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Natural gas pipeline operator Energy Transfer Partners L.P. (ETP - Analyst Report) recently announced that it will be offering $1.25 billion of senior notes. The offering is divided into two parts - $800 million 3.60% senior notes due 2023 and $450 million 5.15% senior notes due 2043.

Energy Transfer plans to utilize the proceeds of approximately $1.24 billion for the repayment of borrowings under its revolving credit facility and for other partnership purposes.

The partnership expects the proceedings to be complete on January 22, 2013, upon fulfillment of customary closing conditions.

The partnership ended third quarter 2012 with long-term debt (less current maturities) of $8,690.7 million. Debt-to-capitalization ratio was 52.7%. With the issuance of $1.25 billion of debt, the debt-to-capital ratio will increase to 56.1%.

We also expect interest expenses to increase with the sale of the new notes.

We believe Energy Transfer Partners is well positioned to compete in the natural gas midstream and transportation & storage businesses with its geographically-dispersed asset mix. The partnership has a significant market presence in each of its operating areas, which are located in major natural gas-producing regions of the U.S.

However, master limited partnerships (MLPs) typically depend on equity and debt markets for growth finance. Market turmoil resulting from issues such as the recent subprime crisis, which hinders access to debt/equity markets, will impact MLP growth prospects.

Earlier in October, Energy Transfer Partners merged with Sunoco Inc. for $5.3 billion. The partnership will have the ownership of Sunoco’s branded retail business, general partner interest, plus a 32.4% stake and incentives distribution rights in Sunoco Logistics Partners L.P. (SXL - Analyst Report), a master limited partnership in which Sunoco had 34% stake.

Energy Transfer Partners currently retains a Zacks Rank #3 (Hold). Longer term, we are maintaining our Neutral recommendation on the stock.

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