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Ferrellgas Partners LP’s Compliance with Debt Covenants
Ferrellgas Partners LP, a leading propane retailer and distributor, recently released its quarterly report, highlighting its compliance with debt covenants and available borrowing capacity of $276 million. The report provides insights into the company’s financial status and future prospects.
Compliance with Debt Covenants
One of the key highlights of the report is Ferrellgas Partners LP’s compliance with its debt covenants as of April 30, 2023. The company’s net leverage ratio, which measures its consolidated total net debt in relation to trailing four quarters consolidated EBITDA, is not greater than 5.0 to 1.0. This compliance indicates a healthy financial position, enabling the company to meet its debt obligations effectively.
Available Borrowing Capacity
Ferrellgas Partners LP reported a strong borrowing capacity of $276 million under its Credit Facility as of April 30, 2023. This available borrowing capacity will provide the company with the flexibility to fund its operations, invest in growth opportunities, and manage its working capital efficiently.
Breakdown of Scheduled Principal Payments
In terms of long-term debt, Ferrellgas Partners LP provided a breakdown of scheduled principal payments. The company is expected to make principal payments as follows:
- $545 million in 2023
- $2.6 billion in 2024
- $2.1 billion in 2025
- $651.7 million in 2026
- $810 million in 2027
- $825.4 million thereafter
This payment structure showcases the company’s long-term financial commitments and its ability to manage upcoming debt obligations.
Letters of Credit Outstanding
Additionally, the report mentions the presence of letters of credit outstanding at April 30, 2023, totaling $74.0 million. These letters of credit are used to secure various arrangements such as insurance, product purchases, and commodity hedges.
Issuance of Preferred Units
The report also discusses the issuance of Preferred Units by the operating partnership on March 30, 2021, with an aggregate initial liquidation preference of $700.0 million. The redemption of these Preferred Units in the near term is unlikely due to the high redemption price in the first three to four years. The redemption price is based on the amount that would result in a 1.47x MOIC (multiple on invested capital) or a 12.25% internal rate of return. The report states that Ferrellgas Partners LP is not expected to achieve any savings in its cost of capital by redeeming the Preferred Units during this period.
Distribution and Tax Distributions for Preferred Units
The report also provides insights into the Distribution and Tax Distributions for the Preferred Units. Pursuant to the OpCo LPA Amendment, the operating partnership is required to pay a cumulative quarterly distribution at the Distribution Rate, which is currently set at 8.956% for the first five years after March 30, 2021. These distributions can be paid in cash or, at the operating partnership’s discretion, through the issuance of additional Preferred Units. The report states that $15.4 million of the Quarterly Distribution was paid in cash to holders of Preferred Units on February 15, 2023, and May 15, 2023. The remaining Quarterly Distribution accrued as of April 30, 2023, was $16.9 million.
In terms of equity, Ferrellgas Partners LP issued 1.3 million Class B Units to holders of its senior unsecured notes in exchange for their contribution of the notes as a capital contribution. According to the terms of the Class B Units outlined in the Amended Ferrellgas Partners LPA, these units have certain rights, including the ability to designate one director to the Board of the general partner. The report mentions that once the holders of Class B Units receive distributions totaling $357.0 million, the units will be convertible into Class A Units or automatically converted, depending on the timing.
Overall, Ferrellgas Partners LP’s quarterly report demonstrates its strong financial position, compliance with debt covenants, and available borrowing capacity. These factors position the company well for future growth and stability in the propane industry.
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