Ferrellgas Partners: Cash Burn And Very High Interest Payments To Lead To Bankruptcy

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About: Ferrellgas Partners, L.P. (FGP)
by: Olsny Freitas
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Olsny Freitas
Long/short equity, special situations, Deep Value, debt
Summary

I discuss the biggest takeaways from the latest earnings release.

Bulls are looking at increased volume and sales numbers.

In the greater scheme of things, the sales increase isn't as relevant as it has not resulted in improved profitability.

FGP lost $56m in cash in 1Q19, leaving the company with $63m of cash on the balance sheet.

Additionally, the company has $187m available borrowing capacity under its revolving credit facility and is expected to generate cash in its upcoming quarter.

Thesis

There is a very realistic possibility of Ferrellgas Partners (FGP) filing for bankruptcy in the next 18 to 24 months. I project that the company runs out of liquidity within 24 months.