Boston, MA 06/18/2014 (wallstreetpr) – NGL Energy Partners LP (NYSE:NGL) needs money. Instead of turning to debt, the company intends to dilute its common units in a secondary offering. Although secondary offering is considered a less expensive way to raise capital compared to debt, such offering impact the value of existing holders and, therefore, unpopular.
However, investors coming in through the secondary offering or later have nothing to worry because the dilution will have been done. Inasmuch as secondary offering has a negative impact on the value of the existing holders, it saves so much in the long run because expensive interests on borrowings are avoided.
Common units on offer
NGL Energy Partners LP (NYSE:NGL) is offering 8 million common units, which represents limited partner interest. The units are being offered at $43.85 per unit. The company has also allowed underwriters a window of opportunity to acquire up to 1.2 million additional common units in case of over allotments.
If all goes as planned, the common units offering is expected to close on June 23, of course, subject to satisfaction of customary closing conditions.
Participants in the offering
NGL Energy Partners LP (NYSE:NGL) has tapped Bank of America Corp (NYSE:BAC), Wells Fargo & Co. (NYSE:WFC), Barclays, UBS Investment Bank, Raymond James, Goldman, RBC Capital Markets and Deutsche Bank Securities as joint bookrunners in the common units offering.
Once the offering is completed, and due deductions are made, the company intends to use the resulting net proceeds to pay down debt and capital expenditures. The company recently announced plans to purchase TransMontaigne, a commodity transporter, for $200 million. The company has made nearly a dozen acquisitions since its IPO in 2011.
Meanwhile, NGL Energy Partners LP (NYSE:NGL) announced increasing its revolving credit facility. The company announced the addition of $472 million to bring the borrowing capacity to $2.2 billion. The company added that about $72 million from the credit kitty will be put into acquisitions while $400 million has been allocated for working capital.
