NGL preferreds are worth a look for the less risk averse here.
NGL is a debt laden MLP in three business lines, with $930m preferred stock, about 60% of it publicly traded. NGL-B and NGL-C are the publicly traded preferred shares, and both pay about 11.8% of $25 each year.
Both are currently about $22.25.
NGL sold off some assets in Q2 2025, and indicated that it will have zero drawn on it's line of credit at the end of Q2 2025 (compared to $212m borrowed in Q4 2024). It will also have cash left over from the asset sales which it plans to use to repurchase the privately held NGL-B preferred stock.
While NGL has a lot of debt $2.85 billion, it's annual EBITDA (about $620m) is plenty to pay debt interest, preferred dividend and Cap Ex.
I would think if interest rates decline a bit over the next year or two, AND NGL begins repurchasing it's preferreds (D series) then the B's and C's will both 1- continue paying, and 2- head up closer to par value of $25 since they pay about 11.8%.
In other words, it's about as safe a 13% annual return (if purchased at $22.25) as one could expect. Usually when a security is yielding 13% it's going bankrupt. NGL is heading in the opposite direction, the balance sheet is improving and the main business (water transport, 85% of EBITDA) seems to be stable with modest growth.
As the quarterly results flow out, and NGL's balance sheet shows zero on the line of credit and they begin to repurchase their obligations in the market, I'd expect the publicly traded preferreds to head closer to $25, and you collect about $2.70 per year while you wait.
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NGL Energy Partners LP Announces Recent Asset Sales and Other Cash Proceeds Totaling Approximately $270 Million
finance.yahoo.com
The proceeds will be used to pay off the remaining ABL balance and the excess cash will be used for additional deleveraging and addressing other parts of our capital structure," commented Mike Krimbill, CEO of NGL. |
