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Calumet Specialty Products Partners LP Message Board

  • richardleeds richardleeds Aug 8, 2013 12:52 PM Flag

    More shares to be issued and more debt

    My take away from the conference call is that they are looking at a ton of deals and that one or two of them could take place including a billion dollar deal. If those deals take place they are going to add debt and shares and deals take time to absorb. The growth of the last 1-2 years is starting to be felt and the government mandates on fuel mixtures is going to cost about $100 million every year over the next decade and that is $1 billion dollars.

    The management interest is aligned with investors but that has nothing to do with the coverage of distributable cash flow which is below 1.0 times. I expect that will be the case for the third quarter.

    I imagine the market is correcting after a big run over the last 12 months and coupled with the negative results here this last quarter and with another quarter coming up like the last one, price is going lower.

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    • Management interest rarely align with short term traders, but rather with long term investors. That said I chipped in for a few more shares, will wait and chip in for a few more each quarter. Let's see how, or if the institutions abandon ship may tell prices near term.

      Sentiment: Hold

    • Yes there will be more deals. That's what they do. Issue more shares also. It will add to earnings growth. Most MLPs have gone down because of LINE. Their problems are the SEC investigation. No proof yet of wrong doing for LINE. LINE may have to cut div'y if Berry merger don't go thru but it may already be discounted. I'm holding CLMT for great divy.

      • 1 Reply to romannorga
      • Agree, the SEC thing really spooked the MLP's, that plus the crack spreads going from the $20's to $2 was really bad timing. Question here is can you get out and get back in at a lower price and save the extra pain. I got back in at $30 thinking a 25% drop from highs was a good play. I don't expect an SPO in this market climate anytime soon and they may well hold off on any new purchases for time being. Newly minted SPO I think would go over like a lead balloon now. The long haul, love CLMT.

        Sentiment: Hold

    • My history shows every time shares were added with new deal debt taken on......CLMT pps advanced holding a fair PE on the new earnings expected from such deal. We will see the outcome over the next six months, cross your fingers, but I trust management from past history and results.

      Sentiment: Buy

      • 1 Reply to steveh8000
      • Take a look at the current coverage of the dividend.
        No company that has increased its' debt every year, year after year has not
        ended up not getting in trouble.
        This company is going to be significantly impacted by the mandate by Congress
        to increase the amount of ethanol added to refinery products. This percentage is going to climb over time and CLMT management has said that this expense could be $25 million each quarter, $100 million in added costs every year. That added expense will come right out of cash flow and therefore distributions.
        Every company: Chesapeake, Linn Energy, Sand Ridge that has added debt, added shares has ended up seeing share values decline significantly at some point.
        You are depending on past history and past history has caught up with every company that has added shares, added debt, with declining coverage of its distribution.

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