Ferrellgas Partners L.P. (FGP) announced that its operating partner Ferrellgas L.P. and its wholly owned subsidiary Ferrellgas Finance Corp. offered $500 million of 6.50% of senior notes due 2021. The partnership raised the issue size from its original level of $470 million. The offer is slated to close on November 24, 2010, subject to certain regulatory obligation.
The partnership intends to utilize the net proceeds of the issue to redeem its outstanding 6.75% senior notes due 2014 and also reduce its outstanding debt under its existing credit facility.
Ferrellgas Partners ended fiscal 2010 with a total debt of $1.11 billion. With the current issuance, the debt levels now reach $1.61 billion. During the last fiscal year the partnership issued new debts worth $580 million in two series. In September 2009, the partnership issued $300 million of 9.125% of senior notes due 2017 and, on April 2010, it issued $280 million of 8.625% of senior notes due 2020.
Interest expenses of Ferrellgas Partners for fiscal 2010 were $101.3 million, up 13% from $89.6 million for fiscal 2009. The increase was largely due to higher debt levels. With this new debts issued, the interest expenses are expected to go higher.
Ferrellgas Partners reported a loss of 58 cents per unit for the fourth quarter of 2010; however, on a full-year basis, the partnership reported a profit of 47 cents per unit.
The Zacks Consensus Estimates for fiscal year 2011 and fiscal year 2012 are 94 cents per unit and $1.06 per unit, respectively.
Ferrellgas currently retains a Zacks #4 Rank (short-term Sell rating). Although the partnership has grown through acquisition, its highly levered balance sheet and lack of near-term catalysts prompt us to maintain a long-term Neutral rating on the stock.
Based in Overland Park, Kansas, Ferrellgas Partners LP distributes and sells propane and related equipment primarily in the United States.
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