Let's say they don't start paying down the arrearage until 2010-11. If you have sold, do you get the arrearage for the period you owned? Or does the arrearage travel to who ever is the owner at that time?
You must own the shares on the x date when dividend is declared to receive it. Just asking that question tells me that this is not for you. I am not trying to be insulting, but this MLP will throw off phantom income this year and next that is taxable to you even if you get NO distribution (this is NOT a Dividend). What will happen is that when distributions resume, the common unit holders will be entitled to ALL distributions paid until all arrearages are made up to the $1.45 MRD level, then subordinated holders will start to be paid again. This protects common holders to a certain extent, though without Nat gas prices and volumes rising, this will be an extend period on little or no distribution as the company currently expects. On the upside, the debt will be greatly reduced in the meantime and equity value will rise so in the future, there will be even more money available to pay the dividend since there will be about $150,000,000 less debt to service. This would save perhaps 6-9 Million a year.
If it works like cumulative preferreds like GKK-A, the distributions in arrears are embedded in the stock when you buy. If you sell now, as I did in the early morning, you don't have the right to anything. An interesting gambit is buying these kind of instruments at just the right time in the future. I need to listen to the call, but this is a radical move and must mean they expect a long period of retrenchment. It's really all about gas prices. If the disaster hits that some predict, it's going to take two years to get thru this. But, if they have spent cash flow that could have been directed to distributions and rather pay down debt, they are going to need a good gas price to produce the necessary extra cash flow to make up back payments and still remain current on present distributions. A pretty tall order.