MLP governance structure puts investors at risk, Moody's says


Moody’s warns the corporate governance structure of MLPs provides less protection to investors and creditors than the structure of a typical public company, calling it a credit negative for the MLP sector.

At public companies, accountability to shareholders is a net plus for bondholders, even when bondholder and shareholder interests differ, Moody's says; by contrast, in the MLP model, the general partner’s limited accountability to the partnership’s actual owners - the common unitholders - is a disadvantage for the MLP’s bondholders.

ETFs: AMLP, AMJ, MLPL, YMLP, MLPI, MLPA, ENY, MLPN, MLPG, EMLP, MLPS, MLPX, MLPY, MLPJ, AMU, YMLI, ATMP, ZMLP, MLPW, IMLP, ENFR, MLPC

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Comments (6)
  • Clayton Rulli
    , contributor
    Comments (3413) | Send Message
     
    Since the GP has very similar incentives as unit holders I dont see how their interests and goals can be as tainted as this report says. How is it different than a CEO getting paid in warrants at a higher strike price for example? GP's want cash flows to increase just as with any normal management team
    22 Jul 2014, 12:37 PM Reply Like
  • CornStove
    , contributor
    Comments (219) | Send Message
     
    As a stock or unit holder in any MPL's such as MLPL, it should strengthen your equity position and weaken the bondholder's position. Moody downgrades the bonds not the stock or equity position. Therefore the MPLs are flying high now ... as long as interest rates are low.
    22 Jul 2014, 01:53 PM Reply Like
  • Uncle Pie
    , contributor
    Comments (4323) | Send Message
     
    seems obvious, doesn't it?
    22 Jul 2014, 03:01 PM Reply Like
  • CornStove
    , contributor
    Comments (219) | Send Message
     
    MLPL is up $.72 to $69.31 since the SA news comment ....
    22 Jul 2014, 03:57 PM Reply Like
  • dave403
    , contributor
    Comments (43) | Send Message
     
    ironic coming from moody's.. they know a bit about conflicts....see their performance relating to rating of cmo's, etc back in the early-mid 2000's
    22 Jul 2014, 04:03 PM Reply Like
  • kevcl6750
    , contributor
    Comments (125) | Send Message
     
    The corporate structure didn't do a whole lot for bond holders at GM !
    23 Jul 2014, 09:32 AM Reply Like
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