Penn Virginia Resource Partners, L.P. (PVR) announced the pricing of $600 million of 8.375% senior notes. This will be sold to the public at 100% of the principal amount and are due in 2020. The partnership has scaled up this offering from $450 million to $600 million. It had announced the $450 million senior notes offering on May 7, 2012.
Penn Virginia Resource Partners plans to utilize $220 million from the net proceeds to finance a part of its earlier announced acquisition of Chief Gathering LLC. The rest of the amount will be used to repay a part of the outstanding debts under the partnership’s revolving credit facilities.
It has been a normal practice for Penn Virginia Resource Partners to issue senior notes for meeting its short and long-term fund requirements. Prior to this offering, on April 22, 2010, the partnership had issued $300 million 8.25% senior notes due in 2018. The partnership utilized the net proceeds to repay a part of its outstanding debts under its revolving credit facility.
As of March 31, 2012, Penn Virginia Resource Partners’ net outstanding indebtedness was $617 million and letters of credit amounted to $2.5 million. After this offering, the partnership’s indebtedness will again increase by $600 million, which will further increase interest expense from $9.8 million as of March 31, 2012.
At the end of first quarter 2012, Penn Virginia Resource Partners failed to meet our expectations due to a decline in coal royalty volumes and lower natural gas prices. But, we believe that the partnership’s continued investments for expansion of its domestic operations, including the Marcellus, Panhandle and Antelope systems, will act as a positive catalyst for its growth.
Penn Virginia Resource Partners, L.P. currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
Based in Radnor, Pennsylvania, Penn Virginia Resource Partners, L.P. is involved in the management of coal and natural resource properties and gathering and processing of natural gas in the United States. The partnership competes with CONSOL Energy, Inc. (CNX).
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