Diversified midstream energy operator Genesis Energy L.P. (GEL), together with Genesis Energy Finance Corporation, announced the start of an exchange offer for their 7 7/8% senior notes due 2018.
Total principal amount of the offer is $100 million. Genesis Energy will swap its outstanding old notes, which were issued in February, 2012, with the new ones.
The material terms of the new notes offering will be the same as that of the earlier one, with one exception. Unlike the old notes, the new notes will be registered under the Securities Act of 1933 with no restrictions on transfer, registration rights or additional interest related to the old notes offering.
The issuers will not receive any returns from the exchange offer.
Recently, Genesis Energy raised its third quarter 2012 cash distribution to 47.25 cents per unit ($1.89 per unit annualized), representing an increase of approximately 2.7% sequentially and 10.5% year over year.
Genesis Energy’s announced distribution boost is in sync with its goal of delivering disciplined growth to unitholders.
Houston, Texas-based Genesis Energy is a master limited partnership that operates crude oil pipelines and is an independent gatherer and marketer of crude oil in North America, with operations concentrated in Texas, Louisiana, Alabama, Florida, Mississippi and New Mexico. Genesis Energy engages in three business segments: Pipeline Transportation, Refinery Services, and Supply and Logistics.
We maintain our long term Outperform recommendation on Genesis Energy, which acquired interests in Gulf of Mexico oil pipelines from Marathon Oil Corp. (MRO) in January.
With an attractive distribution yield of 5.6%, a business model focused on operational efficiencies and attractive acquisitions/growth projects, Genesis Energy provides investors with a steady, predictable income stream.
We expect earnings growth to be strong in 2012 and 2013, based on the solid fixed margin businesses and limited commodity price exposure.
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