Enterprise Prices $2.5 Billion Aggregate Principal Amount of Senior Notes

Rhea-AI Summary

Enterprise Products Partners L.P. (NYSE:EPD) has announced that its operating subsidiary, Enterprise Products Operating , has priced a $2.5 billion public offering of senior notes. The offering comprises:

1. $1.1 billion of senior notes due February 15, 2035, with a 4.95% fixed-rate interest coupon
2. $1.4 billion of senior notes due February 16, 2055, with a 5.55% fixed-rate interest coupon

The proceeds will be used for general company purposes, growth capital investments, and debt repayment, including the potential full repayment of $1.15 billion 3.75% Senior Notes due in February 2025. The settlement is expected on August 8, 2024, subject to customary closing conditions. Enterprise Products Partners L.P. will guarantee the senior notes through an unconditional guarantee on an unsecured and unsubordinated basis.

Positive

• Successful pricing of a large $2.5 billion senior notes offering
• Proceeds to be used for growth capital investments and debt repayment
• Long-term debt maturities (2035 and 2055) provide financial flexibility
• Potential full repayment of $1.15 billion notes due in 2025, improving debt structure

Negative

• Increase in long-term debt obligations
• Higher interest rates on new notes (4.95% and 5.55%) compared to the 3.75% notes being repaid

Insights

Financial Analyst

Enterprise Products Partners L.P.'s recent $2.5 billion senior notes offering is a significant financial move that warrants attention. The company's decision to issue long-term debt with maturities in 2035 and 2055 suggests a strategic approach to capital management and confidence in its long-term prospects.

The offering's structure is noteworthy:

• $1.1 billion in notes due 2035 with a 4.95% coupon
• $1.4 billion in notes due 2055 with a 5.55% coupon

These interest rates, while higher than historical lows, are relatively attractive given the current rising rate environment. The slight discount to par value (99.400% and 99.663% respectively) is typical and helps ensure market competitiveness.

The stated use of proceeds is twofold: general company purposes (including growth capital investments) and debt repayment. The latter, specifically targeting the $1.15 billion 3.75% Senior Notes due in 2025, indicates a proactive approach to managing the company's debt maturity profile. This refinancing at higher rates might slightly increase interest expenses but extends the maturity timeline, potentially reducing near-term financial pressure.

For investors, this offering demonstrates Enterprise's continued access to capital markets and its ability to secure long-term financing. However, the increased debt load and higher interest rates could impact future cash flows and should be monitored in relation to the company's growth initiatives and overall financial health.

Market Research Analyst

Enterprise Products Partners' latest debt offering provides valuable insights into both the company's strategy and broader market conditions. The $2.5 billion raise, split between 11-year and 31-year notes, signals confidence in long-term market dynamics within the midstream energy sector.

The timing of this offering is intriguing. With ongoing discussions about energy transition, EPD's ability to secure such substantial long-term financing suggests that lenders and investors maintain faith in the enduring relevance of traditional energy infrastructure. This could be seen as a counterpoint to narratives about rapid decarbonization.

The coupon rates (4.95% for 2035 notes and 5.55% for 2055 notes) offer a window into current risk assessments for the energy sector. These rates, while competitive, reflect both the general interest rate environment and specific sector risk premiums. The spread between the two maturities (0.60%) provides insight into long-term inflation and risk expectations.

For the broader market, this successful offering may encourage other energy infrastructure companies to tap debt markets, potentially leading to increased capital expenditure and growth initiatives across the sector. It's worth monitoring whether this triggers a wave of similar offerings from EPD's peers.

Investors should view this as a reaffirmation of Enterprise's market position and financial flexibility, but also consider how increased leverage might affect the company's risk profile and dividend sustainability in various energy price scenarios.

HOUSTON--(BUSINESS WIRE)-- Enterprise Products Partners L.P. (NYSE:EPD) (“Enterprise”) today announced that its operating subsidiary, Enterprise Products Operating LLC (“EPO”), has priced a public offering of $2.5 billion aggregate principal amount of notes comprised of (i) $1.1 billion principal amount of senior notes due February 15, 2035 (“Senior Notes JJJ”), and (ii) $1.4 billion principal amount of senior notes due February 16, 2055 (“Senior Notes KKK”).

Enterprise expects to use the net proceeds of this offering for (i) general company purposes, including for growth capital investments, and (ii) the repayment of debt (including the repayment of all or a portion of its $1.15 billion principal amount of 3.75% Senior Notes MM due 2025 at their maturity in February 2025).

Senior Notes JJJ will be issued at 99.400% of their principal amount and will have a fixed-rate interest coupon of 4.95%. Senior Notes KKK will be issued at 99.663% of their principal amount and will have a fixed-rate interest coupon of 5.55%. Enterprise Products Partners L.P. will guarantee the senior notes through an unconditional guarantee on an unsecured and unsubordinated basis. Settlement of the offering is expected to occur on August 8, 2024, subject to the satisfaction of customary closing conditions.

Mizuho Securities USA LLC, Barclays Capital Inc., BMO Capital Markets Corp., SMBC Nikko Securities America, Inc. and Wells Fargo Securities, LLC acted as joint book-running managers for the offering. An investor may obtain a free copy of the prospectus as supplemented for the offering by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, EPO or any underwriter or dealer participating in this offering will arrange to send a prospectus as supplemented to an investor if requested by contacting Mizuho Securities USA LLC at (866) 271-7403, Barclays Capital Inc. at (888) 603-5847, BMO Capital Markets Corp. at (866) 864-7760, SMBC Nikko Securities America, Inc. at (888) 868-6856 or Wells Fargo Securities, LLC at (800) 645-3751.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities described in this press release, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. The offering is being made only by means of a prospectus and related prospectus supplement, which are part of an effective registration statement.

Enterprise Products Partners L.P. is one of the largest publicly traded partnerships and a leading North American provider of midstream energy services to producers and consumers of natural gas, NGLs, crude oil, refined products and petrochemicals. Services include: natural gas gathering, treating, processing, transportation and storage; NGL transportation, fractionation, storage and marine terminals; crude oil gathering, transportation, storage and marine terminals; petrochemical and refined products transportation, storage and marine terminals; and a marine transportation business that operates on key U.S. inland and intracoastal waterway systems. The partnership’s assets currently include more than 50,000 miles of pipelines; over 300 million barrels of storage capacity for NGLs, crude oil, petrochemicals and refined products; and 14 billion cubic feet of natural gas storage capacity.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240801194615/en/

Libby Strait, Investor Relations, (713) 381-4754 or (866) 230-0745, ecstrait@eprod.com

Rick Rainey, Media Relations, (713) 381-3635, rrainey@eprod.com

Source: Enterprise Products Partners L.P.

FAQ

What is the total value of the senior notes offering by Enterprise Products Partners (EPD)?

Enterprise Products Partners (EPD) has priced a public offering of $2.5 billion aggregate principal amount of senior notes.

When are the new senior notes issued by Enterprise Products Partners (EPD) due?

The senior notes are due on two dates: $1.1 billion is due February 15, 2035, and $1.4 billion is due February 16, 2055.

What are the interest rates for the new senior notes issued by Enterprise Products Partners (EPD)?

The senior notes due 2035 have a fixed-rate interest coupon of 4.95%, while the notes due 2055 have a fixed-rate interest coupon of 5.55%.

How does Enterprise Products Partners (EPD) plan to use the proceeds from this senior notes offering?

EPD plans to use the proceeds for general company purposes, growth capital investments, and debt repayment, including potentially repaying all or part of its $1.15 billion 3.75% Senior Notes due in February 2025.