PBF Logistics LP 6.875% 2023 Senior Notes: 10% Yield To Maturity, 4.7X Coverage

Oct. 12, 2020 9:15 AM ETPBF Energy Inc. (PBF)29 Comments

Summary

  • PBFX had 4.73X interest coverage in Q2, vs. 4.39 in Q1 2020.
  • Its 2023 Senior Notes now yield 7.19% and go ex-dividend for their semi-annual interest payment on ~ 11/11/20.
  • The annualized yield to maturity is 10.05%.
  • This idea was discussed in more depth with members of my private investing community, Hidden Dividend Stocks Plus. Get started today »

Company Profile:

PBF Logistics LP (PBFX) is a midstream energy company. It owns, leases, acquires, develops, and operates crude oil and refined petroleum products terminals, pipelines, storage facilities, and other logistics assets in the United States. It has two segments: Transportation and Terminaling, and Storage.

It engages in the receiving, handling, storage, and transferring of crude oil, refined products, natural gas, and intermediates. PBF Logistics GP LLC serves as the general partner of PBF Logistics LP. The company was founded in 2012 and is headquartered in Parsippany, New Jersey. PBF Logistics LP is a subsidiary of PBF Energy Inc.

PBFX had been one of the more stable midstream LPs over the past few years, but then COVID-19 hit, and heavily pressured its price/unit. In order to safeguard liquidity, management cut the quarterly common distribution from $.52 to $.30 in May 2020. This led to better distribution coverage of 2.16 in Q1 2020, and 2.49 in Q2 2020, with a trailing DCF coverage ratio of 1.6X.

However, we moved up the creditor ladder to PBFX 6.875% 5/15/2023 Senior Notes.

Their current yield is 7.19%. These senior notes put us above the common in a liquidation scenario. They're continuously callable, at a rate of $101.72 until 5//15/2021, when they become callable at the par value of $100.00.

(Schwab.com)

Yield To Maturity:

Due to the current discount, these notes have an attractive annualized yield to maturity of 10.05%. If they aren't redeemed prior to their 5/15/2023 maturity date, there will be $20.63 in interest payments.

In addition, there's a $4.36 capital gain, for a net profit of $24.99 at maturity, a total return of 26.12%:

Financials/Interest Coverage:

PBFX's EBITDA/interest coverage already was strong, at 4.08X in Q2 '19. In Q1 2020, it improved to 4.39, and in Q2 2020, it improved yet again, to 4.73X.

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This article was written by

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Disclosure: I am/we are long PBFX 2023 SENIOR NOTES. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: We're long PBFX 2023 Senior Notes.

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