- The NuStar Logistics L.P. 7.625% Fixed-to-Floating Rate Subordinated Notes due 1/15/2043 (NSS) are unlikely to ever be called due to the hybrid nature of this capital structure piece.
- Issued as debt (Subordinated Bonds) the notes have hybrid features because they are not counted towards the Debt/EBITDA calculation (consolidated debt coverage ratio) under the Revolving Credit Agreement.
- NuStar Energy (NS) has always run highly leveraged in terms of Debt/EBITDA metrics and favors any form of capital issuance that does not count towards the debt covenant.
- From the company’s perspective, the Sub Bonds currently have a very attractive interest rate of 3 months Libor+6.734% for a very long tenor debt issuance in the HY space.
- Investors should brace for higher volatility of returns for NSS due to the long duration and wait for a better entry point from a price perspective.
For further details see:
NuStar 7.625% Subordinated Notes Due 1/15/2043: Unlikely To Ever Be Called