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    FERRELLGAS PARTNERS L P (FGPR)

    FGPR Q2 2025: $650M 2026 Debt Refi Uncertainty Weighs on Outlook

    Reported on Mar 7, 2025 (Before Market Open)
    Pre-Earnings Price$10.50Last close (Mar 6, 2025)
    Post-Earnings Price$10.00Open (Mar 7, 2025)
    Price Change
    $-0.50(-4.76%)

    What went well

    • Proactive liquidity and debt management: Management provided clear details on the Eddystone settlement, highlighting that the net cash impact was neutral, and they are actively monitoring refinancing opportunities for the $650 million 2026 senior notes.
    • Strategic acquisition activity: The acquisition of Kilhoffer was noted to perfectly align with the company’s strategic approach by complementing their customer base and route density, positioning the company for potential growth.
    • Robust operational performance in wholesale and branded business: The Q&A emphasized strong growth with wholesale gallons increasing significantly and organic sales of the Blue Rhino brand rising over 14%, underscoring the resilience and market demand for their propane services.

    What went wrong

    • Refinancing Risk: The company faces uncertainty in refinancing its $650 million 2026 senior notes without a specific targeted interest rate, leaving it vulnerable if market conditions deteriorate.
    • Capital Structure Uncertainty: The ongoing evaluation of alternatives for its capital structure—including relisting on the NYSE and the unresolved methods to manage Class B units—adds ambiguity and potential volatility.
    • Complex Redemption Mechanics: The Class B units’ redemption, estimated at approximately $305 million, combined with the increasing IRR requirement and complicated conversion mechanics, creates potential financial stress if further distributions do not materialize.

    Q&A Summary

    1. Refinancing Amounts
      Q: Needed sums for 2026 notes and Class Bs?
      A: Management stated that refinancing the 2026 senior notes requires the face value of $650 million and the Class B units would have an estimated redemption of about $305 million, based on current distributions and IRR calculations.

    2. Capital Structure
      Q: Any plans for NYSE re-listing?
      A: They are actively reviewing the capital structure with Moelis, including potentially reinflating the Class A units, but no timeline has been set for re-listing.

    3. Interest Rate
      Q: What rate triggers refinancing?
      A: There isn’t a set target; management monitors market conditions, secondary trading levels, and consultations with banks to decide on refinancing when appropriate.

    4. Acquisition Fit
      Q: How does Kilhoffer complement our business?
      A: The Kilhoffer acquisition meets their typical M&A criteria by complementing customer bases and route density, fitting strategically into their portfolio.

    5. Wholesale Margins
      Q: What drove wholesale margins upward?
      A: The margins were bolstered by a well-managed supply team utilizing multiple pipelines and favorable market conditions, enhancing overall performance.

    6. Customer Counts
      Q: How did seasonality affect customer numbers?
      A: A warm start delayed some January demand into February, with expectations that customer counts will even out over the extended winter period.

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