Buckeye redeems $300 million of notes, sells $400 million new notes

By Devika Patel

Knoxville, Tenn., Feb. 9 – Buckeye Partners, LP repaid $300 million of its 6.05% notes and issued $400 million of 6 3/8% fixed-to-floating rate notes in January.

“In January of 2018, we repaid in full $300 million principal amount and $9.1 million of accrued interest outstanding under our 6.05% notes using funds available from our $1.5 billion revolving credit facility,” executive vice president and chief financial officer Keith E. St. Clair said on the company’s fourth quarter and year ended Dec. 31, 2017 earnings conference call on Friday.

“We also successfully issued $400 million of junior subordinated notes in January 2018,” St. Clair said.

“These notes carry a five-year fixed coupon of 6 3/8%, after which they convert to a floating interest rate of Libor plus 402 basis points.

“[It is] important to note that these notes are redeemable at Buckeye’s option after five years and, importantly, these hybrid securities receive partial equity credit from the ratings agencies, reducing leverage and providing financial flexibility at a lower cost than issuing common equity,” St. Clair added.

The company uses a mix of debt and equity to finance its growth as part of its bid to remain investment-grade.

“As part of our strategy to maintain our investment-grade rating, we continue to conservatively finance growth opportunities with an appropriate mix of equity and debt,” chairman, president and chief executive officer Clark C. Smith said on the call.

At the end of the fourth quarter, the company had $2.2 billion of cash and cash equivalents and $4.7 billion of long-term debt.

As of Dec. 31, 2017, the company had approximately $1.1 billion of availability under its credit facility and total debt to adjusted EBITDA was 4.4x at year-end.

Adjusted EBITDA for the fourth quarter of 2017 was $289.9 million, up 13.6% or $34.8 million, compared to $255.1 million for the fourth quarter of 2016.

Adjusted EBITDA for 2017 was $1,113,900,000, an increase of 8.4% or $85.9 million compared to $1,028,000,000 for 2016.

On Jan. 18, Buckeye priced $400 million 6.375% 60-year junior subordinated fixed-to-floating rate notes (Ba1/BB/BB).

The company priced the notes at 99.474 to yield 6.5%. The notes accrue interest at a fixed rate until Jan. 22, 2023 then at a rate equal to Libor plus 402 basis points.

Proceeds were earmarked to repay debt under the company’s revolving credit facility and for general partnership purposes, which may include debt repayment, acquisitions, capital expenditures and additions to working capital.

The refined petroleum products pipeline system is based in Houston.

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