MLP investors have pretty modest expectations these days. They’re no longer the wide-eyed optimists seduced by rapid growth plans amid the drilling frenzy that took place before the price of oil crashed.

After a tumultuous year, all we want is a little yield and some stability, boiling down to a modicum of confidence that the distribution won’t get cut (or cut again) in a couple of months.

And that’s just what Plains All American (NYSE: PAA) delivered Monday in unveiling its long-planned “simplification” scheme. The big crude gathering and shipping master limited partnership will issue 246 million common units and take on $593 million of debt to buy out its general partner’s economic interest and incentive distribution rights, in a deal valued at $7.2 billion based on the price of PAA units before the announcement.

PAA also cut its distribution by 21%, from 70 to 55 cents quarterly. That’s a payout management has determined it can sustain even if oil prices remain lower for longer under its worst-case scenario, which assumes a cumulative 17% decline in U.S. crude production this year and next.

Plains GP Holdings (NYSE: PAGP), the investment vehicle tracking the general partner interest just sold, will turn after a reverse split into a PAA tracker, with each of its units representing one unit of PAA but paying a return of capital reported on form 1099 rather than K-1 as for PAA’s limited partners

The deal dilutes PAA’s common equity by 62% but frees it from general partner tribute that recently consumed 36% of its distributions. That will save the partnership $80 million on annual distributions, and $320 million in combination with the distribution cut.

Source: Plains All American

PAA’s distribution coverage will improve from the 0.86x forecast for 2016 in May to an updated 1.05x in the wake of the changes, with the hope of getting close to the partnership’s target of 1.15x by the end of 2017 as it reaps contracted cash flow increases from recently developed pipelines.

By using equity to finance almost the entire deal PAA keeps its long-term debt below 5 times this year’s expected EBITDA. But it will take a couple of years at least to get that ratio down to management’s preferred range of 3.5-4, and as a consequence distribution growth is unlikely to resume before 2018 at the earliest. Capital appreciation will be slowed by at-the-market equity sales, which PAA is counting on  to help it deleverage faster than it would have with a deeper distribution cut.

PAGP, meanwhile, will cut its quarterly distribution from 23 to 21 cents a share, a trim of 11% instead of the 39% cut it was in line for absent the general partner sale. August distributions for both PAA and PAGP will be paid at the higher old rates before the cuts become effective with the November payouts. The GP sale is expected to close by the year’s end and to be tax-free to holders of PAA as well as PAGP. At that time, PAGP will execute a reverse split to match its per-unit payouts with PAA’s.

In an important governance improvement, PAA and PAGP common unitholders will gain the right to elect 6 independent directors to a unified 10-member company board that will also include the CEO and nominees of the three institutional investors in PAA’s general partner.

PAGP’s transition from a general partner proxy to a PAA tracker while retaining corporate tax status will make it more attractive to institutional and retirement investors with limited leeway to invest in partnerships. Meanwhile, its tax shield will ensure that its distributions for the next eight years at least are classed as return of capital. PAGP won’t pay corporate income taxes for a decade.

PAA paid a modest premium of 9% in equity and debt assumption to the market value of PAGP’s shares, while the general partner accepted a lower cash flow multiple (about 16x pro-forma for the avoided 39% distribution cut) than what the market currently assigns to comparable GP interests.

The market feted the arrangement as a win/win, lifting PAA’s price 11% and PAGP’s 12% on the day. At the reduced distribution rates, the current unit prices imply a 7.6% annualized yield for PAA, and 7.5% for PAGP.

These are fully covered by the current cash flow, with coverage set to increase over the next 18 months even if oil prices remain painfully low. Beyond that the outlook is murkier, of course.

But if you believe, as we do, that growing global demand won’t be sated for long without a rebound in U.S. production, than Plains has to remain a core holding.

This is true even though it faces stiff near-term competition for Permian volumes as output from other basins continues to decline. We’re upgrading PAA to a buy below $31.50 in the Growth Portfolio. PAGP moves back from the Aggressive Portfolio to Growth as a newly minted buy below $12.