Ferrellgas Emerges from Restructuring in Return to Propane Roots

Ferrellgas’ recently announced restructuring efforts (Ferrellgas Successfully Strengthens its Financial Position for the Future – March 30, 2021) contained many complex activities. We’re grateful to the editors at OPIS (Oil Price Information Service), which published a thorough recap of our restructuring. The article below was written by Jessica Marron and edited by Bobbie Clark, and is being republished in its entirety with OPIS’ permission. 

Ferrellgas Partners L.P. late Tuesday announced it successfully completed a series of transactions designed to save the 82-year-old propane retailer from going under.

After defaulting on $357 million worth of debt that matured last June, holding company Ferrellgas Partners in December entered "pre-packaged, voluntary Chapter 11" bankruptcy protection with the U.S. Bankruptcy Court for the District of Delaware.

Based on Tuesday's agreements, operating partnership Ferrellgas L.P. (referred to as OpCo in accompanying regulatory filings and press releases) established a new $350 million senior secured revolving credit facility, issued $1.475 billion in new senior unsecured notes due in 2026 and 2029, and sold $700 million in senior preferred equity. These proceeds have, in turn, fully satisfied OpCo's debt obligations and allow the company to wrap up its restructuring ahead of its April 4 deadline.

Traditionally a propane supplier, Overland Park, Kan.-based Ferrellgas in the mid-2010s attempted to expand into the midstream space through acquisitions that included well-water disposal company Sable Environmental for $124.7 million and crude oil transportation firm Bridger Logistics for $837.5 million. The heavy debt it took on to bankroll this expansion planted the seeds of its hardships.

President and CEO James E. Ferrell said in a statement provided to OPIS that this attempt to broaden its midstream footprint beyond propane - under former CEO Steve Wambold -- was a mistake and described the diversification strategy as "flawed." Believing that Ferrellgas's "propane business could and should be saved," he returned from retirement in 2016 to set the company back to rights.

Ferrellgas has since dispatched its non-propane-related assets, and Ferrell replaced all the company's previous senior management staff upon his return. In his statement, he said the company underwent a "complete restructuring of the balance sheets of both the holding company and the operating company."

From here, Ferrell sees a positive future for the company founded by his father in 1939. Among other benefits, the restructuring will preserve jobs in Kansas City and elsewhere, boost the company's credit rating, and allow it to maintain its employee stock ownership plan, he said.

"All this was based on the renewed vigor of our traditional propane business (Ferrellgas) and the other part of the business called Blue Rhino," Ferrell said. Blue Rhino is a leading propane tank-exchange business that operates over
62,500 locations in all 50 states and in Puerto Rico.

Amid a "pandemic year that was also heavily impacted by record-cold temperatures in many parts of the country," Ferrell touted a "transformation [that] took hold a year ago and has driven financial results higher than ever before."

Ferrellgas Partners' results for the quarter that ended on Jan. 31, reported earlier this month, saw net earnings, attributable to the company, rise to $63.3 million vs. $48.2 million the year prior. Propane sales over the quarter fell to 285,330 gallons, from 305,260 gallons, due to weather that was 2.7% warmer than the previous year and a weak U.S. economy.

Ferrellgas said in its earnings release that higher Blue Rhino tank exchange sales and "stay-at-home" buying trends offset the financial impact of lower volume sales.

OPIS notes this reporting period came prior to the massive freeze-offs and transportation logistics nightmare that struck much of the U.S. Southeast and Midwest in February.

-- Reporting by Jessica Marron, [email protected]; Editing by Bobbie Clark, [email protected]