What’s Driving Buckeye Partners’ Leverage Higher?



Buckeye Partners’ outstanding debt

Buckeye Partners (BPL) ended 2Q17 with a total outstanding debt of $4.8 billion, which is 14.0% higher than its debt outstanding at the end of 2016. The increase in its outstanding debt could be attributed to the Vitol acquisition and funding for organic projects. BPL has $912.0 million of liquidity under its credit facility as of June 30, 2017.

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Buckeye Partners’ net debt-to-EBITDA

Buckeye Partners’ net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) multiple stood at 4.5x at the end of 2Q17. That’s higher than its leverage of 4.1x at the end of 2016. The rise in BPL’s leverage is due to an increase in borrowing and weak earnings. Its leverage is still within the industry standards. MLPs generally target a ratio between 4.0x and 4.5x. BPL’s leverage position is better than most of its peers. However, its leverage position might deteriorate in the coming quarters driven by lower earnings and expansion opportunities.

In the next part, we’ll analyze Buckeye Partners’ current valuation.


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