Targa Resource Partners Investor Presentation

Strong midstream energy MLP Targa Resource Partners (NYSE:NGLS) has recently released a investor presentation.

NGLS has a high yield 9% fixed-to-floating rate preferred outstanding (NGLS-A) which pays a monthly dividend. Currently the issue is priced at $26.30 as the company is a strong master limited partnership. The issue is redeemable 11/2020 and shouldn’t be bought unless the price sets back a bunch (like a dollar). We believe there are high odds this issue will be redeemed as it has a spread of 7.71% (plus 1 month Libor) which will put the coupon at 10% or greater (with todays Libor rates).

The presentation can be seen here.

6 thoughts on “Targa Resource Partners Investor Presentation”

  1. NGLS-A is an almost sure call in 21 months. The company just raised 1.5 billion in 8 & 10-year notes at 6.5-6.875%, so hanging on to a 10.2% floater won’t make sense. Think of it as a 21-month CD with a 6.3% YTM. If it drops Tim’s buck it’s 8.7%.

    At 6.3%, I have no interest. At 8.7%, maybe.

    1. I agree totally with your thinking, but one never fully knows on these things, so I suspect the safe play is one being comfortable if it stayed outstanding. Look at NuStar. They have 2027 bond debt with 6.1% YTM yet they are leaving a 9.5% subordinated debt outstanding…Cap stacks, covenents, debt/capital ratios, ability to redeem reissue, etc, etc all come into play. And as a general rule, above my pay grade. So for me, I generally always assume a perpetual truly is that in the back of my mind, even if the trade is an assumption for a redemption notice.

      1. Somewhat similar to the NSS analysis. NS COULD call it, but they count it as equity, so it looks better. Same thing here?

        1. Yes, but they dont get to count it as equity, the creditors and credit agencies are giving NuStar a pass here as they are allowing it. And seniors dont care as its below them anyways. It still is debt, albeit lowly subordinated debt. I cant make any opinion on the issue per se. My only thought was I usually go conservative and assume the worst case that it stays perpetual to determine my interest level, as also as Bob mentioned, and do the math on a YTC also.

  2. Tim, I was wondering about your rating of C on this issue. I know the ratings are somewhat subjective, but have you defined your ratings somewhere? Is C your lowest rating? Thanks

    1. I to would really appreciate an explanation of your rating system Tim. Time permitting of course.

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