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Stonemor Partners LP Message Board

  • crazydoctor28 crazydoctor28 Mar 21, 2013 12:18 PM Flag

    Huh?

    It's been a while since I have been on the Ston board, but this latest move bewilders me.

    Ston consistently borrows on their revolver because their distributable free cash flow includes monies that they have to put into trust and cannot current access. Accordingly, their distributions outpace their liquidity capability.

    Now they are issuing units to pay down the revolver. But they will have to pay distributions on these new units. How will they do this if they don't have the liquidity now? The only possible source is to reborrow on their revolver.

    So they pay $2 million in transaction costs (6% of the capital raise) to pay down a revolver that will have to be reborrowed on in order to meet their prospective distribution nut. I must admit they must be seeing something I am missing if they consider this a viable strategy.

    They might have terms on the revolver that are backing them into this corner. In either case, this cannot be objectively good for unit holders.

    They just keep adding leverage on top of leverage. I hope the well doesn't dry up or there will be problems.

    Sentiment: Hold

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STON
24.790.00(0.00%)Aug 22 4:02 PMEDT

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