Aftermonths of gloom, the capital markets may be opening a crack for the strongestmidstream operators.
OnApril 4, Spectra Energy Corplaunched a stock offering that it plansto use to buy Spectra EnergyPartners LP common units, EnterpriseProducts Partners LP priced$1.25 billion of debt and noted that it sold nearly $1.6 billion of common units in the firstquarter and Sunoco LPupsized a recentlylaunched private offering.
Collectively,the deals show debt markets opening up, equity markets being available for thehigh quality companies and partnerships and an ongoing use of alternativefinancing, Deutsche Bank analysts said in an April 5 note. But equity marketsremain closed for most MLPs, they noted.
DeutscheBank's natural gas experts expected offerings to continue as long as theAlerian MLP Index holds on to the gains made in recent weeks. By the first ofApril, the Alerian MLP Index has risen nearly 30% since a Feb. 11 low. Over thesame time, the S&P 500 had clocked approximately a 13% increase.
Asto the specific transactions, Deutsche Bank's analysts applauded the pricing ofthe Spectra moves and said they help secure 2016 to 2018 capital plans. ForEnterprise, the analysts said the notes were priced attractively compared to aFebruary debt issuancefrom Magellan Midstream PartnersLP. Magellan's notes were priced at 5%, while Enterprise's suite ofsenior notes all came in below 5%.
EduardoSeda, an industry analyst at Ladenburg Thalmann, expected midstream businessesto continue to test the debt market and steer away from issuing equity, givenhow far unit prices have collapsed in the past year.
"ManyMLP unit prices are still significantly down and are no longer a viablecurrency for them," Seda said in an interview. "So,[MLPs] would [rather] rely on the debt market, which is still open, even if itmay be more expensive."