Natural Resource Partners LP (NRP - Free Report) plans to offer senior notes worth $300 million to eligible buyers through a private placement. The senior notes will mature in 2021. The offering is subject to market and other conditions.
Natural Resource Partners intends to utilize the net proceeds of the issue to repay the amount outstanding under its revolving credit facility. The balance would be used to pay a part of the term-loan, worth $200 million, related to the OCI Wyoming acquisition.
Natural Resource Partners and its subsidiaries issue notes from time to time and accumulate funds for repaying existing debts and for expansion projects. The partnership’s subsidiary NRP (Operating) LLC issued senior unsecured notes, worth $50 million, in Oct 2011. Natural Resource Partners primarily used the net proceeds to finance its acquisitions.
Apart from the OCI Wyoming acquisition, Natural Resource Partners recently decided to acquire another asset to expand its existing operations. The partnership acquired a non-operated stake in oil and gas assets located in the Bakken/Three Forks formation from Abraxas Petroleum Corp. (AXAS - Free Report) .
Natural Resource Partners had cash balance of $105.2 million as of Jun 30, 2013. Cash provided by operating activities during second-quarter 2013 was $79.7 million. The partnership had $109 million available as of Jun 30, 2013 under its revolving credit facility.
It is evident that Natural Resource Partners utilizes a major chunk of the net proceeds of the issues for its inorganic growth activities. We believe the partnership’s current liquidity position is not strong enough to meet the fund requirements.
In addition to following an inorganic growth strategy, Natural Resource Partners is also curtailing its debt level. We believe it is easier for the partnership to collect funds from investors as it has a good debt service record with a rating of B1 assigned by credit rating company Moody's Investors Service.
Natural Resource Partners currently has a Zacks Rank #3 (Hold). However, other stocks from the industry that are presently performing well include Alliance Holdings GP, L.P. (AHGP - Free Report) and Alliance Resource Partners LP (ARLP - Free Report) , each with a Zacks Rank #1 (Strong Buy).
Houston, Texas-based Natural Resource Partners along with its subsidiaries engages in the ownership, management, and leasing of mineral properties in the United States.