Clearly, a share offering is coming, but equally clear is management doest want to do one now. First, management appears to want to wait until BBEP is valued "consistently with its peers," but no one says what that means. I assume the subject valuation means "in terms of yield," but what is the comparable yield of BBEP's peers? Line is paying 11.3%, VNR is paying 9.3%, ARP is paying 9.9%, so all the MLPs are seemingly sporting very high yields. Is the mystery value premised on a 9% BBEP, or $21.33 a share? Seems like a guessing game right now.
Second, it seems wise to sit back for now because (a) we need time to digest recent acquistion, (b) we have ample current liquidity even with credit line stacked up with recent acquistion, and (c) issuing shares at $18 that pay $1.92 or or nearly 10.7% "costs more" than funding with current debt instruments including current senior notes. In other words, it seems to make sense for the company to wait a while.
Personally, I think the probably of a share issuance is low below $19,50 and would not be surprised for management to wait until PPS is north of $20. Just my two cents in reacting to the CC transcript. Lex
Yeah agree, but I assume they are chomping at the bit to get leverage back in line, after the financial crisis managements tend to be conservative about debt, and that's a good thing. They can afford to wait, but I bet they don't hold out too long. If it clips $20, Criswell predicts they'll fire, pricing around $19.75.