Oil & gas operator Energy Transfer Equity, L.P. (ETE) has decided to issue 5.875% senior notes worth $450 million due in Jan 2024. The partnership had initially decided to issue $400 million senior notes, which was then raised to $450 million.
The partnership intends to utilize the net proceeds to fund its previously announced tender offer to purchase for cash up to an aggregate of $600.0 million principal amount of its 7.500% senior notes due in 2020.
The redemption of the senior notes worth $600 million will improve the long-term debt-to-capitalization ratio which stood at 56.1% as on Sep 30, 13. This is a smart move by the partnership to lower its interest burden. It also provides the partnership a cushion to recycle the funds in its business for a longer period.
Energy Transfer Equity announced that the new notes will be treated pari passu with its secured term loan and dues under its revolving credit facility. The issue received a Ba2 rating from the rating agency Moody's Investors Service.
We believe Energy Transfer Equity took advantage of the current market condition to issue new debts at favorable interest rates. This new debts will lower the interest burden of the partnership in the long run. The new debt offering is expected to close on Dec 2, 2013.
Energy Transfer Equity has a Zacks Rank #3 (Hold).However, better-placed operators in the sector include Magellan Midstream Partners LP (MMP), Spectra Energy Corp. (SE) and EQT Midstream Partners, LP (EQM), all of which carry a Zacks Rank #2 (Buy).
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