ONEOK Partners, L.P. OKS announced the pricing of two tranches of senior notes worth $800 million. The partnership plans to utilize the proceeds from the notes issue to pay back outstanding borrowing under its commercial paper program. It intends to use the remaining proceeds for general partnership purposes.
While one set comprises five-year senior notes worth $300 million with a coupon of 3.8%, the second issue comprises 10-year senior notes worth $500 million with a coupon of 4.9%.
Net proceeds from the senior notes offering are expected to be $793.8 million. The offering is expected to conclude on Mar 20, 2015.
At 2014-end, ONEOK Partners had an outstanding borrowing limit of $1.1 billion under its commercial paper program. In Feb 2015, the partnership informed the lenders to implement an option to increase the capacity of the facility to an aggregate $2.4 billion.
ONEOK Partners has a stable record of servicing its debts efficiently. In Sep 2013, the partnership offered senior notes worth $1.25 billion. It utilized a portion of the proceeds to pay off outstanding debts under the commercial paper program. The rest was used for general partnership functions.
ONEOK Partners has a strong cash generation capacity through operating activities. At 2014-end, the partnership’s operating cash flow stood at roughly $1.31 billion, up around 30% from the prior-year level. Operating cash flow in 2013 rose 6.5% year over year.
This allows ONEOK Partners to generate sufficient funds for repaying its existing debts. The partnership’s long-term debt (excluding current maturities) as of Dec 31, 2014 declined marginally to around $6.04 billion from 2013-end.
ONEOK Partners holds a well-diversified set of midstream assets covering several mineral-rich locations of the U.S. and follows a systematic capital investment program to expand its scale of operations. This will enable the partnership to serve more upstream players, thereby boosting cash inflow, going forward.
ONEOK Partners currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include Valero Energy Partners LP VLP, EnLink Midstream Partners, LP ENLK and Shell Midstream Partners, L.P. SHLX. Valero Energy sports a Zacks Rank #1 (Strong Buy), while EnLink Midstream and Shell Midstream Partners hold a Zacks Rank #2 (Buy).
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