To: Elroy who wrote (74931 ) 1/25/2024 6:30:48 PM From: Elroy Read Replies (1) | Respond to NGL Energy Partners LP Announces Pricing of $2.2 Billion Offering of Senior Secured NotesTULSA, 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. -- I don't know if anyone is paying attention to these guys at all. The story about a year ago was that a year later they'll refinance their debt, then resume dividends on their preferred stock (which is currently in arrears), and then re-initiate a distribution. When that happens, the stock will be worth about $8-$10. It was about $2.50 at the time. And the prediction was that this entire process would take 18-30 months. Well here we are 12 months later, and the debt has been refinanced (see above). That's step 1. They will now have $2.9 billion debt ($2.2 billion discussed above, and a seven year term loan for $700m). That costs them interest expense of about $240m per year. OK. Now, we've gotta see what they plan to do about their preferred stock. They have $900m of preferred stock which has had a suspended dividend for the past three+ years. They own about $300m arrearage on that. And then the preferred was fixed to floating, 40% is already floating at about 13%, and another big chunk goes to floating April 15th also at about 13%. Methinks they'll want to pay off this arrearage and refinance this preferred stock ASAP. The good thing is after completing the above debt offering they will have refinanced their existing debt and ALSO left about $300m cash for themselves. Methinks they use the $300m cash to pay off the arrearage, and then refinance the preferred stock, probably very soon. Why not, if they can? Who wants to pay 13% if you don't have to? I think that preferred "fix" happens before April 15th. So lets say they issue $1 billion of fixed rate 11% preferred stock. Expensive, but fortunately they can afford it. At that point, they'll have debt expense of $240m and preferred dividend expense of $110m. Annual EBITDA is about $650m+, and growing. So they'll have (at least) $650m EBITDA - ($240m debt interest + $110m preferred dividend) = $300m cash available from operations. They've been spending $125m pre year for the past few years on Cap Ex. They can ramp that up to $170m, and have $130m left over for distributions. That's $1.00 per unit. When they've fixed the preferred situation and implemented the distribution, NGL is easily $8-$10 per unit. Perhaps they use ONE MORE YEAR of cash flows to try to get a better deal on less expensive preferreds. If so, NGL gets to $9 per unit in a year. If not, and they move quickly to distributions, then it's likely $9 by summer 2024. Half way done folks.......the interesting thing now is there really is no reason to move slowly on the preferred stock. By mid-April most of it will be accruing obligations at 13% per year. Might as well refinance that ASAP if NGL can get any number below 13%, which I would expect it can. Once the preferred is refinanced, NGL generates excess cash above Cap Ex and fixed interest/dividend expenses. What is it going to do with that cash? Hopefully give it to me.....
