PAGP IPO Preview Oct 2013

Plains GP Holdings, L.P. (ticker PAGP) is currently out on its IPO roadshow and looking to raise $3.0 billion by selling 128 million common units (before the over-allotment) at a mid-point price of $23.50 with an indicated mid-point yield of ~2.5%. They expect to price the deal Tuesday October 15 (the timing has been moved up one day from the original timing). I view the shortened roadshow as a positive signal that PAGP has been well received by potential investors.

PAGP is a recently formed Delaware limited partnership that will elect to be
treated as a corporation for U.S. federal income tax purposes. PAGP’s only
cash-generating assets at the closing of this offering will consist of 128 million AAP units, that represent a 21.1% limited partner interest in AAP (19.7% economic interest including the dilutive effect of the AAP management units). AAP currently owns all of the IDRs and an indirect 2% general partner interest in Plains All American Pipeline, L.P. (ticker PAA).

PAA is a publicly traded limited partnership engaged in the transportation, storage, terminalling and marketing of crude oil and refined products, as well as in the processing, transportation, fractionation, storage and marketing of NGLs. PAA is one of the largest publicly traded partnerships, with an extensive network of pipeline transportation, terminalling, storage and gathering assets in key crude oil and NGL producing basins and transportation corridors and at major market hubs in the United States and Canada.

IMPORTANT: PAGP will provide investors with a 1099-DIV (instead of a K-1). This makes PAGP acceptable to own in any type of account, including tax advantaged accounts like IRAs. Additionally PAGP estimates that 100% of the distributions/dividends will be return of capital through at least December 31, 2016 (so those buyers who own it in taxable accounts will also not be taxed at all on the yield over that time frame, just lowering their tax basis).

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About Philip Trinder

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