01—Abstract
Summary
Summary of the 8-K filed January 11, 2024. Cited figures are marked; the original filing is the authoritative source.
On January 10, 2024, Energy Transfer LP (NYSE: ET) priced two concurrent debt offerings totaling $2.85 billiona gross: $1.25 billion of 5.550% senior notes due 2034 and $1.75 billion of 5.950% senior notes due 2054 (priced at 99.660% and 99.523% of face, respectively), plus $800 million of 8.000% fixed-to-fixed reset rate junior subordinated notes due 2054 priced at par.
Settlement is expected January 25, 2024, and the two offerings are not conditioned on each other's closing. The filing indicates expected net proceeds of approximately $2.964 billionb from the senior notes and $792 million from the junior subordinated notes, before offering expenses. The proceeds are earmarked primarily to refinance existing indebtedness, including borrowings under the revolving credit facility, and to redeem the Series C and Series D fixed-to-floating rate preferred units, with the Series E preferred units to be redeemed once callable on May 15, 2024.
Notice of redemption for Series C and D was issued, with redemption prices of $25.607454c and $25.619877 per unit, respectively, payable on February 9, 2024. Remaining proceeds would go to general partnership purposes. For investors, the transaction is a liability-management exercise: it replaces higher-cost preferred equity and revolver debt with longer-dated notes, while extending maturities and adding a long-dated junior subordinated layer.
The new debt carries a 5.55%d to 5.95% coupon on senior notes and an 8.00% coupon on the junior notes, so the net effect on interest expense and the cost of capital depends on the coupons on the retired preferred units and revolver borrowings, which the filing does not quantify. Underwriters and their affiliates are also lenders under the revolver and holders of the preferred units, which means they receive part of the proceeds through those repayments and redemptions.
02—Key points
Key Highlights
- Total gross issuance of $3.05 billion across three tranches: $1.25B 5.550% senior notes due 2034, $1.75B 5.950% senior notes due 2054, and $800M 8.000% fixed-to-fixed reset junior subordinated notes due 2054.
- Pricing was 99.660% (2034 notes), 99.523% (2054 notes), and 100.000% (junior subordinated notes) of face value, with expected settlement on January 25, 2024.
- Expected net proceeds of approximately $2.964B (senior notes) and $792M (junior subordinated notes) before offering expenses.
- Proceeds will refinance existing debt, including revolver borrowings, redeem Series C and D preferred units, and fund general partnership purposes.
- Series C ($25.607454) and Series D ($25.619877) preferred units called for redemption on February 9, 2024; Series E units to be redeemed on or after May 15, 2024.
- Offerings were made under an effective Form S-3 shelf (File No. 333-256668) and the two tranches close independently of one another.
- Several underwriters and their affiliates are revolver lenders and preferred unitholders, so they will receive a portion of the net proceeds through these repayments and redemptions.
03—Questions
Frequently Asked Questions
Why is Energy Transfer issuing these notes?
The company is refinancing existing indebtedness, including revolving credit facility borrowings, and redeeming its Series C, D, and E fixed-to-floating rate preferred units. Any remaining proceeds will support general partnership purposes.
What are the key terms of the new debt?
The offering includes $1.25B of 5.550% senior notes due 2034, $1.75B of 5.950% senior notes due 2054, and $800M of 8.000% fixed-to-fixed reset rate junior subordinated notes due 2054. The senior notes were priced at 99.660% and 99.523% of face value, and the junior subordinated notes at par.
When will the offerings close and are they linked?
Both offerings are expected to settle on January 25, 2024, subject to customary closing conditions. Neither offering is conditioned on the other closing.
What happens to the preferred units being redeemed?
Series C and D units are being redeemed on February 9, 2024 at $25.607454 and $25.619877 per unit, respectively, which equals $25.00 plus accrued unpaid distributions. Series E units will be redeemed on or after May 15, 2024, with notice to be issued later.
Do the underwriters have any conflicts of interest?
Yes. The underwriters' affiliates are lenders under the revolving credit facility and hold Series C, D, or E preferred units. They will therefore receive underwriting commissions and a share of the net proceeds through the revolver repayment and preferred unit redemptions.
04—Continue