Plains All American Pipeline, L.P. (PAA) announced that it has commenced the process of an underwritten public offering of 6.4 million of its common units representing limited partner interests. The partnership will allow the underwriters of the issue a window of 30 days to purchase up to 960,000 additional common units to cover over-allotments, if necessary.
The partnership intends to utilize the net proceeds of the issue, including proceeds from any exercise of the over-allotment option, to lower outstanding borrowings under its credit facilities and for general partnership purposes.
The partnership might reborrow the amount paid under the credit facilities to fund its ongoing capital program, to make future acquisitions and for general corporate purposes.
Previously, on November 19, 2010, the partnership had issued 4.2 million common units and gave the underwriters a customary window of 30 days to purchase up to 630,000 common units to cover overallotment. The net proceeds of the issue including receipts from overallotment were $260 million and were used by the partnership to reduce outstanding borrowings under its credit facilities and for general partnership purposes.
Plains All American not only issued new units during 2010 but also returned value to unit holders, leveraging the partnership’s strong financial performance. The new quarterly distribution rate of the partnership is 95.75 cents per unit ($3.83 per unit annually).
The partnership ended 2010 with 138 million outstanding units versus 131 million units at the end of previous year.
Plains All American Pipeline’s peer Enterprise Products Partners LP (EPD) also issued common units during 2010. The latter intends to utilize the net proceeds of issue of $528 million to temporarily reduce borrowings under its multi-year revolving credit facility.
Plains All American Pipeline currently retains a Zacks #3 Rank (short-term Hold rating).
Houston, Texas-based Plains All American Pipeline owns assets strategically located in well-established oil producing regions, catering to major U.S. refinery and distribution markets. Other than organic growth opportunities, the partnership also relies on acquisitions to spur growth.
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