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AGL Resources (GAS) Arm Prices $350M Worth Senior Notes

Energy services holding company AGL Resources Inc.’s GAS fully owned financing affiliate AGL Capital Corporation has declared the pricing of senior notes worth $350 million. The notes, carrying an interest rate of 3.250%, are expected to mature by Jun 15, 2026.   

AGL Capital will likely get $346 million in net proceeds from the offering – anticipated to close by May 18, 2016. Investors should know that the notes offered by AGL Capital are guaranteed by its parent company.

Out of the total net proceeds, almost $300 million will be utilized by the firm for paying back senior notes – to mature by Jul 15, 2016 – with 6.375% interest. The remaining amount is expected to be utilized for paying short-term debts under the company’s commercial paper program and also for normal corporate activities.

AGL Capital’s parent firm AGL Resources was founded in 1856 and is based in Atlanta, GA. The company’s principal business is gas distribution. AGL Resources has a relatively low-risk earnings growth profile. Positioned in a niche industry with high barriers to entry, this energy services holding company enjoys a near monopoly status in its area of operation. Most importantly, the safety and reliability of AGL Resources’ distribution operations that contribute more than three fourths to its operating profits, along with the utility’s consistent earnings make it a must-hold for income-oriented investors.

Despite these positives AGL Resources came up with weak first-quarter 2016 results. The company announced adjusted earnings per share of $1.30 that missed the Zacks Consensus Estimate of $1.64 and deteriorated from the year-ago adjusted profit of $1.34.

As a result, AGL Resources currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy sector include McDermott International Inc. MDR, PetroChina Co. Ltd. PTR and Murphy USA Inc. MUSA. Each of these stocks sports a Zacks Rank #1 (Strong Buy).

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AGL RESOURCES (GAS): Free Stock Analysis Report
 
MURPHY USA INC (MUSA): Free Stock Analysis Report
 
MCDERMOTT INTL (MDR): Free Stock Analysis Report
 
PETROCHINA ADR (PTR): Free Stock Analysis Report
 
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