Plains All American Announces Pricing of Public Offering of $1 Billion of Senior Notes

Rhea-AI Summary

Plains All American Pipeline (PAA) has priced a $1 billion public offering of 5.950% senior unsecured notes due 2035 at 99.761% of face value. The offering, expected to close on January 15, 2025, will generate net proceeds of approximately $988.1 million.

The proceeds will be used to: (1) fund the $475 million acquisition of Ironwood Midstream Energy Partners II, (2) repurchase about 12.7 million Series A Preferred Units at $26.25 per unit, and (3) repay outstanding credit facilities and commercial paper program. If the Ironwood acquisition or Preferred Unit repurchase isn't completed, funds will be used for general partnership purposes, including refinancing 4.65% Senior Notes due October 2025.

The offering is not conditional on completing either the Ironwood acquisition or Preferred Unit repurchase, and vice versa. J.P. Morgan Securities, BMO Capital Markets, Mizuho Securities USA, and Scotia Capital are joint book-running managers.

Positive

• Secured $988.1 million in net proceeds through senior notes offering
• Strategic acquisition of Ironwood Midstream Energy Partners II for $475 million
• Debt refinancing opportunity for 4.65% Senior Notes due October 2025

Negative

• Increased long-term debt with 5.950% interest rate
• Significant cash outflow for Preferred Unit repurchase

Insights

Fixed Income Analyst

The $1 billion senior notes offering at 5.950% yield demonstrates PAA's strong market access and strategic financial planning. The pricing reflects current market conditions and PAA's credit profile, with the slight discount to par (99.761%) suggesting appropriate market positioning. The $988.1 million net proceeds enable three key strategic moves: funding the Ironwood acquisition ($475 million), executing the preferred unit repurchase and optimizing the debt structure.

The debt issuance's 10-year tenor aligns with the long-term nature of midstream assets while taking advantage of the current rate environment. The refinancing of the 4.65% October 2025 notes, if needed, would extend PAA's debt maturity profile and manage near-term maturities effectively.

M&A Strategy Analyst

The financing structure for the Ironwood acquisition represents a well-orchestrated capital allocation strategy. By securing long-term financing before closing, PAA mitigates execution risk while maintaining flexibility through the non-conditional nature of the offering. The preferred unit repurchase of 12.7 million units at $26.25 per unit simultaneously optimizes the capital structure by reducing higher-cost equity components.

The unconditioned nature of these transactions provides PAA with strategic optionality - if the Ironwood deal doesn't materialize, the company can redirect funds to debt refinancing and general corporate purposes, demonstrating prudent contingency planning. This flexible approach to capital deployment enhances PAA's strategic positioning in the midstream sector.

HOUSTON, Jan. 13, 2025 (GLOBE NEWSWIRE) -- Plains All American Pipeline, L.P. (Nasdaq: PAA) today announced that it and PAA Finance Corp., a wholly owned subsidiary of PAA, as co-issuer, have priced an underwritten public offering (the “Offering”) of $1 billion aggregate principal amount of 5.950% senior unsecured notes due 2035 at a price to the public of 99.761% of their face value. The Offering is expected to close on January 15, 2025, subject to the satisfaction of customary closing conditions.

PAA intends to use the net proceeds of approximately $988.1 million from the Offering to (i) fund the acquisition of all of the membership interests in Ironwood Midstream Energy Partners II, LLC for approximately $475 million (the “Ironwood Acquisition”), (ii) fund the repurchase of approximately 12.7 million Series A Preferred Units representing limited partner interests in PAA at par ($26.25 per unit), plus accrued and unpaid distributions (the “Preferred Unit Repurchase”), both of which were announced on January 7, 2025, and (iii) repay amounts outstanding under PAA’s credit facilities and commercial paper program, and, pending such uses, for general partnership purposes, which may include, among other things, intra-group lending and related transactions, repayment of indebtedness, acquisitions, capital expenditures and additions to working capital. If we do not complete the Ironwood Acquisition and/or the Preferred Unit Repurchase, we expect to use the net proceeds from the Offering for general partnership purposes as described above, including refinancing our 4.65% Senior Notes due October 2025.

The Offering is not conditioned on the consummation of either the Ironwood Acquisition or the Preferred Unit Repurchase. In addition, the consummation of the Offering is not a condition to the consummation of either the Ironwood Acquisition or the Preferred Unit Repurchase. No assurance can be given that the Ironwood Acquisition or the Preferred Unit Repurchase will ultimately be completed on the terms currently contemplated or at all.

J.P. Morgan Securities LLC, BMO Capital Markets Corp., Mizuho Securities USA LLC and Scotia Capital (USA) Inc. are acting as joint book-running managers for the Offering.

The Offering is being made pursuant to an effective shelf registration statement on Form S-3 previously filed with the U.S. Securities and Exchange Commission (the “SEC”) and may only be made by means of a base prospectus and accompanying prospectus supplement meeting the requirements of Section 10 of the Securities Act of 1933, as amended, copies of which may be obtained from the underwriters as follows:

J.P. Morgan Securities LLC  383 Madison Avenue  New York, NY 10017  Attn: Investment Grade Syndicate Desk, 3rd Floor  Telephone: 1-212-834-4533	BMO Capital Markets Corp.  151 West 42nd Street  New York, NY 10036  Attn: Legal Department  Telephone: 1-866-864-7760
Mizuho Securities USA LLC  1271 Avenue of the Americas  New York, NY 10020  Attn: Debt Capital Markets  Telephone: 1-866-271-7403	Scotia Capital (USA) Inc.  250 Vesey Street  New York, NY 10281  Telephone: 1-800-372-3930

This news release does not constitute an offer to sell or a 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 state or jurisdiction.

Forward-Looking Statements
This news release may include certain statements concerning expectations for the future that are forward-looking statements as defined by federal law, including without limitation statements regarding the Offering, the Ironwood Acquisition and the Preferred Unit Repurchase. Such forward-looking statements are subject to a variety of known and unknown risks, uncertainties, and other factors that are difficult to predict and many of which are beyond management's control. An extensive list of factors that can affect future results are discussed in PAA's Annual Report on Form 10-K, the registration statement as discussed herein and other documents filed from time to time with the SEC. PAA undertakes no obligation to update or revise any forward-looking statement to reflect new information or events.

About Plains
PAA is a publicly traded master limited partnership that owns and operates midstream energy infrastructure and provides logistics services for crude oil and natural gas liquids (NGL). PAA owns an extensive network of pipeline gathering and transportation systems, in addition to terminalling, storage, processing, fractionation and other infrastructure assets serving key producing basins, transportation corridors and major market hubs and export outlets in the United States and Canada. On average, PAA handles over 8 million barrels per day of crude oil and NGL.

PAA is headquartered in Houston, Texas. 

Investor Relations Contacts:

Blake Fernandez 
Michael Gladstein 
plainsIR@plains.com 
(866) 809-1291 

FAQ

What is the size and interest rate of PAA's January 2025 senior notes offering?

Plains All American Pipeline's offering consists of $1 billion in senior unsecured notes with a 5.950% interest rate, due 2035, priced at 99.761% of face value.

How will PAA use the proceeds from its $1 billion senior notes offering?

PAA will use the $988.1 million net proceeds to fund the $475 million Ironwood Midstream acquisition, repurchase 12.7 million Series A Preferred Units, and repay outstanding credit facilities and commercial paper program.

What is the price per unit for PAA's Series A Preferred Units repurchase?

PAA will repurchase the Series A Preferred Units at par value of $26.25 per unit, plus accrued and unpaid distributions.

Who are the joint book-running managers for PAA's January 2025 notes offering?

J.P. Morgan Securities, BMO Capital Markets, Mizuho Securities USA, and Scotia Capital are acting as joint book-running managers for the offering.

When is PAA's senior notes offering expected to close?

The offering is expected to close on January 15, 2025, subject to customary closing conditions.