Why High Leverage Is Not a Concern for MPLX
MPLX’s outstanding debt
MPLX (MPLX) has seen a sharp rise in total outstanding debt over the first two quarters of 2017. It has increased from $4.4 billion at the end of 2016 to $6.7 billion as of June 30, 2017, a rise of 50.7%. The huge increase in debt is due to the $2.0 billion dropdown completed in March 2017 and other acquisitions.
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MPLX financed the second dropdown with 60.0% equity ($630.0 million) and 40.0% debt ($420.0 million). The debt portion came from draws on MPLX’s ~$2.3 billion credit facility. It had $2.8 billion of liquidity as of June 30, 2017.
MPLX’s net debt-to-adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) rose from 3.1x at the end of 2016 to 4.0x as of June 30, 2017. However, its current leverage is still within the industry standard. The recent dropdown could likely drive its leverage higher in the short term.
In the next part, we’ll look at MPLX’s distribution growth plans and yield.