## What would it take to cure this mess? A suggestion.

Let's assume that after the distribution cut, Q3 represents a "normal" quarter. Where are we (well, not me) at? Annualized EBITDA of $250M, long term debt of $1.2 billion, annualized DCF of $100M, interest expense $76M, 156M common units, market price of $5.46 and . . . a management that has lost all credibility.

Leaving personnel aside, what would it take to convert this to a "normal" MLP, with a 3.0X debt to EBITDA ratio, and coverage at 1.1X let's say. Well, start with that debt ratio of course, it would require replacing $450M of debt with equity. The question is how many units that would require. Keeping in mind there would be roughly $28M of interest savings, that gives us $100M + $28M = $128M of DCF to work with, divided by 1.1 equals $116M of annual distributions. Let's give the company the benefit of the doubt and assume that the price to yield would be 8.5% once it got its house into order. But no way does an offering go off at that level at this point, impossible, right? What shall we say, 10%? I'm trying to be realistic without being too negative.

Now we need algebra to find the number of units to be sold, because we need a per-unit price to determine that. The equation is 450M = XY, where X is the number of units and Y is the price. We also know that $116M / (156M + X) = the distribution per unit, which is Y times 10%. Solve those equations and you get an offering of $99M units (roughly), at $4.55, with a distribution of 46 cents.

That's a haircut, folks, but it also leaves you with an MLP that can operate in a normal fashion, growing through acquisitions and capital projects through offerings combined with leverage, assuming the management is also replaced and confidence is restored. The unit price should also come up as the price to yield is reduced, at 8.5% it would be $5.41. A tall order, but in my opinion, it's the only rational course open to NGP in order to salvage this disaster. I expect a commission.