NuStar Logistics, L.P. - a subsidiary of publicly traded
energy master limited partnership (MLP)
NuStar Energy L.P.
) announced the closure of its previously announced public
offering of hybrid notes. NuStar priced 7.625% fixed-to-floating
rate subordinated notes due 2043 worth $402.5 million.
The offering included a 30-day option to underwriters to
purchase additional notes worth $52.5 million. This
over-allotment option was exercised in full on January 16, 2013.
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The public offering - including underwriter allotment - fetched
approximately $391.5 million for the partnership. The net
proceeds from this offering will be utilized by the partnership
to reduce debt under its revolving credit facility and for other
partnership purposes. NuStar may re-borrow the same to pay for a
part of the purchase price of TexStar NGL assets or growth
capital related to the TexStar Midstream Services LP acquisition.
San Antonio, Texas-based NuStar Energy engages in the
transportation and storage of crude oil as well as refined
products in the U.S., the Netherlands Antilles, Canada, Mexico,
and the U.K. The company has three business segments, namely,
Storage, Transportation and Asphalt and Fuels Marketing.
NuStar, which was spun off from the U.S. refiner
Valero Energy Corp.
) in 2006 - currently retains a Zacks Rank #3 (Hold).
Over the last few years, NuStar has consolidated its business
through a combination of organic efforts and accretive
acquisitions. However, we believe the higher operating expenses
associated with this expanded asset base may lead to reduced
returns in the years to come.
We also remain concerned about NuStar's high debt levels, which
leave the partnership vulnerable to an extended downturn. As of
September 30, 2012, NuStar had long-term debt (including current
portion) of more than $2 billion, representing a
debt-to-capitalization ratio of around 43%.
However, there are other MLP's expected to perform better than
NuStar, which include
Boardwalk Pipeline Partners, LP
) having Zacks Rank #1 (Strong Buy) and
Magellan Midstream Partners L.P.
) having Zacks Rank #2 (Buy).