Global Partners Prices New F-to-F Preferred Units

Large MLP Global Partners (NYSE:GLP) has priced a new fixed-to-floating rate issue with an initial coupon of 9.75%—WOW.  After 8/15/2023 the issue will trade with a coupon of 3 month Libor plus a spread of 6.774%.  This coupon is much higher than we thought it would be and one wonders why it is this high.

Regardless we will do some more due diligence and consider a purchase of this issue.

Thus far no OTC Grey market has been announced.

The issue is cumulative and the distributions will NOT be qualified distributions.  A K-1 will be issued for this issue at tax time.

The SEC pricing term sheet can be found here.

20 thoughts on “Global Partners Prices New F-to-F Preferred Units”

  1. Tim,
    Would love to hear your opinion after you look further into GPL”s numbers. Like you, my first take is this new issue has an eye catching coupon, and, to this skeptical old investor, my first take is there must be a problem with GPL. Of note, it appears that their last quarter’s numbers were reasonable to my non accountant eyes, if not showing improvement, plus GLP just announced an increase in the common dividend, so they must be feeling pretty good about their current financials.

    1. Yes Don – that coupon has me a bit puzzled, but NuStar and NGL Energy have issues 9% and each is trading under $25. Simply might be their business model–a lot of the convenience stores etc in the mix.

      1. i agree but since I am not as experienced, I didn’t immediately say this. NuStar did a 9% coupon late last year and has a credit rating of BA3 just below investment grade. If GPL has a B1 credit rating (TBD), then the 9.75% isn’t so far out of line. Note the 52 week low on Nustar C was 22.31. High was 26.97. It immediately spiked then dropped

        Never understood why, right now trading at 24.82

        1. Steve NuStar just did a private placement preferred with higher yield than the last public IPO. They are papering over their financial problems with a boatload of preferreds which are rated B1. But, I personally am in with NSS.

        2. Steve–I think you are reasoanbly correct in your thinking. I think that these more marginal large MLPs are reasonably safe over the long term–but in the short term when they disappoint they can cause investor indigestion. I think the volatility in these can be chalked up to nervous nellies that get too wrapped up in short term results.

          Like Grid I have been in and out of the NuStar baby bonds–NSS for quite some time.

    1. John, I have scanned enough also, to take a small bite of this apple myself. There finances are above my ability. If you got this from their website, and you are registered, you may want Tim to delete this as they get real nasty about having their info copy and pasted.

      1. Grid,
        Thanks. Perhaps my risk tolerance is between you and Lord Xot. Deferred tax 50 million USD. Large cap. Commons pay huge dividends. No impairment. I intend to buy between 400 – 600 shares. Compared to DCP-B, issuer DCP based on Moody ratings, this one is about the same, perhaps a hair better. Or CAI-A. I believe that they just want to pay off the short term loan to protect credit rating or covenance, I am guessing. Yes, Bruce Miller never touch this thing.

        1. Im thinking about same size. Sold off part of my DCP-B on its run up to have enough powder to buy this. Although I can read balance sheets, I trust the anecdotal such as a relative strong oil market, trading patterns, and bond pricing way more and those make it appear “safe enough” for me near term. DCP though does have strong sponsorship from high quality “parents”. In fact they are willing to kick in “IDR givebacks” through 2019, but it hasnt been necessary for them to do so.

        1. I might be a nervous nelly, but when I signed up to read their info, and read disclosures, I thought I would get thrown in jail just reading it, lol.

          1. Hi Tim and Grid,
            Thanks for your taking care for me. I realize that this is a open WEB. Some in Doug Le Du’s subscription quotes Moody often. I will be more careful from now on.

  2. John, until maybe 6 months ago, what you did was fine. You could just google a credit rating and a Moodys article would pop up and it could all be used and copied and hyperlinked. But then they went on total lock down mode for some reason, and you have to go through their portal.

    1. Yes John–it is not a problem–in fact last night I almost did a copy and paste of the same info-then pulled back.

      I am not going to worry too much with the measly 4000 monthly visitors we have now–just a tiny ant to Moodys so it isn’t likely they would spend much lawyer time on us.

  3. Not too much interest on this one, low volume. Then I am a sucker for 00. Picked up 200 shares at FIDO @ $24.80 and another 240 shares at Vanguard brokerage @ $24.81. Both IRA because I sold off all my ETP which gapped up after ETE merging with its subsidiary Partnership of ETP. Rida and another Canadian CPA with CPA wrote two tongue in cheek articles on ETP and ETE.
    At 11 a.m. EDT, FIDO Active Trade Pro shows 122,930 sold. With BUY of 1,000 x 100? BID and 100 x 100? shares ASK at $24.82. I am a little nervous if I bid more shares, say 400 shares MAX at $24.80. I paid too much for the KEY-J and CODI-B too.

    1. John, its early…A half million traded hands yesterday to the “close friends” when it wasnt available to Joe public. It took a few days for Chicken Soup to get going and that outfit is 40 cents over par now. Many still cant trade it yet IB doesnt allow pre ticker trading I know. Dont get too worried about Level 2 trading, as it is a totally bogus manipulative viewpoint. Many shares are hiding or programmed to only show 100 lot dispersements with more hiding.

    2. Stay with me on this John…I think the thirst for crap high yield is strong. Im hoping for another DCP-B play. I sold my other half lot today near $25.90 and bought near par. Basically when it was all done, I flipped most my DCP-B for this issue. Just have to be patient and wait for them to get all $67 million out (including greenshoe) and see if it heads towards par plus divi in a few months like DCP-B did.
      Kind of a good day…Sold 100 of my WELPM at 119.99 after collecting a divi and holding 2 months after buying at $113. Sold 200 of my ASRVP at 28.71 yesterday and bought 300 total more for the collection at 27.90 and 27.95.
      Cant recomend for anyone with sound mind to play with this one do to huge premium over par and way past call, but if I get smacked on a call thatis fine as this one has been a middle class gold mine flipper for me through the years.

    3. John, are you trusting me and staying strong here? Its all working out fine. Just remember POC Chicken Soup is above par. This is a real company! And I aint know Rida Morwa yield chasing nut. My biggest holding is AILLL with a ~100 times dividend coverage and I am not losing sleep on buying this issue under par. GLPRU is going to be fine for the near term future.

  4. GLP has bonds due 7/15/2022 yielding app. 7%. It’s nice to have a maturity date. Tim, any thoughts about the bonds vs. the preferred?

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