Ferrellgas Partners L.P. (FGP) announced that together with its unit Ferrellgas Partners Finance Corp. it will redeem for cash $98 million aggregate principal amount of their outstanding 8.625% Senior Notes due 2020.
The partnership has fixed the redemption date on March 28, 2011. For each $1,000 principal amount of notes, the holders will receive a redemption price of $1086.25 and any accrued and unpaid interest until March 28, 2011 from the partnership.
Last week, Ferrellgas had commenced a public offering of 4.4 million common units priced at $26.27 per unit, which closed on March 18, 2011. The partnership said it will fund the redemption with a portion of proceeds received from the units offering.
The partnership has outstanding $280.0 million principal amount of 8.625% senior notes due in fiscal 2020. The terms governing the senior notes will allow Ferrellgas to redeem only 35% or $98 million of the principal amount of the notes issued from the proceeds of one or more equity offerings. The senior notes will be redeemed on a pro rata basis.
During the second quarter of fiscal 2011, the partnership issued $500.0 million 6.50% senior notes due 2021 and used the proceeds to redeem all of its $450.0 million 6.75% fixed rate senior notes due 2014 and the rest to reduce outstanding indebtedness under the credit facility. The redemption allowed the partnership to lengthen the maturity of its senior indebtedness and lower the coupon rate.
The partnership’s long-term debt was $1.14 billion and interest expenses were $26.4 million at the end of the second quarter of fiscal 2011. The partial redemption will lower both debt levels and interest expenses as we move forward.
Ferrellgas Partners retains a Zacks #5 Rank (short-term Strong Sell rating). We have recently lowered our long-term rating on the partnership to Underperform from Neutral being disappointed by its inability to grow the distribution rate in more than a decade along with its highly levered balance sheet.
Based in Overland Park, Kansas, Ferrellgas Partners L.P. engages in the distribution and sale of propane and related equipment primarily in the United States. The net margin of the partnership was lower than its peers AmeriGas Partners L.P. (APU), Energy Transfer Partners L.P. (ETP) and Suburban Propane Partners L.P. (SPH) in the trailing twelve months.
AMERIGAS PARTNR (APU): Free Stock Analysis Report
ENERGY TRAN PTR (ETP): Free Stock Analysis Report
FERRELLGAS -LP (FGP): Free Stock Analysis Report
SUBURB PROPANE (SPH): Free Stock Analysis Report
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