Updated: December 11, 2019
Status: Ongoing Case
Labaton Sucharow LLP was appointed lead counsel on December 11, 2019, in a securities class action lawsuit, captioned Paul C. Kraft and Linda E. Kraft JTWROS v. Third Coast Midstream, LLC f/k/a American Midstream Partners, LP, No. 19-cv-09398 (S.D.N.Y.) (the “Action”), on behalf of its client Paul C. Kraft and Linda E. Kraft JTWROS (“Kraft JTWROS”) against Third Coast Midstream, LLC f/k/a American Midstream Partners, LP (“American Midstream” or the “Company”) and certain officers and directors (collectively, “Defendants”). The Action asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and SEC Rule 10b-5 promulgated thereunder, on behalf of all former owners of American Midstream common units who sold their units during the period from July 27, 2018 through July 23, 2019, both dates inclusive (the “Class Period”) and were damaged thereby (the “Class”).
This Action revolves around an undisclosed scheme set in place by Defendants to take American Midstream private for a fraction of its value. In order to effectuate their plans, Defendants abused their control over the Company by first reducing, and then withholding, American Midstream’s quarterly distribution, which caused its unit price to plummet.
American Midstream is a growth-oriented master limited partnership formed to own, operate, develop, and acquire a diversified portfolio of midstream energy assets. At all relevant times, American Midstream’s general partner was American Midstream GP, LLC (the “General Partner”). The General Partner was solely responsible for supporting and conducting the business operations of American Midstream.
At all relevant times, ArcLight Capital Partners, LLC (“ArcLight”) was the Company’s majority unitholder and had control over the General Partner. Therefore, ArcLight ensured that the majority of American Midstream’s Board of Directors were all affiliated with ArcLight, and had the ability to control the Company’s quarterly distribution.
On July 27, 2018, American Midstream declared a 75 percent reduction in the Company’s quarterly common unit distribution. As a result of this reduction, American Midstream’s unit price declined over 42 percent, falling precipitously from $11.55 to $6.60 on July 27, 2018.
Then, on December 31, 2018, American Midstream reported that because of an amendment to its credit facility agreement, it did not expect to make any distributions to its unit holders in the upcoming fourth quarter of 2018, and would continue to withhold said distributions until its consolidated total leverage ratio was reduced. On this news, American Midstream’s common units declined $1.30, or 30 percent, closing at a price of $3.03 per unit on December 31, 2018.
On March 18, 2019, American Midstream publicly disclosed it had entered into a merger agreement with a subsidiary of ArcLight pursuant to which American Midstream unitholders would receive $4.50 per unit. On July 23, 2019, American Midstream announced the closing of the merger.
Therefore, as a result of the distribution cuts put in place by virtue of ArcLight’s control over the Company, American Midstream minority unitholders received approximately 60 percent less consideration for their units than the common unit price immediately prior to the distribution cut on July 27, 2018.