Until the recent disclosure in a footnote on page 257 of a revised proxy for the deal, it wasn't possible to calculate the impact of the puts on Linn's distributable cash. And contrary to the impression the company has given this year in presentations aimed at thwarting short-sellers, that expense is significant. During the first quarter, the cost of puts that settled in that period was $43 million, or nearly 30% of the company's reported distributable cash flow of $150 million.
Linn didn't cover its first-quarter distribution of 72.5 cents per unit even before factoring in the put cost. Including the put cost, the coverage ratio was just 63%. Some investors have said Linn is covering its distribution by selling equity and debt. The company disputes this, maintaining the funds come from free cash flow. Linn says it expects to fully cover its distribution for the full year.
The drop in Linn units could imperil the Berry deal. Linn will pay for Berry with shares of LinnCo (LNCO), a corporation created by Linn that holds Linn units. LinnCo trades at $37, a six-point premium to Linn, but there is reason to believe the price of the less-liquid LinnCo shares will converge with the price of the Linn units, making the deal unattractive to Berry holders. LinnCo's current premium could reflect the difficulty of shorting the stock.
What's more, there could be adverse tax consequences from the Berry deal for LinnCo holders, starting in 2016. Hedgeye's Kevin Kaiser argues that LinnCo shares probably should trade at a discount to Linn units because of the tax liability.
Berry investors might want to think hard about approving the Linn merger, considering Linn's aggressive accounting and the potential tax hit. Linn units may be headed lower, and that could happen quickly if the Berry deal, considered important to Linn's financial outlook, collapses.
Barrons was manipulating the facts again. Taking one quarters numbers and deliberately ignoring multiple years of the same numbers is an attempt to deceive. From the LINE message board.
Now I see Andrew Barry is going way out of his way to put just one quarter's performance out of proportion. It seems that for him and people supporting him behind the scene are desperate to break the merger with BRY.
1qY13 Andrew says the distribution coverage is only 63% if we include $43M of put cost. He should know better that 1q performance doesn't determine the long term performance. He is definitely manipulating the minds of people for his own benefit and benefit to his manipulators behind the scene.
Following his own citation (page 257 footnote of revised filing)-
Distribution coverage including put cost for the whole year 2012 was 91.2%
Distribution coverage including pit cost for the whole year 2011 was 106.4%
Distribution coverage including put cost for the whole year 2010 was 99.5%
The truth will come out in the end and those investors who have cash can use this as an opportunity to take advantage of the fear and greed that drives short term prices of stocks. This is why I bought LINE on Friday I own shares of BRY currently.
Taken right out of this mornings Barron. And just as strange. Exactly how did Barrons get this info? No one outside of the SEC and LINE/Lnco had this info. Did someone from the SEC leak it? And how did people who post on Yhoos boards get this yesterday (as evidenced by numerous posts), one day before Barrons came out? Did someone from Barrons leak it? Were people who post here privy to insider info? Did people who post here use that insider leaked info to try to manipulate the stock price? I have no idea if any of this mess is true or not but it certainly appears that way. Accordingly, I am sending a certified letter to Mary Jo White requesting that an investigation be ordered to find out who in her department is leaking information and who is trading on it. Specifically about the information. What tax liability are they speaking about? Lnco is organized as a wholly owned subsidiary of LINE and the assets placed from LINE to Lnco are not taxable until they are distributed to shareholders as dividends. Or is that not the case? When dividends are received, shareholders pay the normal taxes they owe depending on how and where those shares are owned. So I have no idea what future "..deferred tax liability.." (supposedly taken word for word out of the S-4) they are talking about and neither do you or Barrons or the hedge fund that is leaking this info and shorting the stocks.