the only problem with buying bond back. as a MLP if they buy the bonds back substantially under par that creates taxable income for stockholders even though they dont actually receive income
IMHO not really. for most e&p companies reneging on a contract isnt a viable option if they want to stay in business. If a company files chap 11 and then reneges on a contract its not like another pipeline is already there to transport the oil/gas. even if they build a new pipe it takes time to build. and in the meantime no o/g gets transported...
plus who is going to build a new pipline when capital is contrained and the company seeking the new pipe has already reneged on one pipeline deal
i think the LNG contract is a special situation that doesnt apply in most cases. If a company repudiates their contract who is going to ship their oil/gas. its not like another company can just step in and build a pipeline especially since capital is restrained right now. and without a way to ship a chapter 11 becomes chapter 7 very quickly
the nevada PUC has proposed eliminating net metering which would cause solar companies to abandon nevada
and technically its still true. cash flow is higher than the distribution. they are just choosing to use that cash flow to fund growth instead of paying shareholders. they have that legal right. they never guaranteed to pay the distribution....
i almost never short stocks. given the market in general rises 8% or so on average I feel shorting means starting with a disadvantage.
until i sold today I had owned either KMI or KMR since the crash in 2008-2009
my hard fast rule in any stock is do i have confidence in management. with KMI the answer sadly became no. ergo i sold .If it doubles from here so be it,it wont be the first time thats happened to me.
when i evaluate a stock for sale i ask myself has my thesis for owning the stock changed for better or worse. if my original thesis is no longer valid its time to sell.
Ive owned it for a long time since I owned KMR before the merger. I had faith in Rich Kinder as someone who was looking out for my investment.
The screwing oover that happened to KMP owners during the merger shook my confidence in RK but not enough for me to sell.
Now this. 6 weeks ago everything was supposedly humming along despite the market turmoil. KMI had just issued a preferred to raise capital and was talking about equity needs for the first 1/2 of 2016 filled,and a 6-10% distribution hike.
Last week he decided to buy a pipeline despite widespread marketplace worries about debt loads. Now he cuts distribution by 75%,far in excess of what most market participants were looking for.
That was the last straw. Why would i want to invest in a company with a 3% payout,a highly levered balance sheet and management Ive lost faith in??????
so im out. KMI may go to 25,it may go to 10. doesnt matter to me. Im done. I put the proceeds in what i think is a better managed MLP.
how do you come to that price.. BWP which is in worse shape trades at a yield of 3.44%. the same yield on a .50 payout is 14.53
BWP pays .40 a year. current yield 3.44%
KMI will pay .5 a year. with the same yield as BWP thats a price of 14.54 a share. Now KMI is in much better shape than BWP after the cut, so I would think they would trade a little higher than that. call it $15 a share currently its 14.61 so i think its gotten cheap
why are they going BK?
the have 5B in cash flow every year.
4.4B in dividend payouts
if they reduced the div and cut groth cap ex they could rapidly pay off the debt....
unline enron this is not a fraud