| From: Elroy | 1/25/2024 6:06:56 PM | | | | | | NGL Energy Partners LP Announces Pricing of $2.2 Billion Offering of Senior Secured Notes
TULSA, Okla., January 25, 2024--( BUSINESS WIRE)--NGL Energy Partners LP (NYSE: NGL) ("NGL"), through its wholly owned subsidiaries NGL Energy Operating LLC and NGL Energy Finance Corp., today announced the upsizing of their senior secured notes offering from $2.1 billion to $2.2 billion and have priced $900 million in aggregate principal amount of 8.125% senior secured notes due 2029 (the "2029 Notes") and $1.3 billion in aggregate principal amount of 8.375% senior secured notes due 2032 (the "2032 Notes" and, together with the 2029 Notes, the "Notes"). NGL expects to use the net proceeds of the offering, together with the borrowings under a new seven-year $700.0 million senior secured term loan facility expected to be entered into concurrently with the offering, (i) to fund the redemption, and related discharge of the indentures governing, NGL’s existing 6.125% senior notes due 2025, 7.5% senior notes due 2026, and 7.500% senior secured notes due 2026, including any applicable premiums and accrued and unpaid interest, (ii) to pay fees and expenses in connection therewith, (iii) to repay borrowings under NGL’s senior secured asset-backed lending facility and (iv) to the extent of any remaining net proceeds, for general corporate purposes.
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Ok, my quick calculation for interest expense is as follows:
They've also got a $700m term loan that they're evidently issuing in conjunction with these two tranches of debt. Not sure what rate to give the seven year loan, so lets say 8.25% in the middle of these two.
That means interest expense from here out is $240m per year. Ok. Manageable.
The next question is what is NGL going to do about it's preferred stock, which has been in arrears for about three years and accumulating obligations? With ~$645m EBITDA they've got plenty of options.
I wonder what rate they would get if they tried to refinance all the preferred stock? There's about $900m in three tranches, some of it is already earning at a painful floating rate, and a big chunk of it moves from fixed rate to a painful floating rate in mid-April. So they probably will act on this soon.
It's not out of the question to see a nominal distribution beginning in fiscal 2025 (starts June Q 2024). They could easily afford a token 10 cents per quarter, that's $52m per year. |
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| From: Elroy | 1/25/2024 10:33:47 PM | | | | | | I think NGL one year from now may look a lot like GEL looked one year ago.
Here's GEL's Q4 2022 earnings release:
genesisenergy.com
Trailing EBITDA = $717m
leverage = 4.14x
LT Debt = $2.85b
Line of credit = $200m
Preferred stock = $890m
Common unit distribution = 60 cents per year.
By this time next year, NGL will have almost exactly the same metrics, other than perhaps the distribution (who knows when they start one again??).
At this time last year GEL traded between $9 and $11. Methinks NGL will trade around the same level within a year from today.
The key question for NGL is whether their EBITDA is going to rise from the ~$650m level of the current fiscal year toward the $710m level next fiscal year. If so, the models are too close for NGL to stay down near to $5 rather than $10. |
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| To: Elroy who wrote (6) | 1/26/2024 10:57:09 AM | | From: Elroy | | | | The preferreds have moved from Sub - $10 to almost $25 in the past two months.
These same preferreds are now about $30. Seems like they probably get paid their arrearage in the near term. |
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| From: Elroy | 1/29/2024 11:39:57 AM | | | | | | NGL 52 week high.
I think the next two interesting things are........
-perhaps they're going to pay the arrearage and refinance the preferred stock? By my calculations they generated perhaps $200m free cash in the recent long term debt refinance. Upsizing the offering from $2.1b to $2.2b obviously gives them an additional $100m cash. The arrearage is about $300m and will accumulate interest at about 13% from April 15th. Much better to pay that off with all the cash on hand than earn that 13% obligation.
-peraps they're going to give some guidance on fiscal 2025 (ends March) EBITDA when they report Dec Q results in Feb. They're building this new pipleline, and they said in the previous call that new biz would ramp a bit in the March Q and moreso for during fiscal 2025. They may give some idea of what to expect in fiscal 2025, and if EBITDA is going above $700m per year, well, the long term story looks great.
I think they probably reinstate distributions by Q2 2025 latest. I think they'll have the cash to do it sooner if they choose, it just depends on whether they want to keep delevering, or they want to pay some distributions.
I think it's reasonable to expect NGL to be $8-$10 a year from now, with the fiscal 2025 EBITDA guidance being the main question mark. If they guide to $700m+ EBITDA, then I think the unit price gets above $8.00 by March 2025 easily.
NGL story is about half way done from what was expected when this board launched. Is anybody else on the NGL train? Here I am talking to myself again...... :-) |
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| From: Elroy | 1/29/2024 1:19:26 PM | | | | | | If anyone cares about the publicly traded preferred stock for NGL.......
my calculation says NGL-B (which is floating already) will be worth $33.98 on April 1st ($25 + $8.98 unpaid arrearage) and NGL-C (which will float on April 15th) is worth $32.82 ($25 + $7.82 unpaid arrearage).
Both will actually be worth more than that since the unpaid arrearage is also earning interest.
Since NGL has cash from the recent refi, and the C's float beginning this April 15th, it makes sense to me that NGL tries to refinance the preferreds sooner rather than later. The company (to my knowledge) has not said what they plan to do about the preferreds. |
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| From: Elroy | 1/29/2024 10:09:13 PM | | | | | | Wow. Just noticed that there are 10,542 NGL Apr $7.50 calls outstanding.
Seems like a lot |
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| From: Elroy | 2/6/2024 10:18:40 PM | | | | | | TULSA, Okla., February 06, 2024--( BUSINESS WIRE)--NGL Energy Partners LP (NYSE: NGL or the "Partnership") announced today that the Board of Directors of its general partner declared a distribution of 50% of the arrearages earned and outstanding through December 31, 2023 to be paid to the holders of the Partnership’s 12.806% Class B Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units ("Class B Preferred Units") and the 9.625% Class C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units ("Class C Preferred Units") in accordance with the terms outlined in NGL’s partnership agreement. Each holder of the Class B Preferred Units will receive $4.4439 per unit and each holder of the Class C Preferred Units will receive $4.0746 per unit on February 27, 2024, which payments will be made to holders of record at the close of trading on February 16, 2024.
Additionally, the Board of Directors declared a cash distribution in the amount of $115,035,820.87, which represents 50% of the arrearages earned on the Class D preferred units through December 31, 2023. The Class D Preferred distribution payments will also be made on February 27, 2024. |
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| From: Elroy | 2/8/2024 11:53:31 AM | | | | | | NGL reports after the close today.
NGL's fiscal year ends in March, so they're reporting Q3 (December).
In the previous report they did not update fiscal 2024 EBITDA guidance of more than $645m because they said they were working on some asset sales, and the sales would sell some EBITDA.
They refinanced their long term debt about 10 days ago, and they announced that they are paying 50% of the arrearage (through Dec 2023) at the end of Feb 2024.
They haven't announced any asset sales since the last call. There is some stuff in the debt filings that allows them to sell up to $200m of assets, and use the funds toward the preferred arrearage and perhaps pay off some of the D preferred series.
In the S&P 500 Global Credit note on the new NGL debt the analyst wrote that he expects fiscal 2025 EBITDA to be $700-$720m. It's unclear where that estimate came from.
Since the last call NGL has had what's called an Open Season for their Grand Mesa pipeline. That's when they sell future capacity in fixed committed contracts. Maybe they'll tell us how it went in today's call.
In January they announced that they are building another water pipeline. No idea the cost or how long it takes from announcement to operations, but that indicates water demand is doing perhaps OK.
Lets see, I think the interesting items from the call that I'd like to hear are 1- what's their EBITDA forecast for fiscal 2025? and 2- Use of cash going forward - What is the plan for paying the remainder of the preferred arrearage, paying off or refinancing the preferred stock, and then when the preferred stock is "handled" what's the plan for useage of free cash above debt Interest, preferred dividends, and Cap Ex? Are common unit distributions perhaps on the horizon?
My hunch is they spend fiscal year 2025 delvering and paying off preferred stock, and then in fiscal 2026 (begins June quarter 2026) distributions resume. But....who knows? They could resume with a nominal distribution in June quarter 2025 to make unit holders feel happy..... |
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| From: Elroy | 2/8/2024 10:05:22 PM | | | | | | NGL reported pretty much in line with their pre-announced guidance. They confirmed EBITDA for fiscal 2024 (ends March) will be $645m. Since there is only one quarter to go, it means March Q EBITDA should be $182m.
They said on the call that they will sell some assets before March 31st (some real estate) and then they will pay the second half of the arrearage soon after that. That will make the preferred stock current.
Plans for fiscal 2025 (ends March 2025) will come out in the next earnings call, in early June. So we gotta wait for forward guidance beyond the current quarter.
I think they plan to use operating cash flows going forward to repurchase the preferred series D and growth Cap Ex, and perhaps common unit distributions. The series D preferred expires in summer 2027, so they've gotta buy them back before then. Future debt reduction spending will go toward the D's. Growth Cap Ex will also become a focus. Whether there will be any cash for common unit distributions after those two efforts remains to be seen.
All in all it was an OK and in line report. I think the next catalyst for the stock price will be EBITDA guidance for next year. How much will they grow? Not sure, but even without growth $645m EBITDA is quite a lot, so they can do well with that level of EBITDA, but of course more is better. |
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