Alternative Investments: NGL Energy Partners LP Enters New Loan Facility

NGL Energy Partners LP (NGL) announced that it has entered into a new $250 million term loan facility with certain funds and accounts managed by affiliates of Apollo Global Management (APO). The loan will be used to refinance its existing $250 million bridge term loan facility that was established in July 2019 to finance a portion of the acquisition of Mesquite Disposals Unlimited LLC.

The new term loan has a three-year maturity and is callable after two years at par. It bears interest at LIBOR plus 8.00%, subject to a 1.50% LIBOR floor, and includes similar financial covenants as the Partnership’s existing revolving credit facility, among other terms. The loan is secured by a first lien interest in the Partnership’s assets.

NGL Energy Partners LP on Loan Facility

NGL Energy Partners LP engages in the crude oil logistics, water solutions, liquids, and refined products and renewables businesses. The Master Limited Partnership has sold off sharply as oil and gas prices declined earlier this year. The markets seem to be ignoring the fact that the company recently reported fourth-quarter and record Fiscal 2020 earnings came in at the high-end of our guidance range.

Total debt outstanding at NGL Energy was $3.15 billion at March 31, 2020, compared to $2.16 billion at March 31, 2019, an increase of $989 million. The increase is due primarily to the Mesquite and Hillstone acquisitions and the funding of certain capital expenditures, which was partially offset by a reduction in working capital borrowings using proceeds from the sale of TransMontaigne Product Services, LLC and the Gas Blending and Mid-Con businesses. Management has been working to reduce debt in recent quarters. They have reduced their leverage from 5.0 times last quarter to 4.86 times at the end of the first quarter.

Insiders have been very bullish and were large buyers of the stock during the initial price decline in March.

Wilson Handler and Andy Safran, of Apollo’s Natural Resources Private Equity business, commented on the refinancing saying in a statement. “We are pleased to provide this new facility to NGL, which has built a diversified midstream company with a premier U.S. water infrastructure franchise. With its high-quality assets, customer base and management team led by CEO Mike Krimbill, we believe NGL is well-positioned for future success.”

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