NGL Energy Partners LP Announces $2.1 Billion Offering of Senior Secured Notes

Rhea-AI Summary

NGL Energy Partners LP (NYSE: NGL) announced its intention to offer $2.1 billion in aggregate principal amount of senior secured notes due 2029 and senior secured notes due 2032. The company plans to use the net proceeds to fund the redemption of existing senior notes, pay fees and expenses, and repay a portion of outstanding borrowings under NGL's senior secured asset-backed lending facility.

Insights

Financial Analyst

The strategic refinancing move by NGL Energy Partners LP, involving the issuance of $2.1 billion in senior secured notes and a concurrent $700 million senior secured term loan, is indicative of a proactive approach to capital management. The use of these funds to redeem existing higher-interest notes due 2025 and 2026 suggests an effort to capitalize on current market conditions to reduce long-term interest expenses. This could potentially improve the company's interest coverage ratio, a critical measure of a firm's ability to meet its interest obligations from operating earnings.

Investors will likely scrutinize the interest rates of the new issuances in comparison to those being redeemed. A lower interest rate would signal cost savings, while a higher rate could indicate increased risk perception among investors. The transaction's impact on the company's credit rating and overall leverage will also be pivotal, as a higher leverage ratio could raise concerns about financial risk.

Legal Expert

The offering's structure, as a private placement under Rule 144A and Regulation S, is designed to streamline the capital-raising process by targeting qualified institutional buyers and non-U.S. persons, circumventing the lengthy public registration process with the SEC. This approach is common for companies seeking quick access to capital while maintaining confidentiality on terms.

However, the absence of a public registration means less transparency for retail investors, who rely on SEC filings for detailed information. The legal stipulations also mean that the secondary market for these notes may be less liquid, potentially impacting their pricing. It's essential for stakeholders to understand these regulatory nuances as they can affect the ease with which these securities can be traded in the future.

Market Research Analyst

From a market perspective, the timing and success of such a sizable offering will be influenced by current market liquidity and investor sentiment towards the energy sector. Given the volatility in energy prices and the transition towards renewable sources, investors may exhibit heightened sensitivity to sector-specific risks. The market's reception of NGL's offering could serve as a bellwether for the broader market's appetite for energy sector debt, particularly for firms with significant exposure to commodity price fluctuations.

Furthermore, the decision to repay a portion of the outstanding borrowings under the senior secured asset-backed lending facility could be viewed as a strategic deleveraging move, potentially making the company more resilient to market downturns. This could have a favorable impact on the company's stock performance as investors often reward firms that strengthen their balance sheets.

TULSA, Okla.--(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 that they intend to offer, subject to market and other conditions, $2.1 billion in aggregate principal amount of senior secured notes due 2029 and senior secured notes due 2032 (together, 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 of, 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 to, but excluding, the applicable redemption date, (ii) to pay fees and expenses in connection with the foregoing transactions and (iii) to the extent of any remaining net proceeds, to repay a portion of the outstanding borrowings under NGL’s senior secured asset-backed lending facility.

The Notes will be offered and sold in a transaction exempt from registration under the Securities Act of 1933 (the “Securities Act”) only to persons reasonably believed to be qualified institutional buyers in accordance with Rule 144A under the Securities Act, and outside the United States to persons other than U.S. persons, in reliance on Regulation S under the Securities Act.

The offer and sale of the Notes have not been 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 shall not constitute an offer to sell or a solicitation of an offer to purchase the Notes or any other securities, and shall not constitute an offer, solicitation or sale in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful.

Forward-Looking Statements

This press release includes “forward-looking statements.” All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements. Specifically, forward-looking statements may include, among others, statements concerning the offering, the new term loan facility and the expected use of proceeds thereof. Actual results could vary significantly from those expressed or implied in such statements and are subject to a number of risks and uncertainties. While NGL believes such forward-looking statements are reasonable, NGL cannot assure they will prove to be correct. The forward-looking statements involve risks and uncertainties that affect operations, financial performance, and other factors as discussed in filings with the Securities and Exchange Commission. Other factors that could impact any forward-looking statements are those risks described in NGL’s annual report on Form 10-K, quarterly reports on Form 10-Q, and other public filings. You are urged to carefully review and consider the cautionary statements and other disclosures made in those filings, specifically those under the heading “Risk Factors.” NGL undertakes no obligation to publicly update or revise any forward-looking statements except as required by law.

About NGL Energy Partners LP

NGL Energy Partners LP, a Delaware limited partnership, is a diversified midstream energy company that transports, stores, markets and provides other logistics services for crude oil, natural gas liquids and other products and transports, treats and disposes of produced water generated as part of the oil and natural gas production process.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240123093236/en/

NGL Energy Partners LP

David Sullivan, 918-495-4631

Vice President - Finance

David.Sullivan@nglep.com

Source: NGL Energy Partners LP

FAQ

What is NGL Energy Partners LP's ticker symbol?

The ticker symbol for NGL Energy Partners LP is NGL.

What is the purpose of the $2.1 billion senior secured notes offering?

NGL intends to use the net proceeds to fund the redemption of existing senior notes, pay fees and expenses, and repay a portion of outstanding borrowings under NGL's senior secured asset-backed lending facility.

How will the Notes be offered and sold?

The Notes will be offered and sold in a transaction exempt from registration under the Securities Act of 1933 only to qualified institutional buyers in accordance with Rule 144A under the Securities Act, and outside the United States to persons other than U.S. persons, in reliance on Regulation S under the Securities Act.

Has the offer and sale of the Notes been registered under the Securities Act?

No, the offer and sale of the Notes have not been 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.