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UGI's Unit to Issue Notes for Repaying Outstanding Debt

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UGI's Unit to Issue Notes for Repaying Outstanding Debt

UGI's unit, UGI International intends to issue senior notes and utilize the proceeds to repay its outstanding debt.

UGI Corporation UGI announced that its wholly owned subsidiary, UGI International, LLC (“UGI International”) intends to offer €300,000,000 of senior unsecured notes.

UGI International intends to utilize the net proceeds of the notes, together with cash on hand and proceeds from the New Credit Facilities, to repay the outstanding debt of some of its subsidiaries.

Debt Level Close to Industry
At present, debt-to-capital ratio of the company is 49.16%, marginally higher than the industry level of 48.78%. Moreover, the current ratio is 1.15, better than its industry’s average of 0.89, implying that the company has more liquid assets to meet short-term obligations amid rising interest rates.

Interest rates have increased three times this year and might increase one more time at the end of the year. Rising interest rates hurt the utilities due to their capital intensive nature and dependence on markets for sourcing funds for capital projects. However, UGI is financially better positioned amid the rising interest rates.

Long-Term Plans of the Company

UGI expects to invest roughly $1.2 billion in the next four years to strengthen its existing operations. Over the past couple of decades, the company invested in excess of $9.5 billion to address the infrastructural needs, while growing its customer base for various capital projects and acquisitions in order to curb competition, increasing safety and reliability of its natural gas production and storage facilities, along with replacing the aging infrastructure for modernizing the system.

The company added more than 11,000 new residential heating and commercial customers during the first three quarters of fiscal 2018, which had a positive impact on demand. To cater to the rising demand from customers, it is planning to construct a new LNG storage and vaporization facility in Bethlehem, PA to address the unprecedented demand for LNG services and supply capabilities throughout the Mid-Atlantic region and New England.

Price Movement

Shares of UGI have returned 12.9%, outperforming its industry’s growth of 3.4% in a year’s time.


Zacks Rank & Other Key Picks

UGI currently has a Zacks Rank #2 (Buy). Other top-ranked stocks from the same industry include NewJersey Resources Corporation NJR, One Gas Inc. OGS and Northwest Natural Gas Company NWN, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

The Zacks Consensus Estimate for NewJersey Resources, One Gas and Northwest Natural Gas’s 2018 earnings has moved up 1.1%, 3.8% and 0.5%, respectively, over the past 90 days. Long-term earnings growth of these companies is expected to be 7.0%, 5.7% and 4.33%, respectively.

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