Energy Transfer LP Announces Pricing of $3 Billion of Senior Notes and $800 Million of Fixed-to-Fixed Reset Rate Junior Subordinated Notes

Rhea-AI Summary

Energy Transfer LP (ET) announces the pricing of its concurrent offerings of senior notes and junior subordinated notes, expected to settle on January 25, 2024. The company plans to use the net proceeds of approximately $2.964 billion from the senior notes offering and $792 million from the junior subordinated notes offering to refinance existing indebtedness, including borrowings under its revolving credit facility, to redeem all of its outstanding Series C, D, and E preferred units, and for general partnership purposes.

Financial Analyst

Energy Transfer LP's announcement of pricing its senior notes and junior subordinated notes offerings is a strategic financial maneuver aimed at optimizing its capital structure. By securing $1.25 billion and $1.75 billion in senior notes with interest rates of 5.550% and 5.950% respectively and $800 million in junior subordinated notes at an 8.000% rate, the company is proactively managing its debt profile and interest obligations. This action indicates a reshuffling of debt with potentially lower interest rates compared to existing obligations, which could improve interest coverage ratios and reduce financial risk.

The use of proceeds to refinance existing indebtedness and redeem preferred units suggests a focus on cost management and balance sheet strength. Investors should note the long-term nature of these notes, maturing in 2034 and 2054, which locks in current interest rates but also commits the company to long-term cash outflows. The redemption of Series C, D and E preferred units will affect preferred shareholders, who may need to reassess the yield and risk profiles of their investments in light of these changes.

Debt Capital Markets Expert

In the context of debt issuance, the pricing of Energy Transfer's senior and junior subordinated notes is competitive given the current interest rate environment. The offered rates reflect the company's creditworthiness and the market's appetite for energy sector debt instruments. Senior notes typically attract a lower interest rate due to their higher ranking in a company's capital structure, which provides greater security to investors in case of default. The junior subordinated notes carry a higher rate to compensate for the additional risk, as they are subordinate to other forms of debt.

Investors should consider the implications of the fixed-to-fixed reset rate feature on the junior subordinated notes, which allows for a reset of the interest rate after a predetermined period, based on prevailing market rates. This could introduce variability in future interest payments, potentially affecting the company's cash flow predictability. Moreover, the pricing close to face value indicates a balanced market perception of risk and return for these securities.

Market Research Analyst

Energy Transfer's actions must be analyzed within the broader energy infrastructure industry, where companies often carry significant levels of debt due to the capital-intensive nature of the business. The decision to refinance and redeem existing securities can be seen as a response to the interest rate environment and the company's operational cash flow capabilities. The strategic use of capital for these purposes could signal confidence in the company's future revenue streams from its diversified asset base across major U.S. production basins.

Stakeholders should monitor how this capital restructuring aligns with industry norms. Energy Transfer's extensive pipeline network and energy infrastructure assets place it in a position to potentially benefit from increasing energy demand and the need for modernized infrastructure. However, the long-term debt could also constrain the company's flexibility to invest in new technologies or pivot in response to shifts in the energy market, such as the transition to renewable energy sources.

DALLAS--(BUSINESS WIRE)-- Energy Transfer LP (NYSE: ET) today announced the pricing of its concurrent offerings of $1.25 billion aggregate principal amount of 5.550% senior notes due 2034 and $1.75 billion aggregate principal amount of 5.950% senior notes due 2054 (together, the “senior notes”) and $800 million aggregate principal amount of 8.000% fixed-to-fixed reset rate junior subordinated notes due 2054 (the “junior subordinated notes”) at a price to the public of 99.660%, 99.523%, and 100.000%, respectively, of their face value.

The sale of the senior notes and the junior subordinated notes are expected to settle on January 25, 2024, subject to the satisfaction of customary closing conditions. The settlement of the senior notes is not conditioned on the settlement of the junior subordinated notes, and the settlement of the junior subordinated notes is not conditioned on the settlement of the senior notes. Energy Transfer intends to use the net proceeds of approximately $2.964 billion (before offering expenses) from the senior notes offering and $792 million (before offering expenses) from the junior subordinated notes offering to refinance existing indebtedness, including borrowings under its revolving credit facility, to redeem all of its outstanding Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (the “Series C preferred units”), Series D Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (the “Series D preferred units”) and Series E Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (the “Series E preferred units” and, together with the Series C preferred units and the Series D preferred units, the “select preferred units”), and for general partnership purposes. This press release does not constitute a notice of redemption with respect to, or an offer to purchase, any indebtedness or select preferred units.

Following the pricing of the concurrent offerings, Energy Transfer issued a notice to redeem all of its outstanding (i) Series C preferred units at a redemption price per unit of $25.607454, which is equal to $25.00 per unit plus unpaid distributions to, but excluding, February 9, 2024 (the “Redemption Date”) and (ii) Series D preferred units at a redemption price per unit of $25.619877, which is equal to $25.00 per unit plus unpaid distributions to, but excluding, the Redemption Date. Notice of redemption with respect to the Series E preferred units will be issued at a later date and such units will be redeemed once redeemable on May 15, 2024.

Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., Deutsche Bank Securities Inc., PNC Capital Markets LLC and RBC Capital Markets, LLC are acting as joint book-running managers for the senior notes offering and the junior subordinated notes offering.

The concurrent offerings of the senior notes and the junior subordinated notes are being made pursuant to an effective shelf registration statement and prospectus filed by Energy Transfer with the Securities and Exchange Commission (“SEC”). The concurrent offerings of the senior notes and the junior subordinated notes may each be made only by means of a prospectus and related prospectus supplement meeting the requirements of Section 10 of the Securities Act of 1933, as amended, copies of which may be obtained for each of the senior notes and the junior subordinated notes, respectively, from the following addresses:

Citigroup Global Markets Inc. c/o Broadridge Financial Solutions 1155 Long Island Avenue Edgewood, NY 11717 Telephone: (800) 831-9146 Email: prospectus@citi.com   Deutsche Bank Securities Inc. Attention: Prospectus Group 1 Columbus Circle New York, NY 10019 Telephone: (800) 503-4611 Email: prospectus.CPDG@db.com   RBC Capital Markets, LLC Brookfield Place 200 Vesey Street, 8th Floor New York, NY 10281 Telephone: (866) 375-6829 Email: TMGUS@rbccm.com Attention: DCM Transaction Management

Credit Agricole Securities (USA) Inc. 1301 Avenue of the Americas New York, NY 10019 Attention: Debt Capital Markets Telephone: (866) 807-6030   PNC Capital Markets LLC 300 Fifth Avenue, 10th Floor Pittsburgh, PA 15222 Attention: Debt Capital Markets, Securities Settlement Telephone: (855) 881-0697 Email: pnccmprospectus@pnc.com

You may also obtain these documents for free when they are available by visiting EDGAR on the SEC website at www.sec.gov.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy the securities described herein, nor shall there be any sale of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

Energy Transfer LP owns and operates one of the largest and most diversified portfolios of energy assets in the United States, with more than 125,000 miles of pipeline and associated energy infrastructure. Energy Transfer’s strategic network spans 44 states with assets in all of the major U.S. production basins. Energy Transfer is a publicly traded limited partnership with core operations that include complementary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquids (“NGL”) and refined product transportation and terminalling assets; and NGL fractionation. Energy Transfer also owns Lake Charles LNG Company, as well as the general partner interests, the incentive distribution rights and approximately 34% of the outstanding common units of Sunoco LP (NYSE: SUN), and the general partner interests and approximately 47% of the outstanding common units of USA Compression Partners, LP (NYSE: USAC).

Forward-Looking Statements

Statements about the offering may be forward-looking statements. Forward-looking statements can be identified by words such as “anticipates,” “believes,” “intends,” “projects,” “plans,” “expects,” “continues,” “estimates,” “goals,” “forecasts,” “may,” “will” and other similar expressions. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and factors, many of which are outside the control of Energy Transfer, and a variety of risks that could cause results to differ materially from those expected by management of Energy Transfer. Important information about issues that could cause actual results to differ materially from those expected by management of Energy Transfer can be found in Energy Transfer’s public periodic filings with the SEC, including its Annual Report on Form 10-K. Energy Transfer undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240110912733/en/

Energy Transfer LP

Investor Relations:

Bill Baerg, Brent Ratliff, Lyndsay Hannah, 214-981-0795

Media Relations:

Media@energytransfer.com

214-840-5820

Source: Energy Transfer LP

FAQ

What are the details of Energy Transfer LP's recent offerings?

Energy Transfer LP (ET) has announced the pricing of its concurrent offerings of $1.25 billion aggregate principal amount of 5.550% senior notes due 2034 and $1.75 billion aggregate principal amount of 5.950% senior notes due 2054, along with $800 million aggregate principal amount of 8.000% fixed-to-fixed reset rate junior subordinated notes due 2054.

When are the senior notes and junior subordinated notes expected to settle?

The settlement of the senior notes and the junior subordinated notes is expected to occur on January 25, 2024, subject to the satisfaction of customary closing conditions.

How does Energy Transfer LP plan to utilize the net proceeds from the offerings?

Energy Transfer intends to use the net proceeds of approximately $2.964 billion from the senior notes offering and $792 million from the junior subordinated notes offering to refinance existing indebtedness, including borrowings under its revolving credit facility, to redeem all of its outstanding Series C, D, and E preferred units, and for general partnership purposes.

Who are the joint book-running managers for the senior notes offering and the junior subordinated notes offering?

Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., Deutsche Bank Securities Inc., PNC Capital Markets LLC, and RBC Capital Markets, LLC are acting as joint book-running managers for the offerings.

How can interested parties obtain the prospectus and related documents for the offerings?

Interested parties can obtain the prospectus and related documents for the offerings from various addresses and contact details provided in the press release, or for free when they are available by visiting EDGAR on the SEC website at www.sec.gov.