If they execute perfectly, they might happen...
Well, it doesn't take perfection to stay current. Business as usual with zero growth could keep the preferreds current. Things can even stumble a bit, and they're still likely to have enough free cash flow to pay preferred dividends.
Yes, they repaid the dividends, but the fact that they were suspended so long makes potential buyers uncomfortable (they might do it again).
Sure, that's why today they're trading at $23 and expected to pay $3.10 per year. My point is each quarter that they make the payment, and also improve their balance sheet, the preferred price should rise. Improving the balance sheet means they are less and less likely to go into arrears again.
When they went into arrears annual EBITDA was about $430m. In the last fiscal year it was $611m and is expected to be $665m in the fiscal year ending March 2025.
Their cash obligations are long term debt (~$250m interest) and maintenance Cap Ex (~$100m).
Preferred dividends are $120m pear year.
If EBITDA is just $600m, they've got $130m free cash with nowhere to go. That's a decent cushion. EBITDA is forecast to be $665m, so they've got about $200m free cash per year going forward, after the preferreds are paid.
Sure, everything could collapse, but (in the water business, 85% of EBITDA) things have improved every year for four years in a row.
It doesn't take perfect execution to keep the preferreds current. It just takes business as usual. |
