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What happened

Units of Ferrellgas Partners (OTC:FGP) are slumping again, down more than 10% by 3:15 p.m. EDT on Tuesday.

So what?

Ferrellgas Partners' downward spiral all started a week ago, when the company announced that CEO Stephen Wambold was stepping down and that founder James Ferrell would assume the position on an interim basis. In addition to the change in the C-Suite, the company warned that it could cut its distribution in half next year because of the weak propane and oil market, which is raising concerns about the company's debt. Those debt concerns stem from the 2015 acquisition of its midstream platform, which isn't paying off because of the deepening oil market downturn. As a result, the company's leverage pushed up to 5.5 times EBITDA, which forced it to obtain a waiver from creditors to relax the maximum leverage ratio and move it up to 6.05 times over the next six quarters.

Aside from that news last week, there was an unusual amount of bearish put-buying in Ferrellgas Partners today. According to data from, put-buying volume was 1.6 times expected volumes. That suggests investors are betting that units have further to fall in the future. In addition to that, a multitude of law firms recently announced investigations into the company, which is common when a stock takes a deep dive.

Now what?

Ferrellgas Partners' diversification strategy did not pay off as planned. Now the company needs to dig itself out of a big hole, which could result in a steep reduction in the distribution. That uncertainty could continue to weigh on the company's units until it makes meaningful progress to reduce debt and get back on solid ground.

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