Giant MLP Energy Transfer Partners Prices Fixed-to-Floating Preferred

As anticipated and noted by readers Energy Transfer Partners (NYSE:ETP) has priced their new fixed-to-floating rate preferred with an initial coupon of 7.625%.

The coupon will be fixed until 2023 after which it will float at a rate of 3 month Libor plus a spread of 4.738%.  While the initial coupon is fine the spread on the floating portion could be a bit higher–but it is what it is.

The issue will trade with the permanent ticker of ETP-D.  The issue will start trading today under the temporary OTC Grey Market ticker of ETPZF.

The pricing term sheet for the issue can be found here.

We are considering this issue for a small position in both personal portfolios and in the High Yield Portfolio.

We need to perform a bit more due diligence and read what readers have to say on the issue prior to purchase.

7 thoughts on “Giant MLP Energy Transfer Partners Prices Fixed-to-Floating Preferred”

  1. Pretty unhappy with ETP from a shareholder’s point of view. I brought issue ETP-C (one of my few non-investment grade purchases which I limit to 10% of my portfolio). This issue just came out on 4-18-18. Well the terms of ETP-D seems much better just 3 months later and the market has not moved much in terms of rates. As a shareholder, I just got thrown under the bus as ETP-C will be worth much less. All investors of ETP-C will get the same. Not very good to do to your investors. So, I don’t like what they did to existing investors.

    Let’s see if we can find out what they are doing with the 2nd round of preferreds but i decide on ETP-D

    1. Hi Steve–I was thinking the same thing–in a few short months the coupon moves 3/8%?? Maybe the new issue will go to 26 and the old issue will move back to 25.60.

      I have a small order in at a lowball price.

      1. So what are they doing with the proceeds? The same as they did with Class C. I really don’t understand what they are doing. Paying off a weighted average revolving credit of 2.87% with a much more expensive preferred security rate. Why would they do this? I saw that with C and invested anyway. I took a 0.9% loss of series C and I’ll move on to a different firm unless I see a real lowball price

        From their document:

        We will receive net proceeds of approximately $ million from the sale of the Series D Preferred Units offered hereby after deducting the underwriting discounts but before offering expenses. We intend to use the net proceeds from this offering, including the net proceeds from any exercise of the underwriters’ option to purchase additional Series D Preferred Units, to repay amounts outstanding under our revolving credit facility and for general partnership purposes.

        As of June 30, 2018, there was $1.2 billion of outstanding borrowings at a weighted average interest rate of 2.87% under our revolving credit facility (all of which was commercial paper) and no outstanding borrowings under our 364-day facility. Our revolving credit facility matures in December 2022 and our 364-day facility matures in November 2018.

  2. Hi Tim,

    Thank you so much for your timely post. I own quite a few ETP commons and actually bought a few more shares on non IRA account in June underwater. MorningStar Analyst wrote an article back in May 10, 2018 reaffirming “Fair Market Value = $22 per share. The article is available on Schwab.com in an abbreviated form. ETP has its volatile history, bought following paid subscription by Rida Morwa et. al. Today, there is an article on SA describing some of the challenges that the Company are faced with:
    https://seekingalpha.com/article/4187669-energy-transfer-bets-louisianas-downstream-industry?ifp=0
    Looks to me that it should have upside if these hurdles can be resolved.
    I sold half of my ETP commons and placed a limit buy order 420 shares of ETPZF at $24.81, with proceeds of sales of ETP common and some money from interests/dividends in my IRA account. This is a partnership, so please be careful NOT to exceed the $1,000 limit to avoid the awful Unrelated business income tax. For non retirement account, I believe that the Company will issue Schedule K-1.

    1. Be careful with MLPs in IRAs. I had one MLP that reported 100% of its distribution as UBTI in 2017. It doesn’t take much to get to the limit. Personally, I would never do it.

      1. Hi Bob–bought 100 measly shares so will be ok with it. I believe it is the only MLP I currently have in the IRA. But of course for one committed to owning much in the way of MLPs I would be cautious as well in a IRA

  3. Hi Tim! I had heard that LIBOR was being phased out. How will this affect the floating rate?

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