Buckeye Partners, L.P. BPL announced the pricing of junior subordinated notes worth $400 million. The notes priced at 99.474% of par, will bear interest at a fixed rate of 6.375% per annum, and fall due on 2078 for redemption.
Buckeye Partners expects to close the offering on Jan 22, 2018, subject to customary closing conditions. The partnership expects to receive net proceeds worth $394.9 million after deducting the underwriting discount and other offering expenses.
In November 2017, Buckeye Partners had priced senior unsecured notes worth $400 million aggregate principal amount of 4.125% and due 2027 at 99.503% of par. The partnership received $394.4 million and used the net proceeds from this offering to fund the redemption of $300 million aggregate principal amount of its outstanding 6.050% notes due Jan 15, 2018 and repaid some part of its borrowings under revolving credit facility.
The partnership intends to utilize the net proceeds of the offering of 4.125% senior notes and the 6.375% subordinated notes, to pay off loans under its revolving credit facility along with repaying other debt-borrowings, and for general partnership purposes.
Partnership’s Rising Debts — Cause of Concern
The partnership has been reeling under the pressure of rising interest and debt expenses for quite some time now. Buckeye Partners frequently acquires assets to focus on core business. The partnership pursues both organic and acquisition-driven growth strategies to expand scale of operations. As such, such large capital extensive projects require the company to borrow frequently and subsequently increase the burden of capital expenditures.
Toward this, the partnership’s long-term debt as of Sep 30, 2017 was $4,593.6 million, higher than $4,217.7 million as of Dec 31, 2016. Additionally, interest and debt expenses also increased 17.2% to $168.9 million, during the same period.
This is likely to be the primary cause behind the partnership’s underperformance in price movement over the last year. The partnership has lost 8.8%, wider than the 5.2% decline of the industry.
As a result, Buckeye Partners currently carries a Zacks Rank #4 (Sell). Better-ranked players from the sector are ConocoPhillips COP, Denbury Resources Inc. DNR and Canadian Natural Resources Limited CNQ, all of which sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ConocoPhillips delivered an average surprise of 152.34% in the trailing four quarters. Its 2018 estimates have risen by 25.7% to $2.10 per share in the last 60 days.
Denbury Resources delivered an average earnings surprise of 125% in the trailing four quarters. Its 2018 estimates have risen by 116.7% to 26 cents per share in the last 60 days.
Canadian Natural Resources delivered an average earnings surprise of 0.78% in the trailing four quarters. Its 2018 estimates have risen by 25.4% to $2.12 per share in the last 60 days.
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Buckeye Partners L.P. (BPL) : Free Stock Analysis Report
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