Niska Gas Storage Partners refinances an old debt with a new debt

Avik Chowdhury

Why master limited partnerships have to rely on external funding (Part 5 of 5)

(Continued from Part 4)

Niska Gas Storage Partners LLC (NKA) owns and operates natural gas storage assets in the U.S. It primarily operates the AECO Hub comprising the Countess and Suffield gas storage facilities in Alberta, Canada; the Wild Goose gas storage facility in California; and the Salt Plains gas storage facility in Oklahoma. As of March 31, 2013, the company owned or contracted approximately 225.5 billion cubic feet of total natural gas storage capacity. It serves financial institutions, marketers, pipelines, power generators, municipalities, utilities, and producers of natural gas.

As of March 11, 2014, NKA had market capitalization of $474.1 million and enterprise value of $1.25 billion. The company recorded revenues of $161.5 million in last 12 months (LTM) and recorded LTM earnings before interest, tax, and depreciation and amortization (EBITDA) of $61.9 million.

On March 7, 2014, NKA announced the pricing of its previously announced private placement of senior unsecured notes due 2019 at $575 million. The company expects to use the net proceeds of this offering as well as the borrowings under its asset-based revolving credit facility, to redeem the $644 million outstanding aggregate principal amount of 8.875% senior unsecured notes due 2018.

NKA had $644 million of debt in the form of senior notes that becomes callable at a price of $104.4 on March 15, 2014. NKA issued new notes to replace the old senior notes, which saves the company considerable interest expense as well as pushes the debt maturity out by one year.

Atlas Resource Partners (ARP), Vanguard Natural Resources (VNR), DCP Midstream Partners (DPM), and Niska Gas Storage Partners (NKA) all recently tapped the capital markets for cash at generally favorable rates, signaling the ongoing ability of MLPs to access capital. Note that the above companies are all MLPs, and the benchmark index to track energy MLPs is the Alerian MLP Index which is investable through the Alerian MLP ETF (AMLP).

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