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Brookfield Infrastructure Issues $500M Notes to Repay Debt

Zacks Equity Research

Brookfield Infrastructure Partners L.P. BIP announced a public offering of $500 million of 3.41% medium-term notes due 2029 that is to be paid semi-annually. A subsidiary of Brookfield Infrastructure, Brookfield Infrastructure Finance ULC will receive the net proceeds and have the primary responsibility for the payment of principal and interest on the notes.

The company intends to utilize the net proceeds from the offering to redeem 3.538% medium-term notes due Oct 30, 2020, in order to fund an active and advanced pipeline of investment opportunities and for general working capital purposes.

It is a very common practice among capital-intensive companies to refinance older debts with new ones bearing a low interest rate. After raising interest rates for nine times since December 2015, the Fed announced back to back rate cuts in 2019, taking into consideration overall weakness in the economy. Taking advantage of the downward revision in interest rates, the capital-intensive utilities have started to refinance high-interest debts from the issuance of low-interest-bearing notes.

Recently, companies like Black Hills Corporation BKH, Noble Energy NBL and WPX Energy WPX have issued new debts to refinance the older ones.

Way Ahead

The firm, which owns and operates a globally diversified portfolio of high-quality infrastructure assets, has a highly disciplined and conservative approach of financing business operations.

Its global presence enables it to operate and remain profitable in different market cycles. At present, the firm has significant project backlog for the next few years, which will support organic growth. The company is currently exploring opportunities in data infrastructure and energy in North America and Europe.

From time to time, the firm sells assets that are not in sync with its long-term objective and redirects the proceeds in other high-return businesses. The company, which received $1 billion by selling four assets, invested the entire amount in businesses. The firm aims to invest $1.3 billion in four major businesses.

The firm continues to generate stable cash flow as nearly 95% of its earnings are from regulated operations or contracted. The steady and predictable cash flows allow the firm to pay consistent distribution to its unitholders. Notably, it has been increasing distribution at a compound annual growth rate of 10% since 2011.

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Brookfield Infrastructure Partners LP (BIP) : Free Stock Analysis Report
Black Hills Corporation (BKH) : Free Stock Analysis Report
Noble Energy Inc. (NBL) : Free Stock Analysis Report
WPX Energy, Inc. (WPX) : Free Stock Analysis Report
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