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Golar Partners Prices While Parent fills Warehouse?
Was it a vote for shipping, for the MLP structure, or Mr. Fredriksen? At the end of the day, it does not matter as the first shipping IPO of 2011 met with strong demand and priced above its range. Last week, Golar LNG Partners LP (“GMLP”) priced its initial public offering of 12 million shares at $22.50, above the stated range of $20 to $22 per share. Total gross proceed were $270 million, which could increase to $310.5 million if the green shoe is exercised in full. The limited partners own a 30.1% interest in the company with Golar LNG Limited owning the 2% GP interest as well as a 67.9% limited partner interest. The final details of the transaction are shown in the Guts of the Deal below.
Seeing the Light – Golar LNG Learns From a Competitor
The MLP model is best suited for assets such as FSRUs and LNG carriers that have stable cash flows due to long-term contracts. The common units of the limited partnerships trade on yield and expected growth. Given the low interest rate environment and high demand for yield paper, the MLPs are trading at high EBITDA multiples and premiums to underlying asset value. The valuation premium gives MLPs a lower cost of capital making it an efficient way to grow and access capital.
Teekay LNG Partners Invests In the Angola LNG Project
To facilitate the acquisition of Teekay’s interest in the Angola LNG Project, Teekay LNG Partners L.P. agreed to issue 3.7 million common units at a price of $38.88 per share, a discount of 4% from the closing price just prior to the announcement. Proceeds will be used to fund the equity purchase price of Teekay Corporation’s 33% interest in the Angola LNG Project as payment becomes due while using interim and remaining funds for the repayment of outstanding debt under one of its credit facilities, which matures in August 2018. Net of assumed debt, the total equity purchase price is approximately $73 million subject to adjustment based on actual costs incurred at the time of delivery. The company will acquire the ownership interests and pay a proportionate share of the purchase price as each vessel is delivered which is anticipated to be during the fall of 2011 and in the first quarter of 2012.
TOO Follows-on Again
Once again utilizing its $750 million shelf registration, Teekay Offshore, on the heels of its August follow-on offering of 5.25 million shares, last week offered to the public a further 5.6 million common units. The units were priced at $28.74, a 4.4% discount to Thursday’s closing price of $29.11. A green shoe of 840 thousand shares has been offered to the underwriters. Proceeds will be used for general partnership purposes, including the acquisition of dropdowns from parent, Teekay. In the interim the partnership expects to use the proceeds to pay down a portion of its outstanding debt under various revolving credit facilities. More details are provided in out Guts of the Deal below.
The Right Product for the Right Time – Teekay Offshore Follow-on
Last week, the Wall Street Journal reported on the “Frenzy in Energy Partnerships”. “Lured by hefty yields, investors are pouring billions of dollars into a small corner of the stock market – energy focused master limited partnerships – which has seen a huge rally of 15% this year.” This has caused concern, as these gains are not the result of a meaningful change in fundamentals but simply the consequence of a rush of new money into the sector. This should come as no surprise as investors seek safe havens for their cash and, in this instance, are rewarded with yields, a portion of which may be tax free, well in excess of Treasuries.
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Me TOO
On Tuesday, Teekay Offshore Partners L.P. announced that it too intended to raise equity by selling 4.4 million common units, while giving the underwriters an option to purchase a further 0.66 million shares to cover over-allotments. The deal priced the next day at $19.48/ unit, a discount of 4.98% from the prior day’s close. Gross proceeds of the offering will be $85.7 million.
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Teekay TOO
On Wednesday after the market closed, Teekay Offshore Partners (“TOO”) announced plans to offer 6,500,000 common units, representing limited partnership interests in another follow-on offering. The agreement with the underwriters also includes a green shoe of 975,000 shares.
Today, the units were priced at $14.32, a discount of 6.77% to yesterday’s closing price of $15.36.
The net proceeds of the offering, approximately $100 million, will be used to repay amounts outstanding under one of their credit facilities, which bears interest at LIBOR plus 0.625% and matures in October 2014. Currently, TOO has in total 7 revolvers which provide borrowings of up to $1.45 billion of which $147.7 million is undrawn. With the availability reducing by a further $122.4 million over the reminder of 2009, this repayment will allow the partnership to be able to redraw on this credit facility in the future to fund acquisitions and for general partnership purposes.
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Sentiment Turns
In a welcome turn of events, the market was resoundingly upbeat this week. The pace of transactions picked up notably across sectors, and we can’t help but view this as a positive sign for the financing market going forward.
On the M&A front Excel and Quintana successfully closed their merger. Each issued and outstanding share of Quintana common stock was converted into the right to receive $13.00 in cash and 0.3979 Excel Class A common shares. The merger creates a combined company that operates a fleet of 47 vessels with a total carrying capacity of approximately 3.7 million DWT and an average age of approximately eight years. Stamatis Molaris stepped into the role of CEO of the combined company, while Hans Mende, Corbin Robertson III and Paul Cornell joined its board of directors. We were happy to hear that the deal was executed smoothly. Moreover, Nordea and the underwriting team were successful in syndicating the debt levels required to make the deal possible – without needing to bring market flex provisions into play.
Teekay Amends LNG Filing with 12x EBITDAValuation – Roadshow Next Week
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