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Jonathan Finger
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Background: Investment Banking (New York) - 1983-1986, 1988-1990 Banking / Investment Management - 1990 - 1996 Family Office Manager & Principal - 1996 to Present Led a successful shareholder campaign in 2009 to oust Ken Lewis and 3 directors from board of Bank of America.
  • Niska Gas Storage (NKA) - Beware - Management Does not appear interested in unitholder's best interests 0 comments
    Aug 15, 2011 4:07 PM

    I am (unfortunately) a unit holder of NKA.  It appears that for the most recent quarterly earnings, Niska reported that their sponsor is going to buy additional common units in NKA, and NKA will use the proceeds to buy back 8.875% notes or redeem those notes so that NISKA can avoid violating debt covenants and therefore continue to make distributions to common AND subordinated unitholders.  Read the 8K issued on August 11, 2011.

    The sponsors are private equity firms that appear more interested in getting a cash distribution on their units than doing what they should do, both under contract and what is in the best interests of the common unitholders.  The company has sufficient cash available for distribution to easily cover the common unit distributions, but does not expect to earn enough to cover the subordinated unit distributions.  By contract, the subordinated units are subordinated, meaning they should only get a distribution if funds are available after paying distributions on common units.   A common unitholder might expect they would defer distributions on the subordinated units if they do not have the operating cashflow to make the subordinated unit distribution.  But no.  Management and the sponsor have decided it is better to issue additional common units, thereby diluting common unitholders so they can continue to pay cash distributions to subordinated unitholders rather than deferring cash payments to the subordinated unitholders.  The company’s presentation materials make a point of the fact that cash available for distribution provides 2.2x coverage of the common unit distributions.  I have called the company to get an explanation of this policy.  No response so far other than "we'll get back to you."   On the surface, you cannot trust these folks.  Do not buy.

    Disclosure: I am long NKA.
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