NGL to da moon (well, maybe to $10?)!! Message Board

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Gold/Mining/Energy : NGL to da moon (well, maybe to $10?)!!

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To: Glenn Petersen who wrote (5)	3/6/2023 2:09:42 PM
From: Elroy	Read Replies (1) of 109

Yes. The preferreds have moved from Sub - $10 to almost $25 in the past two months. I think the bonds are trading at par. It seems NGL may sort of be out of the woods in regard to going bust. After this $110m asset sale, if all that money is used to pay down long term debt, they should have about $2.8 billion in long term debt remaining. $380m comes due in 2025, and most of the rest comes due in 2026. There are covenants in the debt that prevent them from using cash for much beyond debt paydown until the debt to trailing 12 months EBITDA is below 4.75. They expect to do $630m in trailing EBITDA in March 2023, so that would put them at 2.8b / 630 = 4.44x leverage ratio. So....I think they will be back to free to do whatever they choose with their free cash. The prefferds are in arrears, and they owe (I think) about $5 per share on each preferred stock. They have about $900m preferred stock, so 900/25 = 36m shares. 36m x $5 = $180m obligations that are in arrears. So they have something like $180m they have to pay off before beginning preferred payments again. And then they can spend on Cap Ex and distributions. Annual interest on existing debt is about $260m per year. That will jump higher when they refinance as the rates will be higher. Lets says worst case it goes to $330m (11% of $3 billion debt, hopefully less). I think March fiscal year end 2023 EBITDA of $630m is expected to grow. No idea to what, but it seems like it's going higher. It has increasd about $100m per year for each of the past two years. But lets just say this happens...... They spend fiscal 2024 (Mar) paying off the preferred arrears obligation ($180m), paying interest on exisiting debt ($260m) and maintenance capital spending $100m?). That costs $540m. They have fsical 2024 (Mar) EBITDA of perhaps $670m (up $40m from 2023), so that leaves $130m to probably pay down their revolver line of credit. Then in fiscal 2025 (Mar) they have perhaps $700m EBITDA. They refinance the 2025/6/7 debt $2.8 billion debt into $3 billion 2030 10% debt. That costs $300m per year. They pay coupons on the $900m preferred stock which costs perhaps $100m per year. They pay $150m per year for maintenance and growth Cap Ex. With $700m EBITDA they pay ($300m + $100m + $150m = $550m) and then spend $130m to pay $1.00 per year distribution (130m shares out I think), and there's $20m left over for whatever. That seems very reasonable. I think at that point NGL's valuation depends on the EBITDA growth story - if it's positive (and it has been for the past two years), we're looking at $10 to $15 unit price.

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