NuStar Logistics LP, a fully owned affiliate of San
Antonio-based publicly traded partnership
NuStar Energy LP
), has closed the offering of 6.750% senior notes worth $300
million, maturing on Feb 1, 2021.
DELEK LOGISTICS (DKL): Free Stock Analysis
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NUSTAR ENERGY (NS): Free Stock Analysis
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NuStar Logistics issued the notes at 100% of their par value,
while the rate of return that is expected at maturity is 6.750%.
NuStar Energy will be the parent guarantor of the notes while
NuStar Pipeline Operating Partnership LP, another subsidiary of
NuStar Energy, will remain the affiliate guarantor.
The net proceeds of roughly $296.3 million will be utilized for
general partnership issues, which include the settlement of part
of the outstanding debt under the revolving credit facility of
NuStar Logistics. The debt was used for capital expenditures,
working capital needs along with the repayment of senior notes.
NuStar Energy is a master limited partnership (MLP) that 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.
NuStar Energy's exposure to asphalt business exposes it to
volatility in commodity prices. Along with the inherent
seasonality of the road construction business, this increases the
partnership's risk profile. As such, NuStar Energy is not a
pristine midstream MLP focused entirely on fee-based and
relatively low risk infrastructure assets.
Moreover, we remain concerned about NuStar Energy's high debt
level, which leaves the partnership vulnerable to an extended
downturn. As of Jun 30, 2013, NuStar had debt (including current
portion) of $2.5 billion, representing a debt-to-capitalization
ratio of around 50.6%.
The partnership currently retains a Zacks Rank #5 (Strong Sell),
implying that it is expected to significantly underperform the
broader U.S. equity market over the next 1 to 3 months.
However, one can look at oil and gas production pipeline MLPs
Magellan Midstream Partners LP
Delek Logistics Partners LP
Pioneer Southwest Energy Partners LP
) that offer value. Magellan Midstream retains a Zacks Rank #1
(Strong Buy), while Delek Logistics and Pioneer Southwest Energy
sport a Zacks Rank #2 (Buy).