Ferrellgas Partners L.P. (FGP) along with its subsidiaries has decided to raise funds through the issue of senior notes. The funds will be raised through a private placement of $325 million 6.25% senior notes due in 2022. The partnership expects to close the issue of notes by Nov 4, 2013, subject to customary closing conditions.
Ferrellgas intends to utilize the proceeds from the new notes to repay its $300 million 9.125% notes due in 2017. The partnership also expects to utilize the balance to partially repay amounts outstanding under the revolving credit facility, and to pay related costs and expenses.
This is a smart move by the partnership to lower its interest burden. It gives the partnership the cushion to recycle the funds in its business for a longer period. The financial strength of the partnership will enable it to easily meet the annual interest burden of $20.3 million resulting from the new issue.
The rating agency Moody's Investors Service assigned a B2 rating to Ferrellgas’ proposed $325 million senior unsecured notes due 2022. The rating agency retained Ferrellgas' other ratings along with a stable outlook.
Ferrellgas Partners is working on enhancing its business through strategic acquisitions. The partnership has already completed several acquisitions in fiscal 2013 and continues to reap the benefits from an acquisition-based growth strategy. We expect the contribution from the acquired assets will aid the partnership to report earnings in the green going forward.
Ferrellgas Partners has a Zacks Rank #3 (Hold). Other operators in the sector that are performing well and have a Zacks Rank #2 (Buy) are Phillips 66 Partners L.P. (PSXP), Piedmont Natural Gas Co. Inc. (PNY) and Questar Corp. (STR).