I don't like the idea of the GP having to tie up new money in LP units. I understand the reasoning, but, a c-corp investing in LP units is not an efficient use of capital. It might be great for individual investors looking for a nice steady growing revenue stream, but 5%-7% won't cut the mustard for a c-corp as far as clearing the hurdle rate.
The Atlas GP deal is intriguing. I like their GP, lots of cash flow growth coming..
The idea is not for the GP to participate in offerings of LP units as a matter of course, but to have the ability to do so if needed. The idea is to keep the powder dry in case the market can not soak up an offering of units at some time in the future, however unlikely that may be.
Have you looked at TMG? Looks like the GP's IDRs are a few years out, and there is a weird distribution supply business in the mix, but the GP should be getting nice IDRs as they sell the remaining assets to the LP over the next few years. The CFO told me his model is to look like XTXI down the road, so that's a good sign. They are tied up a bit by their debt, which has covenants preventing them from being more aggressive about selling assets to the LP and also preventing them from paying dividends, but the debt can be retired in 2007 I think.
All the more reason for XTEX to finance more than 50% of any deals they do (organic or acquisition) with equity. That way, if in the future, equity is hard to issue, then can bring the ratio back down to a 50/50 by using more debt than equity. Personally, I would like to see them do another offering of 100 million to 150 million in anticipation of the numerous projects that they have coming online. The MLP market is getting very crowded and one has to wonder how long the demand for MLP's will be so robust (i.e. low yields).