Hess Midstream Operations LP Announces Pricing of Private Offering of Senior Notes Due 2028

Rhea-AI Summary

Hess Midstream Operations, a consolidated subsidiary of Hess Midstream LP (NYSE: HESM), has priced a $800 million private offering of 5.875% senior unsecured notes due 2028. The notes are being priced at par and will be sold exclusively to qualified institutional buyers under Rule 144A and non-U.S. persons under Regulation S.

The company plans to use the net proceeds, combined with borrowings from its revolving credit facility, to redeem its outstanding 5.625% senior notes due 2026. The redemption notice was delivered on February 3, 2025, and the new offering is expected to close on February 12, 2025, subject to customary closing conditions.

Positive

• Successful pricing of $800 million senior notes offering
• Refinancing of existing debt with slightly higher interest rate notes
• Strong institutional investor interest in the offering

Negative

• Higher interest rate on new notes (5.875%) compared to existing notes (5.625%)
• Additional borrowing from revolving credit facility required for redemption
• Increased debt service costs due to higher interest rate

Insights

Fixed Income Analyst

The $800 million senior notes offering at 5.875% represents a strategic debt refinancing move by Hess Midstream Operations, though at a slightly higher cost than the existing 5.625% notes. The 25 basis point increase in interest rate will result in approximately $2 million in additional annual interest expenses, a manageable increment given the company's robust midstream operations and fee-based revenue model.

The timing of this refinancing is particularly noteworthy, as it comes amid expectations of potential rate cuts by the Federal Reserve later in 2025. By securing this rate now and extending the maturity by two years to 2028, HESM demonstrates proactive liability management, potentially avoiding the risk of refinancing in a less favorable environment closer to the 2026 maturity date.

This refinancing also maintains HESM's well-laddered debt maturity profile, enhancing financial flexibility. The private placement structure, targeting qualified institutional buyers, typically allows for more flexible terms and faster execution compared to public offerings, while the investment-grade level coupon reflects the market's positive view of HESM's credit quality and stable midstream business model.

HOUSTON--(BUSINESS WIRE)-- Hess Midstream Operations LP (the “Issuer”), a consolidated subsidiary of Hess Midstream LP (NYSE: HESM) (“HESM” and, together with the Issuer, “Hess Midstream”), today announced that it has priced $800 million aggregate principal amount of 5.875% senior unsecured notes due 2028 (the “Notes”) at par in a private offering. Hess Midstream intends to use the net proceeds from the offering, along with borrowings under its revolving credit facility, to redeem its outstanding 5.625% senior notes due 2026. Hess Midstream delivered a notice of redemption in respect of its 5.625% senior notes due 2026 on February 3, 2025. The private offering of the Notes is expected to close on February 12, 2025, subject to the satisfaction of customary closing conditions.

The Notes are being sold only to persons reasonably believed to be “qualified institutional buyers” pursuant to Rule 144A and outside the United States to non-U.S. Persons in compliance with Regulation S under the Securities Act of 1933, as amended (the “Securities Act”). The Notes have not been and will not be registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act and applicable state laws.

This press release is neither an offer to sell nor a solicitation of an offer to buy the Notes or any other securities and shall not constitute an offer to sell or a solicitation of an offer to buy, or a sale of, the Notes or any other securities in any jurisdiction in which such offer, solicitation or sale is unlawful.

About Hess Midstream LP

HESM is a fee-based, growth-oriented, midstream company that owns, operates, develops and acquires a diverse set of midstream assets to provide services to Hess Corporation and third-party customers. HESM owns oil, gas and produced water handling assets that are primarily located in the Bakken and Three Forks Shale plays in the Williston Basin area of North Dakota.

Forward Looking Statements

This press release contains “forward-looking statements” within the meaning of U.S. federal securities laws. Words such as “anticipate,” “estimate,” “expect,” “forecast,” “guidance,” “could,” “may,” “should,” “would,” “believe,” “intend,” “project,” “plan,” “predict,” “will,” “target” and similar expressions identify forward-looking statements, which are not historical in nature. Forward-looking statements are subject to certain known and unknown risks and uncertainties that could cause actual results to differ materially from our historical experience and our current projections or expectations of future results expressed or implied by these forward-looking statements. You should keep in mind the risk factors and other cautionary statements in the filings made by HESM with the U.S. Securities and Exchange Commission, which are available to the public. HESM undertakes no obligation to, and does not intend to, update these forward-looking statements to reflect events or circumstances occurring after this press release. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250203830910/en/

Investor Contact:

Jennifer Gordon

(212) 536-8244

Media Contact:

Lorrie Hecker

(212) 536-8250

Source: Hess Midstream Operations LP

FAQ

What is the size and interest rate of HESM's new senior notes offering?

Hess Midstream Operations is offering $800 million in senior unsecured notes with a 5.875% interest rate, due in 2028.

When will HESM's new senior notes offering close?

The private offering is expected to close on February 12, 2025, subject to customary closing conditions.

How will HESM use the proceeds from the 2028 senior notes?

The proceeds, along with revolving credit facility borrowings, will be used to redeem the outstanding 5.625% senior notes due 2026.

What is the difference in interest rates between HESM's new and old notes?

The new 2028 notes carry a 5.875% interest rate, which is 0.25% higher than the existing 2026 notes' 5.625% rate.

Who can purchase HESM's new senior notes?

The notes are being sold only to qualified institutional buyers under Rule 144A and non-U.S. persons under Regulation S.