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Ferrellgas Partners’ Leverage Is a Key Concern

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Ferrellgas Partners’ leverage

Ferrellgas Partners’ (FGP) net debt-to-adjusted EBITDA ratio stood at ~9.9x at the end of fiscal 2017—much higher than desired. Ferrellgas Partners’ Bridger Logistics acquisition in 2015 added to its debt burden. At the same time, issues in Ferrellgas Partners’ midstream business restricted its EBITDA growth and increased its leverage.

Ferrellgas Partners completed the sale of the Bridger Energy and Bridger Rail businesses for ~$60 million in the quarter ending April 30. James E. Ferrell, Ferrellgas Partners’ interim CEO and president, said, “We have also executed on sales of non-core assets that have streamlined our business, reduced our debt, and positively enhanced our key credit metrics.”

Ferrellgas Partners slashed its distribution 80% in 2016 with the aim of strengthening its balance sheet.

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Suburban Propane Partners and AmeriGas Partners 

Suburban Propane Partners (SPH) cut its distributions for the quarter ending September 30, 2017, to strengthen its balance sheet. Suburban Propane Partners’ net-debt-to-adjusted-EBITDA ratio was ~4.9x at the end of fiscal 2017. AmeriGas Partners’ (APU) ratio stood at ~5.1x. The above graph compares the debt-to-EBITDA ratios of the four companies—AmeriGas Partners, Suburban Propane Partners, Ferrellgas Partners, and Star Group (SGU).

The growth in propane companies’ EBITDA in fiscal 2018 might bring their leverage down. However, Ferrellgas Partners’ ratio remains high. The company will need significant EBITDA growth to bring its leverage down meaningfully.

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