What is ‘Incentive Distribution Rights – IDRs’
The general partner of a limited partnership receives an increasing proportion of the additional distributable cash flow generated by the partnership as a result of these provisions. This happens along with increases in the per-unit distributions to the limited partners. This share of increased distributable cash flow is normally valued at 2 percent, but it may reach higher amounts such as 20 percent or even 50% in certain cases.
Explaining ‘Incentive Distribution Rights – IDRs’
It is anticipated that these rights will encourage the general partner to increase distributions to limited partners at a quick pace. According to the industry standard, incentive distribution rights are calculated based on quarterly distribution data.
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