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Is Alon USA Partners’ Leverage a Concern for Investors?


Dec. 4 2020, Updated 10:53 a.m. ET

ALDW’s net debt-to-equity ratio

So far, we’ve discussed Alon USA Partners’ (ALDW) cash flow measures and distributions. In this part, we’ll analyze its leverage position.

Alon USA Partners’ net debt-to-equity ratio currently stands at 1.4x. In comparison, CVR Refining (CVRR) and Calumet Specialty Products Partners (CLMT) have net debt-to-equity ratios of 0.3x and 4x, respectively. Alon USA Partners had total outstanding debt of $292 million at the end of 1Q16.

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Net debt-to-EBITDA ratio

The above graph shows Alon USA Partners’ quarterly net debt-to-equity and net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratios over the last three years.

Alon USA Partners’ net debt-to-EBITDA ratio is 0.79x. The net debt-to-EBITDA ratio is often used to assess a company’s ability to repay its debt. It’s commonly used by credit rating agencies to determine a company’s credit rating. A lower ratio is considered better from a credit perspective. As the above graph shows, ALDW’s ratio has been fairly conservative for several quarters.

In comparison, CVR Refining and Calumet Specialty Products Partners have net debt-to-EBITDA ratios of 1.4x and 15.8x, respectively.

CLMT’s high leverage has been a matter of concern for quite some time. To learn more about it, you can read Calumet’s High Leverage: A Key Concern for Investors. To learn more about refining MLPs, you can read High-Return Refining MLPs: The 4 Investors Should Watch.

Debt and equity issuances

Alon USA Partners didn’t issue any debt or equity in 1Q16. In the next part, we’ll analyze where Alon USA Partners stands compared to its own historical valuations.


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