Brookfield Infrastructure Partners L.P. BIP recently issued 8 million Class A Series 13 preferred units worth $200 million. These inaugural green preferred units will further enhance the company’s commitment to sustainable investment practices.
Moreover, the unit holders will get a cumulative quarterly distribution of 5.125% per annum. Notably, the units will be listed on the New York Stock Exchange under the symbol BIP PR A.
Motive Behind the Act
Brookfield Infrastructure is making the most of low interest rates. Further, it is utilizing the proceeds to refinance its recently completed and future Eligible Green Projects including the development and redevelopment of such projects. Apart from project allocations, some portion of the proceeds will be used to repay amounts drawn under the utility’s unsecured revolving credit facility.
Current Debt Situation
Currently, the company’s total debt to total capital stands 52.76%, comparing favorably with the industry average of 57.53%. Its times interest earned ratio of 1.74 in the June quarter is lower than 1.97 in the March quarter. Though the ratio decreased in the second quarter, the same with a value of more than 1 indicates that the utility will be able to meet its near-term debt obligations.
Interest expenses of the partnership at the end of first-half 2020 were $529 million, up from $453 million in the year-ago period. Also, in August, the utility had entered into an agreement to sell $500 million aggregate principal amount of Series 8 medium-term notes to redeem 3.452% Series 2 Notes due Mar 11, 2022. Thus, refinancing of debts will allow the firm to lower its capital-servicing expenses and boost its margins.
Other companies from the same sector are also capitalizing on this opportunity of near-zero interest rates to incur debt at cheaper rates, repay or refinance their debt obligations and reduce the debt-servicing costs. Recently, NiSource Inc. NI, Bloom Energy Corporation BE and Linde plc LIN among others opted for refinancing their debts.
Zacks Rank & Price Performance
Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past three months, shares of the company have gained 9.6% against the industry’s fall of 3%.
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