uploads///BPL Net debt to EBITDA

Key Analysis of Buckeye Partners’ Leverage Situation


Jan. 20 2016, Updated 12:07 p.m. ET

Buckeye Partners’ outstanding debt

In the previous article, we looked at Buckeye Partners’ (BPL) recent operating performance. In this article, we’ll analyze BPL’s balance sheet position.

Buckeye Partners’ total outstanding debt by the end of 3Q15 was $3.6 billion. Buckeye Partners borrowed ~$1.1 billion under its credit facility in the first nine months of 2015. It repaid ~$0.84 billion under the same facility.

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Buckeye Partners’ net debt-to-EBITDA

Buckeye Partners’ net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) stood at 4.98x at the end of 3Q15 based on analyst calculations. This metric has declined compared to 3Q14.

BPL’s peers Sunoco Logistics Partners (SXL), VTTI Energy Partners (VTTI), and NuStar Energy (NS) have net debt-to-EBITDA multiples of 5.07x, 3.44x, and 5.28x, respectively. This shows BPL’s slightly better leverage position compared to its peers. High leverage is a major concern for midstream companies in the current low energy price environment. We’ll discuss this in more detail in a later article.

Buckeye Partners’ EBITDA-to-interest expense

Buckeye Partners’ EBITDA-to-interest expense ratio stood at 4.6x at the end of 3Q15. The ratio indicates a company’s ability to service its interest expense.

Currently, the ratio is above its last 12 quarters’ average of 4.4x. BPL constitutes ~5.7% of the Global X MLP ETF (MLPA).

Buckeye Partners’ means of financing

Buckeye Partners is using both debt and equity to fund its organic projects. BPL issued 0.8 million common units in 3Q15 under the ATM program to fund a portion of its growth capital projects. However, with rising distribution yields, equity would no longer be cheap for BPL.


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