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Oxford Resource Partners, Komandit ┼×irket Message Board

  • lizahuang54321 lizahuang54321 Jan 29, 2013 3:19 PM Flag

    OXF was a scam from the very start

    OK, scam is a little too strong a word.
    But if you look back to articles on seekingalpha and elsewhere right back at the IPO, there were several which warned this was a bad deal and was coming out with a distribution level which probably could not be sustained, especially if coal prices turned down, which they did. The reason for IPOing with a high distribution level is obvious - the pricing of MLPs and income vehicles at the time was pretty much exclusively based on yield (in the last year a little more realism has come into the market in the case of royalty trusts and many of them have reset to lower prices to reflect actual future cash flows rather than just today's yield). So by coming out at an unsustainable distribution level, the sponsors were able to get a big payday for a business which was already marginal right from the start. They were able to keep it up for a few years, including by cutting distributions to subordinate units, but fast forward to now and the units have lost 80% of their value relative to the IPO price and more than that relative to the price it reached during the first year publicly traded. Again, there was not just one but several writers who raised this concern right back at the IPO and shortly afterwards - you can probably find some of them looking back on seekingalpha for the oldest articles. The mystery is how reputable MLP analyst firms like Wells Fargo gave them an outperform rating back in the first year.

    I see it as a similar situation to CEP where that MLP came out with a high and unsustainable distribution level based on temporarily spiking NG prices and as soon as NG prices crashed they were forced to eliminate distributions and there is still no visibility into any resumption of distributions 3 or 4 years later. Unless coal prices rebound, the future for OXF may be similar. On the other hand, if coal prices rebound and they are able to reinstate distributions, and if (an even bigger IF and probably unlikely since they always seem to be able to get out of these arrearages situations with some sort of restructuring which eliminates them - see EROC, for an example), they eventually pay arrearages for all the distributions below the minimum, this could be a great buying opportunity.

    So, the question is what will it take (coal prices, etc) for OXF to be able to resume meaningful and sustainable distributions. Anyone like to take a stab at that?

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