That said, it's nice to see they are buying back shares. At a 30% discount to NAV, probably a better investment than they can make. Ironic isn't it? Maybe there is a new strategy here. Just be a lousy investment manager so that your shares constantly trade at a large discount to NAV and then get rewarded by buying back your stock at the discount.
Because they never had the $200m to pay the dividend in the first place. If they had the cash flow they could have simply cut the dividend, but in addition they had to borrow more money at an outrageous interest rate to maintain liquidity. If oil price dynamics do not eventually improve they are going to have to sell assets to survive. They alluded to this in their recent SEC filing. They simply have too much debt and they just acquired more. Not good.
Those bonds are trading around 70 according to a recent etrade bond quote. Last trade 70.5. On Friday they traded at 73. Not too bad of a hit.
And he gets paid $1.69 million to make a difficult decision? Right. You keep telling yourself that. How much did you get paid for that decision? I don't think you get it. If the bonds are in distress and trading at under 10 cents on the dollar, what do you think the units are worth? Hint. Nothing.
The real issue here is they have a lot of debt. And a lot of this debt is tied to the banks who periodically redetermine the borrowing base. If their revenues fall enough, the borrowing base could be reduced and put them into financial distress. It's happening to a lot of these MLP's. It's something to watch for with this one too, even though they are midstream. Witness SXE.
I agree. It is unlikely the units will have value longer term. Renegotiating debt usually results in the debt holders becoming the new equity holders (or in this case unit holders) and the existing unit holders being wiped out. I suppose there is always a probability that the existing unit holders will receive some benefit depending on exogenous events (such as the oil price recovering), however unlikely, which is perhaps represented in the current value of LINE/LNCO units. A better idea may be to sell the units and use the proceeds to buy the bonds which are trading around 10c on the dollar. I think that raises your probability of achieving some type of return.