Niska Gas Storage (NKA -4.8%) enjoys three analyst upgrades a day after agreeing to sell the partnership, including the managing member and incentive distribution rights, to Brookfield Infrastructure for total consideration of ~$912M.
Credit Suisse upgrades NKA to Neutral from Underperform while raising the price target to $4 from $3, noting that "importantly, for an undisclosed limited period, NKA can discuss and negotiate alternative acquisition proposals with third parties, subject to Brookfield having the right to match the offer or receiving a termination fee."
Under the deal, Brookfield agreed to lend $50M to NKA, which Credit Suisse says addresses concerns surrounding NKA's ability to support working capital requirements.
NKA also was upgraded to Hold from Sell at Stifel and to Market Perform from Underperform at Raymond James.
Niska Gas Storage (NYSE:NKA) confirms it is considering strategic alternatives, including a sale of the interests of certain affiliates or a potential sale of the entire company, as well as refinancing debt and other actions that could improve liquidity.
NKA says it is working with Evercore to assist in pursuing the strategic alternatives.
Earlier: Bloomberg: Niska Gas Storage puts itself up for sale
Niska Gas Storage Partners (NKA +8.6%), whose value has collapsed from more than $1B to just $80M and who stopped distributions to shareholders in February to preserve cash, is exploring a sale, Bloomberg reports.
NKA, controlled by P-E funds Riverstone Holdings and Carlyle Group, is said to be working with Evercore Partners to find a buyer, as part of a broader restructuring effort as it struggles to revive its prospects amid the natural gas glut.
Boardwalk Pipeline Partners (NYSE:BWP) and Crestwood Midstream Partners (NYSE:CMLP) also provide gas storage services and have struggled, but they are considered less vulnerable than NKA because they are more diversified.
Niska Gas Storage (NKA -9.2%) sinks following a downgrade to Sell at Citigroup, where analyst Faisel Khan sees a potential credit event and the stock valued at zero.
While NKA's gas storage assets will be valuable over the long-run, "the business does not support the capital structure today, and a credit event now seems likely," Khan writes.
He also sees increased risk that the public equity will be diluted substantially in a restructuring, and that it will be challenging to refinance the debt because the cash flow is not likely to support the financing costs.
NKA explains "very disappointing" FQ3 results, saying increases in natural gas supply across North America coupled with relatively warm weather patterns in its markets - which have continued into FQ4 - resulted in extremely low seasonal spreads and little of the expected volatility as the winter withdrawal season approached.