I own ATLS in size (200,000 units) and I've held onto my ARP spin-off shares (20,420 units - I'd advise all to contact ATLS to get the basis in your ARP Shares - in my case, the basis was about $14.50 per unit). I just added to my ARP position under $22 to get up to 45,000 units, or just about $1 MM. ARP just got too cheap, yielding well over 10% with a distribution growth rate second only to ATLS, an inherent advantage in capital cost, by effectively leveraging other people's capital through the syndication business. The return on capital of the syndication business is nearly undefined given you can't divide by $0.
Think about this, ARP just raised $250 MM of unsecured 10-year debt at 7.75%. The income from the debt is fully taxable. The distribution on the MLP units is well over 10% and nearly all the distribution comes back to you as a return of capital, effectively lowering your basis in your units, arbitraging the tax code by turning income into capital gains. Once all your capital is returned, it makes sense to pay the gain and buy the shares back stepping up your basis assuming you still like the story a few years out.
Management was just out doing a road show to the high yield market. My bet is those who bought the bonds will also be tempted to buy the MLP units as well. The unsecured bonds are really not that different from the MLP units in the capital structure because if things go bad, they tend to go really bad. I think the yield pick-up in the MLP units relative to the bonds more than compensates investors for the junior standing of the MLP units in the capital structure.
As the High Yield players look at the Atlas complex, I think they will also be drawn to ATLS. Although the current yield is only 3%, you don't have to dream very much to see the distribution rising to $4 per unit by 2016 (see Morgan Stanley estimates). Huge distribution growth rate with zero capital deployed. If ATLS holds a 3-4% yield, I could see the units trade up to $75 over the next 18 months based on the annualized distributions. In 18 months, ARP and APL will be hitting on all cylinders. It will be interesting to see if the Cohen's just hold on for the extended ride or try to extract a huge premium selling out the GP in 2-3 years.