Hoegh LNG Partners Sells a High-Yield Preferred

October 4, 2017

By  Tim McPartland

Master limited partnership Hoegh LNG Partners (NYSE: HMLP) has sold a new preferred unit offering with a very enticing coupon of 8.75%.

This is the third-highest coupon on a preferred issue sold this year. The only two higher coupons were the 9% fixed-to-floating-rate preferred from NGL Energy and the 9.25% fixed-to-floating offering of Tsakos Energy Navigation.

While we normally are lukewarm to issues coming from many of the master limited partnerships (MLPs), this one is more palatable to us since Hoegh LNG Partners is a profitable business that owns floating storage and regasification Liquefied Natural Gas (LNG) ships. Global shipping of LNG has become a highly desired area in which to be a ship owner, as more liquefied natural gas is being transported around the globe than ever before.

Additionally, Hoegh chose to be taxed as a C corporation and its investors therefore receive a 1099 instead of a K-1 at tax time. Also, because the company pays taxes at the corporate level, the dividends received by investors are qualified for preferential tax treatment.

Potential investors should note that if you are buying any of these units through a Fidelity account, you will be charged an additional $50 commission since Hoegh LNG Patners is a foreign corporation. As far as we can tell, other brokerages do not charge this extra fee.

This issue is now trading on the OTC Grey Market under temporary ticker HGLPF and has been gyrating between $25.00 and $25.50 a share. We believe this issue will move into the $26 to $26.25 area once NYSE trading begins in a few days.

Details of this issue can be found here.


Tim McPartland

Tim McPartland is a private investor with over 45 years of investment experience. His analysis, research and writing is devoted to the hunt for income producing securities of all types, but in particular specializing in preferred stocks, exchange traded debt and Master Limited Partnerships.

 

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