It isn't a secret that KMP will be doing a secondary this year. Their own guidance for the year suggests they will.
From a 2/11 report by Wells Fargo, WF estimates the KMP capital requirements in 2011 total $2.08 B, including maintenance and growth capex (total $1.38B) and maturing debt ($700M).
The funding for this will come in part from $1,408M in debt (half from existing revolving credit facility, half from new senior note offering to replace the maturing debt). There will be two parts of capital raised through public equity funding. KMR dividends will contribute another $442M (KMR's dividends are effectively a mini-secondary every quarter. The rest will come from a $230M public equity offering (i.e., a secondary).
There is no question that there will be a secondary.
These can open windows of opportunity, as the price often dips temporarily. The magnitude of that dip is partially dependent upon the announced offering price. I have seen this with other MLP's, but have not actively followed KMP/KMR until just a couple weeks ago.
Given the recent volatility of the MLP sector, it's hard to know if the secondary dip will be as deep as the kinds of dips we see in reaction to politicians taking punches at companies that operate in the fossil fuel sector.
What I would like to know is whether anyone here, based on experience or analysis, can predict the timing of the offering announcement. I am looking for a better entry point and patient enough to wait. For ease of lot tracking, I want to make only one purchase, or I would simply accumulate whenever the price seemed adequately low. I don't expect to get the absolute bottom, but I will certainly do my best.
Thanks in advance.
Cash acquisition, to be financed 60% equity (i.e. secondary offering to the public), 40% cash & new debt to be raised or borrowed under bank lines. KMI benefits from the additional KMP shares (even though distribution rights have been "forgiven" for 2 years as part of this deal)