of petroleum supplies and markets, and the possibility that infrastructure facilities could be direct targets of, or indirect casualties of, an act of terror.

        Changes in the insurance markets attributable to terrorist attacks may make certain types of insurance more difficult for us to obtain. Moreover, the insurance that may be available to us may be significantly more expensive than our existing insurance coverage. Instability in the financial markets as a result of terrorism or war could also affect our ability to raise capital.

23

We depend upon unionized labor for the provision of our services. Any work stoppages or labor disturbances could disrupt our business.

        All of our seagoing personnel other than tug and tanker captains, or approximately 76% of our workforce, are employed under a contract with a division of the International Longshoreman's Association that expires on April 30, 2004. Any work stoppages or other labor disturbances could have a material adverse effect on our business, financial condition and results of operations.

Increased competition in the domestic tank vessel industry could result in reduced profitability and loss of market share for us.

        Contracts for our vessels are generally awarded on a competitive basis, and competition in the markets we serve is intense. The most important factors determining whether a contract will be awarded include:

•

availability and capability of the vessels;



•

ability to meet the customer's schedule;



•

price;



•

safety record;



•

reputation; and



•

experience.

        Some of our competitors may have greater financial resources and larger operating staffs than we do. As a result, they may be able to make vessels available more quickly and efficiently, transition to double-hull barges from single-hull barges more rapidly, and withstand the effects of declines in charter rates for a longer period of time. They may also be better able to weather a downturn in the oil and gas industry. As a result, we could lose customers and market share to these competitors.

        We also face competition from refined petroleum product pipelines. Long-haul transportation of refined petroleum products is generally less costly by pipeline than by tank vessel. The construction of new pipeline segments to carry petroleum products into our markets, including pipeline segments that connect with existing pipeline systems, and the conversion of existing non-refined petroleum product pipelines, could adversely affect our ability to compete in particular locations.

Our employees are covered by federal laws that may subject us to job-related claims in addition to those provided by state laws.

        Some of our employees are covered by provisions of the Jones Act and general maritime law. These laws typically operate to make liability limits established by state workers' compensation laws inapplicable to these employees and to permit these employees and their representatives to pursue actions against employers for job-related injuries in federal courts. Because we are not generally protected by the limits imposed by state workers' compensation statutes, we may have greater exposure for claims made by these employees.

Delays or cost overruns in the construction of a new vessel or the modification of existing vessels could adversely affect our business. Cash flows from new or retrofitted vessels may not be immediate or as high as expected.

        We are currently building a new vessel, modifying two other vessels and completing other smaller projects. We expect to spend approximately $26.1 million during the remaining three quarters of fiscal 2004 on these projects, of which approximately $10.0 million relating to the DBL 102 has been financed

24

and is held in cash equivalents in our Title XI escrow account. These projects are subject to the risk of delay or cost overruns caused by the following:

•

unforeseen quality or engineering problems;



•

work stoppages;



•

weather interference;



•

unanticipated cost increases;



•

delays in receipt of necessary equipment; and



•

inability to obtain the requisite permits or approvals.

        Significant delays could also have a material adverse effect on expected contract commitments for these vessels and our future revenues and cash flows. We will not receive any material increase in revenue or cash flow from new or modified vessels until they are placed in service and customers enter into binding arrangements for the use of the vessels. Furthermore, customer demand for new or modified vessels may not be as high as we currently anticipate, and, as a result, our future cash flows may be adversely affected.

We may not be able to grow or effectively manage our growth.

        A principal focus of our strategy is to continue to grow by expanding our business in the East Coast and Gulf Coast regions and, possibly, to expand into other geographic markets. Our future growth will depend upon a number of factors, some of which we can control and some of which we cannot. These factors include our ability to:

•

identify businesses engaged in managing, operating or owning vessels for acquisitions or joint ventures;



•

identify vessels for acquisition;



•

consummate acquisitions or joint ventures;



•

integrate any acquired businesses or vessels successfully with our existing operations;



•

hire, train and retain qualified personnel to manage and operate our growing business and fleet;



•

identify new markets outside of the East Coast and Gulf Coast regions;



•

improve our operating and financial systems and controls; and



•

obtain required financing for our existing and new operations.

        A deficiency in any of these factors would adversely affect our ability to achieve anticipated levels of cash flows or realize other anticipated benefits. In addition, competition from other buyers could reduce our acquisition opportunities or cause us to pay a higher price than we might otherwise pay.

We depend on key personnel for the success of our business.

        We depend on the services of our senior management team and other key personnel, none of whom has any experience managing and operating a publicly traded company. In particular, our success depends on the continued efforts of Mr. Timothy J. Casey, the President and Chief Executive Officer of the general partner of our general partner, and other key employees. The loss of the services of any key employee could have a material adverse effect on our business, financial condition and results of operations. We may not be able to locate or employ on acceptable terms qualified replacements for senior management or key employees if their services were no longer available.

25

Changes in international trade agreements could affect our ability to provide marine transportation services at competitive rates.

        Currently, vessel trade or marine transportation between two points within the same country, generally known as cabotage or coastwise trade, is not included in the General Agreement on Trade in Services or the North American Free Trade Agreement. In addition, the Jones Act restricts maritime cargo transportation between U.S. ports to U.S.-flag vessels qualified to engage in U.S. coastwise trade. If maritime services were deemed to include cabotage and included in the General Agreement on Trade in Services, the North American Free Trade Agreement or other multi-national trade agreements, transportation of maritime cargo between U.S. ports could be opened to foreign-flag vessels. Foreign vessels would have lower construction costs and would generally operate at significantly lower costs than we do in U.S. markets, which would likely have a material adverse effect on our ability to compete.

Due to our lack of asset diversification, adverse developments in our marine transportation business would reduce our ability to make distributions to our unitholders.

        We rely exclusively on the revenues generated from our marine transportation business. Due to our lack of asset diversification, an adverse development in this business would have a significantly greater impact on our business, financial condition and results of operations than if we maintained more diverse assets.

Risks Inherent in an Investment in Us

K-Sea General Partner L.P. and its affiliates have conflicts of interest and limited fiduciary duties, which may permit them to favor their own interests to the detriment of our unitholders.

        Following the offering, K-Sea Investors L.P. and its affiliates will indirectly own the 2% general partner interest and a 56.8% limited partner interest in us and will own and control the general partner of our general partner. Conflicts of interest may arise between K-Sea General Partner L.P. and its affiliates, on the one hand, and us and our unitholders, on the other hand. As a result of these conflicts, our general partner may favor its own interests and the interests of its affiliates over the interests of our unitholders. These conflicts include, among others, the following situations:

•

our general partner is allowed to take into account the interests of parties other than us, such as K-Sea Investors L.P., in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to our unitholders;



•

our general partner may limit its liability and reduce its fiduciary duties, while also restricting the remedies available to our unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty. As a result of purchasing common units, our unitholders consent to some actions and conflicts of interest that might otherwise constitute a breach of fiduciary or other duties under applicable state law;



•

our general partner determines the amount and timing of asset purchases and sales, capital expenditures, borrowings, issuance of additional partnership securities and reserves, each of which can affect the amount of cash that is distributed to our unitholders;



•

in some instances, our general partner may 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 hasten the expiration of the subordination period;



•

our general partner determines which costs incurred by it and its affiliates, including K-Sea General Partner GP LLC, are reimbursable by us;

26

•

our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered on terms that are fair and reasonable to us or entering into additional contractual arrangements with any of these entities on our behalf;



•

our general partner controls the enforcement of obligations owed to us by it and its affiliates; and



•

our general partner decides whether to retain separate counsel, accountants or others to perform services for us.

        Please read "Certain Relationships and Related Transactions—Omnibus Agreement" beginning on page 115 and "Conflicts of Interest and Fiduciary Duties" beginning on page 116.

Even if unitholders are dissatisfied, they cannot remove our general partner without its consent.

        Unlike the holders of common stock in a corporation, unitholders have only limited voting rights on matters affecting our business and, therefore, limited ability to influence management's decisions regarding our business. Unitholders did not elect our general partner or the board of directors of its general partner and will have no right to elect our general partner or the board of directors of its general partner on an annual or other continuing basis. The board of directors of the general partner of our general partner is chosen by its members. None of the directors of the general partner of our general partner, other than Mr. Brian P. Friedman, has been a director of a publicly traded company. Furthermore, none of the executive officers of the general partner of our general partner has any experience managing and operating a publicly traded company.

        Furthermore, if the unitholders are dissatisfied with the performance of our general partner, they will have little ability to remove our general partner. The unitholders will be unable initially to remove our general partner without its consent because K-Sea Investors L.P. and its affiliates will own sufficient units upon completion of the offering to be able to prevent the general partner's removal. The vote of the holders of at least 66²/3% of all outstanding common and subordinated units voting together as a single class is required to remove our general partner. Also, if our general partner is removed without cause during the subordination period and units held by our general partner and its affiliates are not voted in favor of that removal, all remaining subordinated units will automatically be converted 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 in our partnership agreement to mean that a court of competent jurisdiction has entered a final, non-appealable judgment finding our general partner liable for actual fraud, gross negligence 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 during the subordination period because of the unitholders' dissatisfaction with our general partner's performance in managing our partnership will most likely result in the termination of the subordination period.

Our general partner's discretion in establishing cash reserves may reduce the amount of cash available for distribution to you.

        Our partnership agreement gives our general partner broad discretion in establishing financial reserves for the proper conduct of our business. These reserves also will affect the amount of cash available for distribution. Our general partner may establish reserves for distributions on the subordinated units, but only if those reserves will not prevent us from distributing the full minimum quarterly distribution, plus any arrearages, on the common units for the following four quarters. As described above under "—Risks Inherent in Our Business—We must make substantial expenditures to

27

maintain the operating capacity of our fleet, which will reduce our cash available for distribution," the partnership agreement requires our general partner to deduct from operating surplus each quarter estimated maintenance capital expenditures as opposed to actual expenditures, which could reduce the amount of available cash for distribution.

You will experience immediate and substantial dilution of $7.22 per common unit.

        The assumed initial public offering price of $22.50 per common unit exceeds pro forma net tangible book value of $15.28 per common unit. You will incur immediate and substantial dilution of $7.22 per common unit. This dilution results primarily because the assets contributed by our general partner and its affiliates are recorded at their historical cost, and not their fair value, in accordance with GAAP. Please read "Dilution" beginning on page 36.

We may issue additional common units without your approval, which would dilute your ownership interests.

        During the subordination period, without the approval of our unitholders, our general partner may cause us to issue up to 2,082,500 additional common units. Our general partner may also cause us to issue an unlimited number of additional common units or other equity securities of equal rank with the common units, without unitholder approval, in a number of circumstances such as:

•

the issuance of common units upon the exercise of the underwriters' over-allotment option;



•

the issuance of common units in connection with acquisitions or capital improvements that increase cash flow from operations per unit on a pro forma or estimated pro forma basis;



•

issuances of common units to repay indebtedness, the cost of which to service is greater than the distribution obligations associated with the units issued in connection with the repayment of the indebtedness;



•

the redemption of common units from the net proceeds of an issuance of common units;



•

the conversion of subordinated units into common units;



•

the conversion of units of equal rank with the common units into common units under some circumstances;



•

issuances of common units under our employee benefit plans;



•

the conversion of the general partner interest and the incentive distribution rights into common units as a result of the withdrawal or removal of our general partner; or



•

the combination or subdivision of common units.

        The issuance by us of additional common units or other equity securities of equal or senior rank will have the following effects:

•

our unitholders' proportionate ownership interest in us will decrease;



•

the amount of cash available for distribution on each unit may decrease;



•

because a lower percentage of total outstanding units will be subordinated units, the risk that a shortfall in the payment of the minimum quarterly distribution will be borne by our common unitholders will increase;



•

the relative voting strength of each previously outstanding unit may be diminished; and



•

the market price of the common units may decline.

        After the end of the subordination period, we may issue an unlimited number of limited partner interests of any type without the approval of our unitholders. Our partnership agreement does not give our unitholders the right to approve our issuance of equity securities ranking junior to the common units at any time.

28

Our partnership agreement currently limits the ownership of our partnership interests by individuals or entities that are not U.S. citizens. This restriction could limit the liquidity of our common units.

        In order to ensure compliance with Jones Act citizenship requirements, the board of directors of the general partner of our general partner has adopted a requirement that at least 85% of our partnership interests must be held by U.S. citizens. This requirement may have an adverse impact on the liquidity or market value of our common units, because holders will be unable to sell units to non-U.S. citizens. Any purported transfer of common units in violation of these provisions will be ineffective to transfer the common units or any voting, dividend or other rights in respect of the common units.

Our general partner has a limited call right that may require you to sell your common units at an undesirable time or price.

        If at any time our general partner and its affiliates own more than 80% of the common units, our general partner will have the right, but not the obligation, which it may assign to any of its affiliates or to us, to acquire all, but not less than all, of the common units held by unaffiliated persons at a price not less than their then-current market price. As a result, you may be required to sell your common units at an undesirable time or price and may not receive any return on your investment. You may also incur a tax liability upon a sale of your units. Our general partner is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon exercise of the limited call right. There is no restriction in our partnership agreement that prevents our general partner from issuing additional common units and exercising its call right. If our general partner exercised its limited call right, the effect would be to take us private and, if the units were subsequently deregistered, we would no longer be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended. For additional information about the limited call right, please read "The Partnership Agreement—Limited Call Right" beginning on page 136.

Our partnership agreement restricts the voting rights of unitholders owning 20% or more of our common units.

        Our partnership agreement restricts unitholders' voting rights by providing that any units held by a person that owns 20% or more of any class of units then outstanding, other than our general partner, its affiliates, their transferees and persons who acquired such units with the prior approval of the board of directors of the general partner of our general partner, cannot vote on any matter. The partnership agreement also contains provisions limiting the ability of unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting the unitholders' ability to influence the manner or direction of management.

Cost reimbursements due our general partner and its affiliates will reduce cash available for distribution to you.

        Prior to making any distribution on the common units, we will reimburse our general partner and its affiliates for all expenses they incur on our behalf, which will be determined by our general partner in its sole discretion. These expenses will include all costs incurred by the general partner and its affiliates in managing and operating us, including costs for rendering corporate staff and support services to us. In addition, our general partner and its affiliates may provide us with other services for which the general partner or its affiliates may charge us fees. Please read "Certain Relationships and Related Transactions" beginning on page 113 and "Conflicts of Interest and Fiduciary Duties—Conflicts of Interest" beginning on page 116. The reimbursement of expenses and payment of fees, if any, to our general partner and its affiliates could adversely affect our ability to pay cash distributions to you. Excluding reimbursements for costs and expenses associated with this offering and the related transactions, we estimate that the total amount of the reimbursements and fees will be approximately $75,000 in the first year following the offering.

29

You may not have limited liability if a court finds that unitholder action constitutes control of our business.

        As a limited partner in a partnership organized under Delaware law, you could be held liable for our obligations to the same extent as a general partner if you participate in the "control" of our business. Our general partner generally has unlimited liability for the obligations of the partnership, such as its debts and environmental liabilities, except for those contractual obligations of the partnership that are expressly made without recourse to our general partner. In addition, Section 17-607 of the Delaware Revised Uniform Limited Partnership Act provides that, under some circumstances, a unitholder may be liable to us for the amount of a distribution for a period of three years from the date of the distribution. The limitations on the liability of holders of limited partner interests for the obligations of a limited partnership have not been clearly established in some of the other states in which we do business. Please read "The Partnership Agreement—Limited Liability" beginning on page 125 for a discussion of the implications of the limitations on liability to a unitholder.

Restrictions in our debt agreements may prevent us from engaging in some beneficial transactions or paying distributions.

        Upon completion of this offering, we expect our total outstanding indebtedness to be approximately $39.8 million, consisting solely of bonds issued under Title XI of the Merchant Marine Act of 1936, which we refer to as the Title XI financing. We will also have available borrowing capacity under our new credit agreement of $40.0 million upon completion of this offering. Our payment of principal and interest on the debt will reduce cash available for distribution on our units. K-Sea Transportation LLC's debt agreements currently prohibit the payment of distributions except in very limited circumstances. Assuming we restructure these debt agreements as described in "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Title XI Borrowings" beginning on page 70 and "—New Credit Agreement" beginning on page 72, these debt agreements will prohibit the payment of distributions upon the occurrence of the following events, among others:

•

failure to pay any principal, interest, fees, expenses or other amounts when due;



•

default under any vessel mortgage;



•

failure to notify the lenders of any oil spill or discharge of hazardous material, or of any action or claim related thereto;



•

breach or lapse of any insurance with respect to the vessels;



•

breach of certain financial covenants;



•

breach by our general partner or any of our subsidiaries of the guarantees issued under our new credit agreement;



•

failure to observe any other agreement, security instrument, obligation or covenant beyond specified cure periods in certain cases;



•

the incurrence of indebtedness during any calendar year exceeding $5.0 million for the purpose of making distributions or indemnity payments to K-Sea Transportation LLC and certain of its affiliates;



•

default under other indebtedness of our operating partnership, our general partner or any of our subsidiaries above $500,000;



•

bankruptcy or insolvency events involving us, our general partner or any of our subsidiaries;



•

failure of any representation or warranty to be materially correct;



•

a change of control, as defined in the applicable agreement; and

30

•

a material adverse effect, as defined in the applicable agreement, occurs relating to us or our business.

        Our new credit agreement will also prohibit the payment of distributions in the event of judgments against us, our general partner or any of our subsidiaries in excess of certain allowances. Any subsequent refinancing of our current debt or any new debt could have similar restrictions. For more information regarding our debt agreements, please read "Management's Discussion and Analysis of Financial Conditions and Results of Operations—Liquidity and Capital Resources—Title XI Borrowings" beginning on page 70 and "—New Credit Agreement" beginning on page 72.

The control of our general partner may be transferred to a third party without unitholder consent.

        Our general partner may transfer its general partner interest to a third party in a merger or in a sale of all or substantially all of its assets without the consent of the unitholders so long as the third party satisfies the citizenship requirements of the Jones Act. Furthermore, there is no restriction in the partnership agreement on the ability of the partners of our general partner from transferring their respective partnership interests in our general partner to a third party that satisfies the citizenship requirements of the Jones Act. The new partners of our general partner would then be in a position to replace the board of directors and officers of the general partner of our general partner with their own choices and to control the decisions taken by the board of directors and officers.

The partners of K-Sea Investors L.P. and their affiliates may engage in activities that compete directly with us.