Image source: Calumet Specialty Products Partners.

What: Shares of Calumet Specialty Products Partners (NASDAQ:CLMT) are down 48% as of 11:00 a.m. ET today after announcing that it had issued $400 million in secured debt and suspended its quarterly payout.

So what: You pretty much know that when a company issues a press release on a Friday after the market closes, it's never good news. In this case, Calumet's management used the end of Friday's trading to announce that the company was suspending its payout to its investors indefinitely. It also announced that it was issuing $400 million in senior notes -- with a whopping 11% interest rate -- to pay down part of its credit line and to give an injection of cash that can help it meet other debt covenants.

In reality, though, investors should have seen this one coming from a mile out. The company had been struggling to generate enough cash to meet its payout for some time now, its debt profile was already looking rather bloated, and its distribution yield of greater than 20% pretty much meant that issuing new equity was prohibitively expensive. With all of these things piling up, Calumet could ill afford to pay out so much to investors when there were clearly more pressing business needs for that cash.

Now what: Calumet is a uniquely positioned refiner. Its concentration on non-fuel-related products does give it a niche that is relatively underserved. However, the company has not executed well on this plan, and so newly appointed CEO Timothy Go has decided the company needs to do some house cleaning before it starts to fork over cash to its investors. Until Go can start to bring its cost structure under control and clean up the balance sheet, even today's decimated stock price doesn't look like an opportunity for this beleaguered company. 

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