NuStar Energy L.P. Sells a Fixed-to-Floating Rate Preferred

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Giant master limited partnership NuStar Energy L.P. (NYSE:NS) has sold a 7.625% Fixed-to-Floating rate preferred.  The offering is a large one with 14,000,000 shares sold with an over allotment of 1.4 million shares which will generate gross proceeds of $385,000,000 assuming exercise of the over allotment.

NuStar is one of the larger companies in the MLP space with over 8,700 miles of pipelines which are dedicated to crude oil, refined products and anhydrous ammonia.  Additionally NS owns 79 storage terminals with room for 94 million barrels of product.  The company also has a sizable product sales segment.  An additional interesting twist to NuStar is that they have operations in the Netherlands and the United Kingdom in additional to their North American operations.

Part of the reason for this offering is to fund their recently announced acquisition of Navigator Energy Services LLC. Navigator is a company similar to NuStar in that they own storage facilities and crude oil gathering pipelines in Texas.  The cost of the acquisition is $1.475 billion.


Being a fixed-to-floating rate issue the coupon on this issue will be fixed at 7.625% until 6/15/2022 at which point it will convert to a floating rate coupon which will reset quarterly with a base rate of 5.643% to which the 3 month Libor rate will be added.  

The issue is perpetual and distributions will not be qualified for preferential tax treatment since it is a MLP.  Additionally distributions will generate a K-1 at tax time instead of the more straightforward 1099.  Distributions will be cumulative meaning if the board of directors does not declare a dividend they will accrue and will need to be paid in the future.

Details of this new issue can be found here.

This issue is now trading on the OTC Grey Market with the temporary ticker of NUSRP and shares are priced in the $25.30 area.
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Tim McPartland

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Tim McPartland
Tim McPartland is a private investor with over 45 years of investing 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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