CVR Refining kicked off their roadshow and in contrast to many that seek to provide some context around their market and company CVR jumps right into the depths of their refining business in way that only an oil man (or oil woman) could love.
There’s noting obviously wrong with the story and the deal is being led to market by Credit Suisse, Citi, Barclays, UBS and Jefferies with co-managers JP Morgan, Macquarie and Simmons. The refinery business is conceptually simple insofar as they process volumes and earn a profit based on the “spread” between their inputs and outputs net of their expenses and costs. In some cases a refiner by virtue of processing skill and/or location a refinery may also enjoy some cost advantages. CVR has some of those going for it as well.
Unlike some other refiners CVR is keeping their logistics assets in-house rather than spinning them off into a separate MLP. Management estimates that $35M of EBITDA would generate a higher multiple as a separate and fixed dividend security but they prefer to keep it for “stability.” In other words this is another “variable” deal similar to PetroLogistics (PDH) that may be more volatile than the business suggests.
The roadshow labors well beyond where it should end. In fact at minute 16 a summary of the investment highlights is presented and it feels like a natural place to end. Combined with a super-high projected yield the show should have ended it there. Nope. Management plods on for another 25 minutes to tell you more than you could ever want to know and repeat many of the same points over again.
As usual we’d encourage our readers to consult an energy/MLP specialist to really look into the depths of this deal structure. On the surface though the numbers appear sound with plenty of reserves. The units come with a projected estimated distribution of $4.72 for 2013 which comes to a yield of nearly 19% based on the $25 mid-point of the filing range.
We’re not transcribing this one but have made the CVR IPO roadshow slides available to our IPO Candy Toffee members.
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