NGL Energy Partners LP Announces Pricing of $2.2 Billion Offering of Senior Secured Notes

Rhea-AI Summary

NGL Energy Partners LP has announced the upsizing of their senior secured notes offering from $2.1 billion to $2.2 billion. The company has priced $900 million in aggregate principal amount of 8.125% senior secured notes due 2029 and $1.3 billion in aggregate principal amount of 8.375% senior secured notes due 2032. NGL expects to use the net proceeds of the offering for various purposes including funding the redemption of existing notes and general corporate purposes.

Insights

Financial Analyst

The upsizing of NGL Energy Partners LP's senior secured notes offering reflects a significant capital restructuring effort. The increase from $2.1 billion to $2.2 billion, including the pricing of $900 million at 8.125% due 2029 and $1.3 billion at 8.375% due 2032, indicates a strategic move to refinance existing debt. This is a common practice aimed at capitalizing on market conditions to reduce interest expenses or extend maturities, thereby improving the company's liquidity profile and financial flexibility.

Investors should note the relatively high interest rates, which could suggest a higher risk profile for the company or a response to a higher interest rate environment. The interest rates are above the current average for investment-grade corporate bonds, implying a non-investment grade status. This is important as it affects the cost of capital and, consequently, the company's profitability and cash flow.

The use of proceeds to redeem higher-cost debt and pay down the asset-backed lending facility should, in theory, strengthen the balance sheet. However, stakeholders should consider the potential risks associated with the increase in leverage and the implications for the company's long-term financial health. The quarterly interest payments beginning in 2024 will require consistent cash flow generation to meet these obligations.

Market Research Analyst

From a market perspective, the offering and subsequent debt restructuring by NGL Energy Partners LP may have broader implications for the midstream energy sector. The decision to tap into the debt market at this juncture could signal management's confidence in the company's future cash flows, despite the traditionally volatile nature of the energy market.

Investors and analysts will likely monitor the impact of this financial maneuver on the company's credit ratings and overall market perception. The success of this offering could set a precedent for similar moves by other midstream players, especially if it proves beneficial in strengthening NGL's financial position. The exemption from registration under the Securities Act indicates a targeted approach towards institutional investors, which could be seen as a move to secure funding from more sophisticated investors with a deeper understanding of the risks involved.

Legal Expert

The legal implications of the notes offering, especially being exempt from registration under the Securities Act of 1933 and offered under Rule 144A and Regulation S, are crucial for compliance and regulatory purposes. This exemption allows NGL to streamline the offering process to qualified institutional buyers and non-U.S. persons without the extensive disclosures required for a public offering.

Investors should be aware that the lack of registration means less public information and potentially less liquidity for these securities. The restriction on sales to U.S. persons and the absence of registration under state securities laws also limit the potential investor base, which could impact the secondary market for these notes.

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 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.

The Notes are being initially sold to investors at a price of 100% of their principal amount and interest on the Notes will be payable quarterly on February 15, May 15, August 15 and November 15 of each year, beginning on May 15, 2024. Interest on the 2029 Notes will accrue at a rate of 8.125% per annum. The maturity date of the 2029 Notes is February 15, 2029. Interest on the 2032 Notes will accrue at a rate of 8.375% per annum. The maturity date of the 2032 Notes is February 15, 2032.

The Notes are being 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/20240125580152/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 the ticker symbol for NGL Energy Partners LP?

The ticker symbol for NGL Energy Partners LP is NGL.

What is the purpose of the senior secured notes offering announced by NGL Energy Partners LP?

The purpose of the senior secured notes offering is to fund the redemption of existing notes, pay fees and expenses, repay borrowings, and for general corporate purposes.

What is the interest rate and maturity date for the 2029 Notes?

The interest rate for the 2029 Notes is 8.125% per annum and the maturity date is February 15, 2029.

Who are the Notes being offered and sold to?

The Notes are being initially sold to investors at a price of 100% of their principal amount and interest on the Notes will be payable quarterly. They are offered 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 of the Securities Act and applicable state laws.