Buckeye Partners Issues $650M Notes - Analyst Blog

The refined petroleum pipelines operator Buckeye Partners L.P. (BPL) issued $650 million 4.875% senior unsecured notes due in February 1, 2021.  The offer price of the unsecured notes is $99.620 (per $100.00 principal).

The offering will close on January 13, 2011, and the partnership expects the net proceed from the offering to be $643.3 million. The partnership intends to utilize a part of the proceeds to fund a portion of the pending $1.36 billion acquisition of an 80% interest in Bahamas Oil Refining Company International Limited (BORCO), and for general business purposes.

The partnership might also use the proceeds to fund a portion of the purchase price of the remaining 20% interest of BORCO, if the owner agrees to sell the same to Buckeye. The rest of the proceeds will be a part of the partnership's cash or cash equivalents.

The company has from time to time engaged in note selling. In August 2009, the partnership issued $250 million 5.50% senior unsecured notes due in August 15, 2019. The partnership used the proceeds to lower its dues under its revolving credit facility and for general partnership purposes.

Buckeye ended the third quarter 2010 with long-term debts of $1.44 billion compared with $1.42 billion in the year-ago period. Interest and debt expenses of the partnership increased 7.2% to $22 million in the reported quarter from $20.5 million in the year-ago period, a fallout of higher debt levels from the previous year. We expect interest expenses of the partnership to increase further from its present level.

The operating earnings of Buckeye at the end of third-quarter 2010 were 93 cents per unit versus 89 cents per unit in the year-ago period.  The Zacks Consensus Estimates for fourth-quarter 2010, fiscal year 2010 and fiscal year 2011 are 95 cents per unit, $3.37 per unit and $3.62 per unit, respectively.

Buckeye Partners currently retains a Zacks #3 Rank (short-term Hold rating) in consonance with our Neutral rating on the stock. On a competitive landscape, net margin of the partnership fared better than its peers AmeriGas Partners LP (APU) and Ferrellgas Partners LP (FGP) in the trailing twelve months.

Based in Houston, Texas, Buckeye Partners, L.P. primarily operates refined petroleum products pipeline systems in the United States.

 
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