Energy Transfer LP Announces Pricing of $3.5 Billion of Senior Notes and $400 Million of Fixed-to-Fixed Reset Rate Junior Subordinated Notes

Rhea-AI Summary

Energy Transfer LP (NYSE: ET) has announced the pricing of $3.5 billion in senior notes and $400 million in junior subordinated notes, with the offerings expected to close on June 21, 2024. The senior notes are divided into three tranches: $1 billion at 5.250% due 2029, $1.25 billion at 5.600% due 2034, and $1.25 billion at 6.050% due 2054. The junior subordinated notes are priced at 7.125% due 2054. The company plans to use the net proceeds of $3.463 billion and $396 million, respectively, for funding its acquisition of WTG Midstream Holdings , refinancing existing debt, and other general purposes.

Positive

• Energy Transfer LP successfully priced $3.9 billion in notes, boosting liquidity.
• Net proceeds of $3.463 billion from senior notes and $396 million from junior notes.
• Funding will support the acquisition of WTG Midstream Holdings
• Refinancing existing debt may reduce interest costs.
• Redemption of Series A preferred units simplifies capital structure.

Negative

• High interest rates on notes: 5.250% to 7.125%, increasing future interest expenses.
• Offerings contribute to increased leverage and potential financial risk.
• Potential shareholder dilution from new debt issuance.

Insights

Financial Analyst

The issuance of $3.5 billion in senior notes and $400 million in junior subordinated notes is a significant financial move for Energy Transfer LP. The senior notes, with interest rates ranging from 5.250% to 6.050% and the junior subordinated notes at 7.125%, indicate a strategic approach to secure long-term financing at relatively competitive rates. The company’s intent to use these funds for refinancing existing debt and financing the acquisition of WTG Midstream Holdings LLC suggests a focus on strengthening its financial position and expanding its asset base.

Investors should note that refinancing existing debt can reduce interest expenses in the long term, which could be beneficial for the company's cash flow. Furthermore, funding the acquisition through debt instead of equity minimizes shareholder dilution. However, it also increases the company's leverage, adding to financial risk. The mixed maturity dates of these notes spread over decades provide a balanced structure, reducing refinancing risk in the short term.

It’s important to consider the company’s existing debt levels and overall financial health. The redemption of Series A preferred units at a premium could indicate a strategic move to optimize the capital structure, but it also represents an immediate cash outflow. Monitoring how these actions impact the company's debt-to-equity ratio and interest coverage will be important for assessing long-term financial stability.

Market Research Analyst

Energy Transfer LP's decision to issue both senior and junior subordinated notes indicates a robust demand for its debt instruments, which is a positive sign of market confidence. The diversified portfolio of energy assets and strategic geographical presence across major U.S. production basins add layers of operational security, which likely appeals to investors. The specific use of proceeds to fund the acquisition of WTG Midstream Holdings LLC and refinance existing debt points to a strategic alignment towards growth and operational efficiency.

The issuance is structured to target both short-term and long-term investors. Senior notes with staggered maturities cater to different investment horizons, while junior subordinated notes offer higher yields, attracting yield-seeking investors. This diversified investor base could provide stability in case of market volatility.

Additionally, the redemption of Series A preferred units represents a direct effort to streamline capital costs. For retail investors, understanding these dynamics is important as they highlight the company's proactive approach in managing its capital structure and strategically positioning itself for future growth.

Given the comprehensive use of proceeds and strategic financial management, the issuance is seen positively. However, retail investors should stay aware of the broader market and industry conditions that could influence Energy Transfer LP’s performance and the energy sector at large.

Energy Sector Analyst

From an industry perspective, Energy Transfer LP’s move to raise substantial capital through debt issuance reflects ongoing consolidation and investment trends in the energy sector. The acquisition of WTG Midstream Holdings LLC aligns with broader industry movements where companies seek to control more of the midstream infrastructure, ensuring steady revenue streams from transportation and storage services. This acquisition is expected to enhance Energy Transfer's footprint and operational capabilities, providing strategic leverage in an increasingly competitive market environment.

Energy infrastructure assets are critical as they ensure the reliable flow of crude oil, natural gas and refined products. By expanding its asset base, Energy Transfer is not only enhancing its service capabilities but also diversifying its revenue sources, which is a protective measure against market fluctuations. The senior notes’ varying maturity dates and interest rates reflect a calculated approach to managing long-term financial obligations while positioning itself to leverage growth opportunities within the industry.

Investors should appreciate the strategic foresight in these decisions, but remain mindful of the inherent risks associated with increased leverage and market fluctuations in commodity prices. The energy sector is subject to regulatory changes and geopolitical dynamics that can significantly impact operations and profitability.

DALLAS--(BUSINESS WIRE)-- Energy Transfer LP (NYSE: ET) today announced the pricing of its concurrent offerings of $1.0 billion aggregate principal amount of 5.250% senior notes due 2029, $1.25 billion aggregate principal amount of 5.600% senior notes due 2034 and $1.25 billion aggregate principal amount of 6.050% senior notes due 2054 (together, the “senior notes”), and $400 million aggregate principal amount of 7.125% fixed-to-fixed reset rate junior subordinated notes due 2054 (the “junior subordinated notes”) at a price to the public of 99.797%, 99.741%, 99.461%, and 100.000%, respectively, of their face value.

The sale of the senior notes and the junior subordinated notes are expected to settle on June 21, 2024, subject to the satisfaction of customary closing conditions. The settlement of the senior notes is not conditioned on the settlement of the junior subordinated notes, and the settlement of the junior subordinated notes is not conditioned on the settlement of the senior notes. Energy Transfer intends to use the net proceeds of approximately $3.463 billion (before offering expenses) from the senior notes offering and $396 million (before offering expenses) from the junior subordinated notes offering to fund all or a portion of the cash consideration for its previously announced acquisition of WTG Midstream Holdings LLC, refinance existing indebtedness, including borrowings under its revolving credit facility, redeem all of its outstanding Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (the “Series A preferred units” ), and for general partnership purposes. This press release does not constitute a notice of redemption with respect to, or an offer to purchase, any indebtedness or Series A preferred units.

In connection with the pricing of the concurrent offerings, Energy Transfer issued a notice to redeem all of its outstanding Series A preferred units at a redemption price per unit of $1,009.87899, which is equal to $1,000.00 per unit plus unpaid distributions to, but excluding, June 21, 2024.

Barclays Capital Inc., J.P. Morgan Securities LLC, MUFG Securities Americas Inc., TD Securities (USA) LLC and Wells Fargo Securities, LLC are acting as joint book-running managers for the senior notes offering and the junior subordinated notes offering.

The concurrent offerings of the senior notes and the junior subordinated notes are being made pursuant to an effective shelf registration statement and prospectus filed by Energy Transfer with the Securities and Exchange Commission (“SEC”). The concurrent offerings of the senior notes and the junior subordinated notes may each be made only by means of a prospectus and related prospectus supplement meeting the requirements of Section 10 of the Securities Act of 1933, as amended, copies of which may be obtained for each of the senior notes and the junior subordinated notes, respectively, from the following addresses:

Barclays Capital Inc. c/o Broadridge Financial Solutions 1155 Long Island Avenue Edgewood, NY 11717 Email: barclaysprospectus@broadridge.com 1-888-603-5847   J.P. Morgan Securities, LLC 383 Madison Avenue New York, NY 10017 Attention: Investment Grade Syndicate Desk Fax: (212) 834-6081   MUFG Securities Americas Inc. 1221 Avenue of the Americas, 6th Floor New York, NY 10020 Attention: Capital Markets Group 1-877-649-6848

TD Securities (USA) LLC 1 Vanderbilt Avenue, 11th Floor New York, NY 10017 Attention: DCM-Transaction Advisory 1-855-495-9846   Well Fargo Securities, LLC 608 2nd Avenue South, Suite 1000 Minneapolis, MN 55402 Attention: WFS Customer Service Email: wfscustomerservice@wellsfargo.com 1-800-645-3751

You may also obtain these documents for free when they are available by visiting EDGAR on the SEC website at www.sec.gov.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities described herein, 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.

Energy Transfer LP owns and operates one of the largest and most diversified portfolios of energy assets in the United States, with more than 125,000 miles of pipeline and associated energy infrastructure. Energy Transfer’s strategic network spans 44 states with assets in all of the major U.S. production basins. Energy Transfer is a publicly traded limited partnership with core operations that include complementary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquids (“NGL”) and refined product transportation and terminalling assets; and NGL fractionation. Energy Transfer also owns Lake Charles LNG Company, as well as the general partner interests, the incentive distribution rights and approximately 21% of the outstanding common units of Sunoco LP (NYSE: SUN), and the general partner interests and approximately 39% of the outstanding common units of USA Compression Partners, LP (NYSE: USAC).

Forward-Looking Statements

Statements about the offering may be forward-looking statements. Forward-looking statements can be identified by words such as “anticipates,” “believes,” “intends,” “projects,” “plans,” “expects,” “continues,” “estimates,” “goals,” “forecasts,” “may,” “will” and other similar expressions. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and factors, many of which are outside the control of Energy Transfer, and a variety of risks that could cause results to differ materially from those expected by management of Energy Transfer. Important information about issues that could cause actual results to differ materially from those expected by management of Energy Transfer can be found in Energy Transfer’s public periodic filings with the SEC, including its Annual Report on Form 10-K. Energy Transfer undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240606747356/en/

Energy Transfer LP

Investor Relations:

Bill Baerg, Brent Ratliff, Lyndsay Hannah, 214-981-0795

Media Relations:

Media@energytransfer.com

214-840-5820

Source: Energy Transfer LP

FAQ

What are the details of Energy Transfer's recent senior notes offering?

Energy Transfer priced $3.5 billion in senior notes, divided into three tranches: $1 billion at 5.250% due 2029, $1.25 billion at 5.600% due 2034, and $1.25 billion at 6.050% due 2054.

What are the terms for Energy Transfer's junior subordinated notes?

Energy Transfer's junior subordinated notes are priced at $400 million with a 7.125% fixed-to-fixed reset rate, due 2054.

What will Energy Transfer use the proceeds from the notes offering for?

The net proceeds will fund the acquisition of WTG Midstream Holdings , refinance existing debt, redeem Series A preferred units, and for general partnership purposes.

When is the settlement date for Energy Transfer's notes offering?

The settlement date for the notes offering is expected to be June 21, 2024, subject to customary closing conditions.

What is the expected impact of Energy Transfer's notes offering on its financial structure?

The offering will increase Energy Transfer's liquidity but also its leverage, potentially raising future interest expenses and financial risks.