2 problems - 1st you can't pick and choose which shares get a distribution and which ones dont, its all or nothing, so that leaves us at $160 million for the year (80 million units x $2.00 per unit). 2nd the EBITDA to distributable cash flow isnt as simple as you make it out to be.
"I note that recently management has released guidance of "Adjusted EBITDA" of $245-$260 million for FY 2013. I could write a whole other article on "Adjusted" EBITDA (maybe I will!) which excludes a host of items (such as stock compensation, which is a direct transfer of shareholder wealth), "loss on disposal of assets and other," and a several other real and recurring items, but let's ignore all that for now and assume a "clean" EBITDA figure of $250M. Interest eats up approximately $100M. If true "maintenance" capital expenditures are in the $65M range (I think I have made the case here), that leaves (250-100-65) about $85 million left over to pay a current distribution level of $158 million."
Dont pay any attention to infinitidrivr. His argument against the SA article was that it must be wrong because a ratings agency put out a buy recommendation with a $22 price target. I laughed my rear end off when I read that. He sounds like one of those #$%$ who bought Bear Stearns a week before it went under because Jim Cramer recommended it.
I thought the SA article was well thought out and hit the nail on the head. It does not surprise me that none of the FGP supporters have yet to point out one argument in the article that is factually inaccurate.
I performed my own, albeit much more simple, analysis based on the quarterly cash flow statement, six months ended January 31, 2013.
Distribution - ($79,814,000)
Proceeds from increase in long term debt - $22,552,000
Net additions to collateralized short term borrowings $60,000,000
There you go - borrowing $82.5 million smackers to pay an $80 million distribution is not sustainable!!!!!!!!!