OREANDA-NEWS. Costly and unattractive debt and capital markets have hindered the high yield master limited partnership (MLP) space and NGL Energy Partners LP (NGL) is no exception.

The partnership may be seeking alternatives to boost its liquidity, underscored by the partnership's recent filing with the Securities and Exchange Commission (SEC) indicating that it may now sell common units in TransMontaigne Partners, LP (TLP). If NGL does elect to sell its TLP common units, it could raise approximately $100 million for the sale of approximately 3.2 million TLP common units, or 19.7% of TLP units. In total, NGL currently owns 19.7% of TLP common units and in addition it owns the general partner.

Should NGL sell the majority of its common units held in TLP, it could provide NGL with additional liquidity. NGL would still own some of the TLP common units as well as the general partner and Fitch does not believe that NGL is in need of selling assets to maintain liquidity in the near term. Fitch continues to expect reduced liquidity for issuers into 2016 as they increase reliance on revolvers and may seek alternatives to traditional financing.

NGL has been making strategic moves to keep ample liquidity amid a difficult market environment as access to capital markets remains unattractive. NGL's common units have fallen 45.5% over the past 12 months compared with a 34.0% decline for the Alerian MLP Index. NGL's units are currently yielding a lofty 13.7%. The partnership's equity cost of capital is even higher than that since it also pays incentive distribution rights to its general partner. In addition, the cost of debt has been on the rise for issuers in the MLP space particularly for high yield issuers.

The SEC filing follows NGL's efforts to improve liquidity on its bank facility. The partnership shifted $400 million of commitments from its working capital facility (which is restricted by a borrowing base) to its expansion facility (which is not restricted). Falling commodity prices have reduced the value of inventory and other collateral and NGL's borrowing base has been on the decline. Its total bank facility is a $2.296 billion secured one which is now comprised of a $1.038 billion working capital facility (previously commitments were $1.438 billion and availability to draw is restricted by a borrowing base) and a $1.258 million expansion facility (previously this was only $858 million and this facility is not restricted by a borrowing base). This shift in lender commitments was effective on July 31, 2015.

We believe NGL should have sufficient liquidity in the near term given its resources despite unattractive capital markets. Fitch affirmed NGL's Issuer Default Rating at 'BB' in early October.