Does the StoneMor Offering Help Bolster the Distribution?

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Published: July 6, 2015 4:36 pm

Last Updated: July 7, 2015 7:09 am

StoneMor Partners L.P. (NYSE: STON) is selling some 2,100,000 common units, which represent limited partner interests, in an effort to raise capital to bolster the balance sheet. While this may not be a critical company to many investors, what stands out here is that StoneMor is a cemetery partnership that comes with an enormous yield equivalent distribution.

StoneMor did outline the use of proceeds here, but some may wonder if this also helps to bolster the high distribution rate as well.

For those unaware of StoneMor: it owns and operates 303 cemeteries and 98 funeral homes in 28 states and Puerto Rico. It keeps raising its payouts after having been static at $0.60 per unit during part of 2013 and 2014. The latest payout of $0.64 per unit would represent a yield equivalent of roughly 8.2%.

StoneMor said that it intends to use the net proceeds from the offering to pay down outstanding indebtedness under its revolving credit facility. If the underwriters exercise their option to purchase additional common units, StoneMor will use the additional net proceeds to pay down outstanding indebtedness under its revolving credit facility.

Raymond James is serving as book-runner. Janney Montgomery Scott and Wunderlich are the senior co-managers, and additional co-managers are BB&T Capital Markets and Ladenburg Thalmann. StoneMor intends to grant the underwriters a 30-day option to purchase up to 315,000 additional common units to cover over-allotments, if any.

Gross proceeds would be roughly $65 million at current unit prices. StoneMor’s current market cap is just above $912 million. StoneMor closed at $31.19 and has a 52-week range of $23.50 to $31.75.

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