MLP IPO Review: Alon USA Partners, L.P. (“ALDW”)

The emails and materials sent to subscribers on the day of the ALDW IPO pricing are as follows:

Email sent during the early afternoon of November 19:

Attached please find some brief thoughts and analytics on the Alon USA Partners, L.P. IPO that should be pricing tonight. I have also included a copy of the roadshow slides for reference as well.

Email sent on the evening of November 19, after the IPO pricing came out at $16:

Pricing just came out for the Alon USA Partners, L.P. (“ALDW”) IPO at $16 per unit, so below the expected $19 to $21 price range.

Yes ALDW is EXTREMELY RISKY and any investment in it is VERY SPECULATIVE but I plan to buy any weakness in the name tomorrow morning. This fact pattern is now similar to what happened with the Northern Tier Energy (“NTI”) IPO back in July. They are both variable rate refining MLPs that apparently were not well received during their roadshows. NTI priced at $14 and traded down to $13 during the first minute of trading but has performed rather well since then (admittedly NTI did outperform their guidance for their September quarter but it was still up strongly even prior to that announcement).

The IPO pricing seems to indicate that the IPO buyers do not believe that ALDW will be able to make the distributions they discussed in the S-1 and the roadshow. Please find updated analytics attached with ALDW run at $16 per unit and with the expected distribution run rate lowered from $5.20 down to $2.60 (a 50% reduction in expected distributions). Even with the substantially lowered distribution run rate assumption ALDW compares favorably to its peer group.

How has ALDW done since November 20th?


Not too shabby…

Note: The ALDW distribution for 4Q12 will be prorated so the 4 quarter estimate of $5.20 is high since the first distribution is not prorated in the Prospectus and the variability of the crack spread will make the actual distributions differ substantially from the projections provided in the Prospectus.

About Philip Trinder

President of MLP Protocol, investor, trader, and proponent of Master Limited Partnerships.
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