BBEP LP eliminated distribution...not good for KWK
BreitBurn announced today they were suspending their distribution until ??? Probably at LEAST through the rest of the year.
KWK own 40% of BBEP units. Non only will the value of the KWK investment go down, but KWK will also loose an appreciable cash flow coming in annually from BBEP. KWK own 21.3 million units of BBEP. At the recent run rate for BBEP's distribution ($2.08/year), KWK will loose $44 million in incoming cash flow they were counting on.
Monday is going to be very grim for BBEP, and KWK will feel the pain too.
Well, today was grim for BBEP (-34.32%), and "merely" ugly for KWK (-22.68%). But KWK's tumble today had two separate causes, which combined to create a "big bad news" day. Not only did the BBEP distribution cut announcement happen after the close on Friday, but KWK also announced before the market today that their interest rate range on the revolving credit facility went up. Perhaps the two events were actually related somehow (banks reacting the BBEP cut effect on KWK?? I don't know the timing), but I think the market's knee jerk reaction was to see two bad news items and say OH NO.
first off, I reported both these issues in a previous post, but second.... this ISSSSSSSS bad news! terrible news. the IR increase can go 4 times as high, from .006% to .024 , and thats on a current balance of over 900 million dollars!!!!! say 16 million for that, 44 million a year for loss of distribution. how to pay for these shortfalls? increased production, or use MORE of the line of credit? arggggggg