this selloff is totally stupid but don't look a gift horse in the mouth. It's the end of the quarter and the owner wants it off the books for some reason. By the end of next week, this will be much higher.
Whatever Enduro's reason, the net effect was a haircut of about 120mm in market cap. Figure they got an average of maybe 13 per unit, so they "lost" 22mm in value since last week. Amazing. I know big blocks always go for a discount but this is amazing. They must have really needed that dough.
Oh well, their loss is our gain. I did my best to personally benefit in my small share of that 22mm - thanks! Managed to bring down my average cost per share by almost $2.
The operator (Enduro Resource Partners) need $ to pay down a credit facility. It's possible they're fearful of LIBOR rising from the dead and making their credit facility prohibitively expensive. I need to find more information on their credit facility.
Whatever the case may be, this was not dilutive and does not impact the shares outstanding.. distributions should remain the same.. In other words, the amount of "mouths to feed" is unchanged in terms of how the trust proceeds pay out.
here is some (dated) information about the credit facility.
Enduro Sponsor maintains a $500 million senior secured credit agreement, which provides for revolving loans. Borrowings under the revolving credit facility have a maturity date of December 1, 2015 and bear interest at the applicable LIBOR rate, plus applicable margins ranging from 1.75% to 2.75%, or at a base rate, plus applicable margins ranging from 0.75% to 1.75%. The base rate is calculated as the highest of (a) the prime rate, (b) the federal funds effective rate plus 0.5%, and (c) the one-month LIBOR plus 1%.
As of October 10, 2011, total borrowings under Enduro Sponsor’s revolving credit facility were $232 million. For the first half of 2011, the weighted average interest rate was approximately 3.2%. The current borrowings under the revolving credit facility were incurred to fund the acquisition of the Acquired Properties. Affiliates of certain of the underwriters participating in this offering are lenders under Enduro Sponsor’s senior secured credit agreement and will receive a substantial portion of the proceeds from this offering pursuant to the repayment of a portion of the borrowings thereunder. Please read “Underwriting — FINRA Rules.”
Enduro (the Partnership) "intends to use the net proceeds from the sale of its trust units to pay down a portion of the outstanding borrowings under its senior secured credit facility". It would appear that the partnership received a margin call. That would explain why 9.5 million shares were sold in 1 day. Margin clerks do not maximize the price.