HOUSTON, TX – Plains GP Holdings (NASDAQ:PAGP) LP, a pipeline operator, announced Thursday the completion of a significant financial transaction involving its consolidated subsidiaries, Plains All American Pipeline, L.P. ("PAA") and PAA Finance Corp. The companies have successfully issued $650 million in senior unsecured notes with an interest rate of 5.700%, set to mature on September 15, 2034.
The offering, which was finalized on Thursday, is part of an indenture agreement with U.S. Bank Trust Company, National Association, acting as the trustee. These notes will rank equally with PAA's current and future senior unsecured debt and will take precedence over any future subordinated debt. However, they will be effectively subordinate to all secured debt to the extent of the collateral's value.
Interest payments on the notes are scheduled semi-annually, with the first payment due on March 15, 2025. The company reserves the right to redeem the notes, in whole or in part, at specified redemption prices before the maturity date.
The indenture includes customary covenants that limit the ability of PAA and certain subsidiaries to engage in specific activities, such as sale and leaseback transactions, incurring liens, and merging or consolidating with other companies. These covenants are subject to a number of important exceptions and qualifications.
The agreement also outlines events of default, which include non-payment of interest or principal, failure to comply with obligations under the indenture, and certain bankruptcy or insolvency events. In such cases, the trustee or the holders of at least 25% of the principal amount of the outstanding notes may demand immediate payment of the principal, premium, and accrued interest.
This financial move is part of Plains GP Holdings' broader strategy to manage its capital structure and finance its operations. The company's Class A shares are traded on the Nasdaq under the ticker PAGP.
The transaction details are provided in the prospectus supplement dated June 17, 2024. This news is based on a press release statement and the complete terms of the notes and the indenture are included in the Supplemental Indenture filed with the SEC.
In other recent news, Plains All American Pipeline and Plains GP Holdings announced a steady outlook for 2024 during their First Quarter Earnings Conference Call. The company reported an adjusted EBITDA of $718 million for the first quarter and reaffirmed its 2024 EBITDA forecast. Recent developments include the acquisition of an additional 10% in Saddlehorn Pipeline Company and Mid-Con Terminal asset, which is expected to generate returns in line with the company's return threshold.
The company's focus remains on generating consistent cash flow and returning capital to investors. Plains All American anticipates a weighted-average contract duration of approximately five years for its Permian portfolio, enhancing its stability. Despite the expectation of flat performance in 2026 and upcoming maintenance on the Wink-to-Webster pipeline, the outlook for Plains All American's Canadian assets and Permian production growth remains positive.
The company is actively monitoring hedging opportunities and focusing on fee-based revenue. Plains All American expects Permian production growth to be between 200,000 to 300,000 barrels per day by the end of 2024. These recent developments highlight Plains All American's strategic direction towards long-term consistent cash flow and asset optimization.
InvestingPro Insights
Plains GP Holdings (PAGP) has recently demonstrated a commitment to shareholder returns, maintaining dividend payments for 11 consecutive years and offering a robust dividend yield of 6.83% as of the last twelve months up to Q1 2024. This dedication to consistent dividends is particularly noteworthy for income-focused investors. Additionally, the stock's low price volatility suggests a level of stability that may appeal to risk-averse shareholders.
In terms of financial health, PAGP's market capitalization stands at $4.33 billion, with a Price/Earnings (P/E) ratio of 21.36, reflecting investor expectations of future profitability. This is slightly above the adjusted P/E ratio for the last twelve months as of Q1 2024, which is 21.92. Moreover, the company's significant revenue of $48.37 billion, despite a decline of 13.62% in the last twelve months as of Q1 2024, underscores its prominent position in the Oil, Gas & Consumable Fuels industry.
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