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Energy Transfer Partners: These 7.375% Fixed-To-Floating Units Started Trading On The NYSE

May 02, 2018 12:12 PM ETEnergy Transfer LP (ET)21 Comments


  • Overview of Energy Transfer Partners' new preferred units, ETP-C.
  • Comparison with the sector.
  • Where in the context of all fixed-to-floating securities is ETP-C?
  • Schedule K-1.

In this article, we want to shed light on a new Preferred Units issued by Energy Transfer Partners (ETP). Our main goal is purely to inform you about the product while refraining from an investment recommendation. Even though the product might not be of interest to us and our financial objectives, it definitely is worth taking a look at.

The New Issue

Before we submerge into our brief analysis, here is a link to the prospectus. For a total of 18M units issued, the total gross proceeds to the company are $450M. You can find some relevant information about the new preferred units in the table below:

Source: Author's spreadsheet

Energy Transfer Partners 7.375% Series C Fixed-to-Floating Cumulative Redeemable Perpetual Preferred Units (NYSE: ETP-C) pays a fixed dividend at a rate of 7.375% before 05/15/2023 and then switches to a floating dividend at a rate of the Three-month LIBOR plus 4.53%. The new preferred units carry a 'BB' S&P rating and are callable as of 12/15/2023. Currently, the new issue trades at a price of $24.88 and have a current yield of 7.41% and yield-to-call of 7.49%. The dividends paid by this preferred stock are not eligible for the preferential 15-20% tax rate on dividends. They are also not eligible for the dividend received deduction for corporate holders. This means that the "qualified equivalent" current yield and YTC would be 6.18% and 6.24%, respectively.

Here is how the stock's YTC curve looks like right now:
Source: Author's spreadsheet

The Company

As per the company's website:

On April 28, 2017, Energy Transfer Partners and Sunoco Logistics Partners (NYSE:SXL) closed on their previously announced merger, in which SXL acquired ETP. Upon closing of the merger, SXL changed its name to Energy Transfer Partners, L.P. and applied to list its common units on the NYSE under the

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This article was written by

Arbitrage Trader profile picture

Day trader whose strategy is based on arbitrages in preferred stocks and closed-end funds. I have been trading the markets since I started my education in Finance. My professional trading career started right before the big financial crisis of 2008-2009 and I clearly understand what are the risks the average investor faces. Being a very competitive trader I have always worked hard on improving my research and knowledge. All my bets are heavily leveraged(up to 25 times) so there is very little room for mistakes. Through the years my approach has been constantly changing. I started as a pure day trader. Later I added pair trades. At the moment most of my profits come from leveraging my fixed income picks. I find myself somewhere in between a trader and an investor. I am always invested in the markets but constantly replace my normally valued constituents with undervalued ones. This approach is similar to rebalancing your portfolio and I just do this any time there is some better value in the markets. I separate my trading results from my trading/investment results. I target 40% ROE on my investment account and since inception in 2015, I am very close to this target.

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Comments (21)

ETP has such an awful, declining chart that I took a chance and bought some last month around $16 in hopes of hitting the bottom. Not sure yet. Crossing fingers.
Well, you just made $2 a share. What are you complaining about?
(S)he made more than $2.00 a share. on the 14th, (s)he is going to add about 3% to that from her/ his cash distribution.
Mktneutralhedger profile picture
Having seen TGP I guess K-1 will keep this undervalued too.
Arbitrage Trader profile picture
Yes, I do think K-1 actually provides an arbitrage opportunity. It is like a good neighborhood with a bad name that sells at a discount because it is not trendy.
g.dimit profile picture
Too Many Tax Complications, Don't want Uncle Sam In my Billfold.

You could Do Just as Good or Better in other Places.
The dividend from an oil and gas MLP is basically tax free. Do you know what your talking about?
g.dimit profile picture
Yes, I do. my Friend:

Check with your CPA & get the Scoop
There isn't an investor in the world who doesn't know that MLP distributions are not taxable!
ChuckXX profile picture
I was somewhat interested in this as an investment until I got to the part about they have "33 Billion in Total Debt". You can slice it anyway you want and then stir it up and give it a good spin but at the end of the day thats a huge amount of debt and therefore I shall take a rain check on this one.
Huh? What does looking at debt do without looking at the $75 billion assets created with that debt like 1,000 mile The Dakota Access Pipeline carrying 575,000 barrels of oil a day at $4 a barrel? Maybe you should take Accounting 101 or a Finance class before you start investing your money! 😎
ChuckXX profile picture
Last time I checked there are no guarantees in life. I just don't like all the massive debt its just that simple.
ClarisaTS profile picture
I get it. Perhaps traditional savings that pay 0.2%/year or cash under mattress are best suited for your risk tolerance.
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