Buckeye Partners L.P. (BPL) announced it will issue senior notes in two tranches. The partnership plans to utilize the proceeds from the notes issue to fund a portion of its Trafigura Corpus Christi Holdings Inc. acquisition, redeem the $275 million aggregate principal amount of its outstanding 5.300% notes due Oct 15, 2014 and use the balance for general corporate purposes.
While one offering comprises $300 million of 4.35% senior notes due 2024, at an offer price of $99.825 (per $100.00 principal), the second tranche constitutes $300 million of 5.60% senior notes due 2044, at an offer price of $99.876 (per $100.00 principal). The net proceeds of the total offering will be $598.4 million. The partnership expects the offering to close on Sep 12, 2014, subject to customary closing conditions.
The partnership from time to time issues units or notes to raise funds. On Sep 3, 2014, Buckeye Partners priced an offering of 6.75 million common units at $80 per unit. The proceeds of the units issue were also utilized by the partnership to fund its Trafigura Corpus Christi Holdings Inc. acquisition and for general partnership purposes (read: Buckeye Partners Offers More Units to Fund Acquisition).
Increasing exploration and production activities in North America and the shale boom have invigorated demand for midstream services. Buckeye Partners’ strategic acquisition of assets will give it access to the prolific Eagle Ford shale.
Apart from funding the Trafigura Corpus Christi acquisition, the decision to refinance existing debts will allow the partnership to utilize the funds in other profitable operations for a longer period of time.
Buckeye Partners’ earnings per unit fell short of the Zacks Consensus Estimate in the last four quarters, with an average miss of 17.32%. The above initiatives can help the partnership to post better-than-expected results going forward.
Buckeye Partners currently has a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the sector include Delek Logistics Partners, LP (DKL), Sunoco Logistics Partners L.P. (SXL) and Valero Energy Partners LP (VLP). All three stocks currently sport a Zacks Rank #1 (Strong Buy).
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