How about using the FCF (EBITDA) to pay down debt in the good times (when fertilizer prices are high).
They're doing that.
They plan to pay down $95m of their 9.25% debt over two years beginning in Q3 2021. They've bought back $30m so far ($15m each in Q3 and Q4), and have $65m to go.
They refinanced the remaining portion (I think $550m) of the 9.25% debt down to 6.125% debt in Q2 this year.
That will increase their operating margins.
Well, not really. Debt/interest expense is usually after operating margin and before net margin.
But the main thing is the company should generate free cash flow. How they use free cash (reduce debt, pay distributions, spend on growth projects, buy back their own units, save for a rainy day, lotsa choices) is a great question to have to wonder about.
It seems like UAN is being played to his interests not the other unit holders.
Not sure why you say this. Paying down debt is in unit holders' interest, while paying distributions to unit holders is not? I don't agree with that. Each dollar of debt paid down represents a dollar that does NOT go toward distributions, you know.
Free cash flow is generally going toward unit holders. What does Icahn have to do with anything? You are the one that wants to pay down debt, there's no reason paying down debt is preferable to paying larger distributions. UAN the MLP survived when fertilizer prices were low and the debt cost was 9.25%, I'm pretty sure they'll do just fine as far as surviving now that the debt cost is 6.125%. So....why pay down debt?
Personally I would have preferred it if they refinanced all of the 9.25% debt to 6.125% debt, and didn't pay down a dime. I want the distributions for myself, and I'd rather they have more debt but pay more distributions than less debt and less distributions.
Does he eventually package CVI to sell it to a much larger processor (like PSX) and UAN shareholders get taken under?
CVI only owns 34% of UAN units. How can he sell CVI and force UAN to get a bad deal out of it? 66% of the units would vote no, unless you think they would vote against their own interests.
I think the Icahn "concern" is overstated. He doesn't have majority control. And I don't see why he would want to sell UAN for below market value? I'm sure UAN for sale could get a nice price, and his 34% stake would prefer a nice UAN sales price to a lower price. This is common sense, no?
Perhaps UAN may/could be the 'value' asset that allows Carl Icahn to 'Exit' his CVI position.
How? The buyer of CVI would own 34% of publicly traded UAN. So? |
