ATLANTA, Ga. (April 15, 2011) - Buckeye Partners LP (NYSE: BPL) has been underperforming the pipeline limited partnership market for months, and disappointment hit the tipping point on April 14 when disgruntled unitholders dumped more than 6.1 million units, driving down the long-flagging unit price of BPL securities.
According to “Energy Pipeline News,” a daily newsletter that covers the pipeline master limited partnership market, the disappointment in the security’s performance culminated when Buckeye announced the offering of at least 4.8 million new limited partnership units priced at a 3.3 percent discount to BPL’s April 13 closing price.
Existing units fell 2.7 percent to $59.75 in premarket trading on April 14. By the market close, Buckeye units were at $60.35, down $1.06 (1.73 percent) after hitting an intraday low of $59.89. Much of the dumping of 6.1 million units occurred during the final minutes of trading. The final-minutes selloff was attributed to programmed trading.
Through April 13’s close, Buckeye units were down 8.1 percent this year.
The new units were priced at $59.41 each. The underwriters have been granted an option to purchase up to 720,000 additional LP Units.
Barclays Capital, Citi, J.P. Morgan, Morgan Stanley and Wells Fargo Securities are acting as joint book-running managers of the new BPL unit offering. Deutsche Bank Securities and Credit Suisse are acting as the co-managers of the LP unit offering.
The operator of petroleum products transmission, gas storage and fuel distribution businesses plans said it planned to use the proceeds from the new float to reduce the indebtedness outstanding under its revolving credit facility.
The offering is expected to increase the number of units outstanding by about six percent. The company also sold units in January.
Buckeye Partners, which has expanded greatly through acquisitions in recent months, in February reported that its fourth-quarter profit fell by half as effects of the expansion masked rising revenue across most of its businesses.
BPL closed its merger with sister company Buckeye GP Holdings LP and acquired a marine terminal in Puerto Rico late last year. In January, it acquired an 80 percent interest in Bahamas Oil Refining Co. and agreed to pick up the remaining stake in a deal valuing the target at $1.7 billion. Last month, it agreed to acquire refined petroleum products terminals and pipeline assets for $225 million from BP PLC.
BPL is included in the three model portfolios run by “Energy Pipeline News.” The three portfolios had returns in 2010 of 28.9 percent, 29.1 percent and 74.8 percent respectively. The 74.8 percent return was in the leveraged model portfolio.