24/7 Wall St.

Master limited partnerships (MLPs) have been great vehicles for investors wanting to participate in growth and income-oriented investing. While these payouts generally are deemed return of capital rather than classic dividends, they have high payouts continually and have brought great rewards to investors in recent years. The question is what to think when so many MLPs are yet again revisiting the trough for additional capital.

24/7 Wall St. has tracked the financings announced in the MLP sector since late February and the numbers are rather large. Some funds are being used to pay down debt. Some are for funding transactions and acquisitions, and some are for general corporate purposes. Yet with so many MLPs raising what are already very high payouts (distributions of 4% to 8%), some investors believe that these capital raises are a key component for these entities to keep raising their payouts.

One such instance came from Kayne Anderson MLP Investment Co. (NYSE: KYN) earlier in March. This is a key closed-end fund that invests with some extra leverage in MLPs and passes the returns through to its investors. In early March it sold an upsized offering of 4.5 million shares at $33.36 per share to raise about $150 million. It more recently announced that it had reached a conditional agreement with institutional investors related to a private placement of $235 million of senior unsecured notes. Net proceeds will be used to make new portfolio investments with about $110 million, about $125 to refinance notes, and the rest for general corporate purposes. Kayne Anderson is a very plugged-in investor in MLPs, and when it raises capital we take it is a signal that the MLP sector is embarking on another round of capital raises.

These are the MLP offerings that we have tracked since late February. There have been some smaller deals as well, but these are the major financings we tracked. Not all have taken place, but they are on the books.

Boardwalk Pipelines L.P. (NYSE: BWP) filed in late February to raise up to $500 million with the sale of any combination of common or preferred units, warrants, debt, rights and more.

Calumet Specialty Products Partners L.P. (NASDAQ: CLMT) is in the process of selling 5.25 million common units. At close to $39 per unit, that is close to $200 million versus a prior market cap of $2.47 billion.

Crestwood Midstream Partners L.P. (NYSE: CMLP) sold 4.5 million common units at $23.90 per unit on March 19 to purchase additional units, to cut its debt and for general corporate purposes. This came to about $107 million in gross proceeds.

DCP Midstream Partners L.P. (NYSE: DPM) on March 11 sold $500 million in senior notes due in 2023 to fund a portion of its Eagle Ford shale transaction. At the end of February it also sold an upsized offering of 11 million units (was 10 million originally) at $40.63 per unit to repay debt and for general partnership purposes. This represented almost $450 million from the common units and another $500 million in debt, versus a current market cap of $2.8 billion.

El Paso Pipeline Partners L.P. (NYSE: EPB) has filed to sell up to $500 million in common units. Its market cap before this was $9 billion. The sale is for general partnership purposes.

Eagle Rock Energy Partners L.P. (NASDAQ: EROC) bumped the offering up to 9 million units at $9.31 per unit in mid-March. It intended to use the net proceeds to repay a portion of the outstanding borrowings under its credit facility. Be advised that the distribution “yield” screens at more than 9%, and the $83 million or so compares to a current market cap of $1.39 billion.

Enterprise Products Partners L.P. (NYSE: EPD) announced that its Enterprise Products Operating subsidiary sold $2.25 billion of senior unsecured notes, comprised of $1.25 billion due in 2023 and $1 billion due in 2044, in order to repay and refinance debt and for general company purposes.

Exterran Partners L.P. (NASDAQ: EXLP) filed to raise up to $500 million, and on March 22 it sold an increased debt offering of $350 million (from $300 million) in 6% senior notes due in 2021.

Holly Energy Partners L.P. (NYSE: HEP) on March 19 sold 1.875 million units, but HollyFrontier Corp. (NYSE: HFC) also sold the same number of units. Its market cap is almost $2.3 billion, and its payout rate screens at about 4.7%.

LRR Energy L.P. (NYSE: LRE) sold 6 million common units at $16.84 per unit in mid-March. LRE will use 50% of the proceeds to repay borrowings under its term loan and the rest to repay its revolving credit facility. The $100 million or so in proceeds compares to a market cap of $384 million and its payout (dividend equivalent) screens out at 11%.

Memorial Production Partners L.P. (NASDAQ: MEMP) sold 8.5 million units at $17.39 per unit, but the overallotment was taken in full and that ended up being 9.775 million units. This was close to $170 million against a $660 million market cap. Its distribution (dividend equivalent) screens out at just over 10%.

Mid-Con Energy Partners L.P. (NASDAQ: MCEP) filed for up to $300 million at the start of March and its market cap is $451 million.

What is interesting here is that many of these MLPs have risen since the offerings. Many were also upsized, implying that investor demand remains very strong. With Copano Energy LLC (NASDAQ: CPNO) being acquired for $5 billion or so in units and debt by Kinder Morgan Energy Partners L.P. (NYSE: KMP), investors are eager to get their slice of the pie here for those high payouts and the continued growth of the U.S. energy infrastructure.