Publicly traded energy master limited partnership NuStar Energy L.P. (NS) has closed the previously announced sale of 50% interest in its asphalt operations to privately held investment firm Lindsay Goldberg LLC. The transaction – an attempt by NuStar to raise funds to pay down debt – was declared in July.
Per the terms, a subsidiary of Lindsay Goldberg paid $175 million to NuStar for the stakes of the asphalt refining assets. As part of the sale, the companies have formed a joint venture – with 50% voting interest for each – to conduct the operations of the asphalt business.
The sold properties includes NuStar’s two asphalt refineries – one in Paulsboro, New Jersey and the other in Savannah, Georgia – with a combined daily capacity of 104,000 barrels plus the associated inventory.
Inclusive of the $175 million paid by Lindsay Goldberg, San Antonio-based NuStar received initial cash payment of approximately $270 million. The owner/operator of crude oil and refined products pipelines and storage facilities expects to lower its debt balance by $400–$500 million eventually through this transaction, the final figure depending upon the joint venture’s working capital requirements.
NuStar intends to use the proceeds from this divestment to pay back the outstanding debt under its revolving credit facility, to finance potential future acquisitions, and for general partnership purposes.
We view the Lindsay Goldberg deal as a positive for NuStar, as it will help the firm to monetize a portion of the volatile asphalt operations, while still allowing the partnership to retain 50% voting rights in a business that can yield substantial cash flows in an improving domestic economy.
NuStar – which was spun off from the U.S. refiner Valero Energy Corp. (VLO) in 2006 – currently retains a Zacks #3 Rank (short-term Hold rating). We are also maintaining our long-term Neutral recommendation on the unit.
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