What happened
Ferrellgas Partners, L.P. (FGP) plunged on Thursday, slumping more than 18% by 2:45 p.m. EDT. Fueling the downdraft: the propane company's weak fourth-quarter results, which fueled more concerns about its financial situation.
So what
Ferrellgas Partners generated $8.2 million in EBITDA during the fourth quarter, which was well below the $19.2 million it produced in the year-ago quarter. While volumes were 1.6% higher, operating expenses expanded at an even faster pace as the company continued to position for future customer and sales growth by opening additional selling locations.
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Another factor weighing on the company is its financial situation. That led it to sell its midstream and Global Sourcing businesses, as well as to secure a $575 million credit facility to boost its liquidity. However, Ferrellgas Partners noted that it continues to evaluate various options related to its outstanding bonds; it's looking at refinancing or exchanging them to give itself more breathing room. Interim CEO Jim Ferrell stated on the accompanying conference call that the company is working on long-term solutions to address its capital structure, even if they impact its sky-high 17.4%-yielding distribution to investors.
Now what
While Ferrellgas is working to solve its balance-sheet problems, it's unclear what actions it will take. Investors should steer clear of this ultra-high-yield stock until it's back on solid ground, and consider buying other stocks instead.
