Wed 12/08/2021 07:41 AM
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Relevant Documents:
Link to Analysis Page
Link to Restructuring Database on Reorg
Disclosure Statement
Plan
10-K

Ferrellgas Partners LP, a retail distributor of propane and related equipment sales, emerged from bankruptcy on March 30 after equitizing its senior notes and refinancing the debt at its subsidiary operating partnership, Ferrellgas LP. As part of the bankruptcy, the holding company, Ferrellgas Partners, issued Class B units to holders of its $357 million of senior notes that were due in 2020 in satisfaction of their claims and issued Class A units to prepetition limited partnership interests. Additionally, to refinance debt at the OpCo entity, Ferrellgas LP issued $700 million of preferred equity to Ares, JPMorgan and holders of the 2020 senior notes.

The preferred units and Class B units have created different incentives for the company to redeem them from the capital structure. The preferred units require high quarterly distributions and have a high redemption price based on the greater of a multiple of invested capital and an internal rate of return in order to be redeemed. Additionally, under certain conditions by the tenth anniversary of the effective date, the preferreds have the ability to force a sale in order to be redeemed. While the Class B units do not have required distributions, they do possess a distribution threshold of $357 million that upon reaching will convert the units to Class A units at a specified conversion factor. The conversion factor increases exponentially over time, incentivizing the company to allocate distributions solely to Class B units over allocating to both Class A and B units in order to limit the dilution to Class A units upon conversion. If the company wants to redeem Class B units and avoid the Class A unit dilution altogether, it must pay the Class B unit call price which allows redemption at a premium, similar to the preferred units.

Through the plan treatment, and as a result of their reported prepetition holdings in the senior notes, PGIM and Standard General owned approximately 69% and 9%, respectively, of the Class B units. The Class A units and B units possess different rights including rights related to distributions prioritizing distributions to the Class B holders over Class A units. Prior to emerging from bankruptcy, the company stated on its second-quarter earnings call that it was “highly unlikely” to make distributions to common units in 2021.

Since emerging from bankruptcy, propane prices have continued to rise significantly above previous years with the November spot price for Mt. Belvieu, Texas, being $1.27 per gallon, the highest price for the first month of the company’s winter heating season since 2011. Historically, an increase in sales price per gallon has not always translated to higher propane sales volumes, however the company has managed to offset declines in propane volumes with improvements in gross margin, thereby increasing cash flow. In September, Ferrellgas declared a cash distribution on the partnership’s Class B Units of $38.46 per unit, or $49.9 million in the aggregate that was paid on Oct. 8. Management commented on both the rise of propane prices and its recent distribution on its fourth-quarter earnings call stating that it was not forecasting demand destruction due to higher propane prices and that it has started “a multi-year process to reduce [its] cost of capital” with its distribution. CEO Jim Ferrell also stated during the call that its Class B units are “the most expensive part of [Ferrellgas Partners] capital structure.”

This analysis examines Ferrellgas Partners’ free cash flow sensitivity and its ability to continue to make distributions to unitholders. We also analyze the company’s historical financial and operational performance.

Ferrellgas Partners filed for bankruptcy on Jan. 11, due to its inability to repay or refinance the debt due under its $357 million 8.625% senior notes due 2020. The company entered bankruptcy to restructure its holdco debt in addition to refinance the debt at its operating partnership, Ferrellgas LP, which did not file for bankruptcy. However, debt at the operating partnership was refinanced with a new credit facility, new debt and preferred equity. Ferrellgas LP also provided a $19.9 million unsecured term loan to Ferrellgas Partners to finance the chapter 11 cases.

The bankruptcy plan provided for the 2020 senior notes claims to receive 100% of the Class B units and that the existing holdco LP unit interests receive 100% of the Class A units. Additionally, the holdco guaranteed the operating partnership’s $700 million secured notes due 2025. As part of the bankruptcy plan, this opco secured guaranty would be reinstated, however these secured notes were refinanced along with the remainder of the opco capital structure prior to Ferrellgas Partners emerging from bankruptcy.

A summary of the plan treatment and recoveries for the holdco is shown below:

Treatment as laid out in Reorg’s Restructuring Database is below. Please use this link to access the database to find specific aspects of the plan including economic information, legal topics and key documents.

Ferrellgas Partners entered bankruptcy having debt of $357 million in senior notes due 2020. The company’s operating partnership and nondebtor Ferrellgas LP had $2.175 billion of debt including $700 million of secured notes and $1.475 billion of senior notes when its holdco filed for bankruptcy. The bankruptcy eliminated debt at the holdco.

On a consolidated basis, Ferrellgas Partners emerged with total debt outstanding of $1.475 billion and $700 million of preferred units all issued by the operating partnership. Additionally, the opco entered into a new $350 million secured revolver due 2025. Distributions to the preferred units and Class B units are considered restricted payments under the opco’s senior notes. These distributions are limited by the company’s fixed charge coverage ratio which is further discussed below in the Free Cash Flow Sensitivity & Distributions section of this piece. The opco notes trade in the mid-90s and have a make whole premium if redeemed prior to April 1, 2023, for the 5.375% senior notes due 2026 and prior to April 1, 2024, for the 5.875% senior notes due 2029.

The company’s capital structure as of July 31 is shown below:

Reorganized Equity

On the effective date of the plan, Ferrellgas Partners issued an aggregate 1.3 million Class B units to holders of the prepetition holdco 2020 senior note claims. The plan also provided for a 1-for-20 reverse unit split resulting in 4.9 million Class A common units outstanding at emergence that were issued to prepetition holdco limited partnership interest holders. The Class A units are traded on the OTC Pink market under the symbol “FGPR.”

The company executed its sixth amended and restated limited partnership agreement of Ferrellgas Partners LP on the effective date. This agreement contains a special provision relating to the Class B units that states that distributions to Class B units will be “at least six times greater than the amount to be distributed” to Class A units until the Class B units receive distributions in the aggregate amount equaling $357 million. While any Class B units remain outstanding, Class A unitholders will not receive more than approximately 14% of any distribution.

Once the holders of the Class B units have received the aggregate distributions of $357 million, the class B units will be converted to Class A units at the option of Ferrellgas Partners in the first five years after the effective date and automatically thereafter. Such conversion will dilute the Class A units at an exceeding rate as each year passes and the conversion ratio increases as shown in the table below:

To the extent the distribution threshold is not satisfied in the first 10 years after issuance, the Class B units will automatically be converted to new Class A units based on the tenth year conversion factor, creating 25 new Class A units per Class B unit.

The amended partnership agreement permits holdco to make 100% of distributions to the Class B units. Holdco can redeem the Class B units during the first five years after the effective date based on a specified internal rate of return of 15.85%, but that amount increases under certain circumstances, including if the operating partnership paid distributions on the preferred units in-kind rather than in cash for a certain number of quarters. The agreement states that if the Class B units are called on or before the first anniversary of the effective date, March 30, 2022, “then the minimum Class B Call Price shall be $302.08 per Class B Unit less any cash distributed” which equals a total call price of $342.7 million after subtracting the $38.46 per Class B unit distribution in September (emphasis added).

The table below illustrates the equity dilution by class and assumes that the 1.3 million of Class B units are converted in the fifth year at a conversion factor of 5x under the post-dilution column:

Reorg calculates the implied percentage of Class B unit ownership and Class A unit ownership assuming the Class B units are converted at the five-year conversion factor of 5x. Based on the consenting noteholders January 2019 statement, Reorg estimates that PGIM and Standard General own 68.6% and 9.2%, respectively, of Class B units.

Ferrellgas Partners announced at emergence that it fully allocated the 35% of the $700 million in senior preferred units which were used to partially repay the prepetition OpCo debt and were originally designated for the holders of 2020 note claims as part of the plan. During the chapter 11 cases, Ferrellgas disclosed that Ares and JPMorgan Funding provided a commitment to fund the entire $700 million preferred issuance. Ferrellgas later disclosed that Ares purchased an aggregate $246 million of senior preferred units, approximately 35% of the preferred units issuance. Signatories to a purchase agreement for the preferred units include Ares, Barings, Cyrus, Keyframe, Commonwealth Land Title Insurance Company, PGIM, Shenkman Capital, and Standard General.

The company disclosed that as of July 31, Ferrell Cos. owns 23.4% of the Class A units and that Ferrell Cos. is owned 100% by an employee stock ownership trust. Also, CEO James Ferrell indirectly owns 4.9% of the Class A units. These are the same ownership percentages Ferrell Cos. and James Ferrell held prior to Ferrellgas Partners filing for bankruptcy. As stated previously, the plan provided for a 1-for-20 reverse unit split to allocate new Class A units for prepetition limited partnership interests.

The company’s illustrative postpetition organizational structure is shown below:

(Click HERE to enlarge.)

As part of a voting agreement among the Class B unitholders, Ferrell Cos. Inc., the parent of Ferrellgas Inc., and Ferrellgas Inc., the general partner of holdco and opco, the Class B unitholders are permitted to designate one independent director for Ferrellgas Inc., the general partner of Ferrellgas Partners LP.

Class A unitholders have no right to elect holdco’s general partner, or the directors of its general partner, Ferrellgas, Inc., on an annual or other continuing basis. In addition, the amendment to the opco partnership agreement provides holders of the preferred units the right to designate one director to the board of directors of Ferrellgas Inc. so long as at least 140,000 of the preferred units remain outstanding. Under certain circumstances, holders of the preferred units may have the right to appoint a majority of the board of directors of Ferrellgas Inc. 10 years after the effective date, March 30, 2031.

The general partner can be removed by the vote of the holders of at least two-thirds of the outstanding units entitled to vote, which includes the class A units owned by the general partner and its affiliates, and upon the election of a successor general partner by the majority vote of the outstanding Class A unitholders entitled to vote.

The board of directors of Ferrellgas Inc., the general partner of holdco and opco, include:

  • James Ferrell, CEO and chair of the board of directors;

  • Pamela A. Breuckmann, co-plan administrator of the Ferrell Cos. Inc. ESOP;

  • Stephen M. Clifford, CEO of PBI Gordon Cos.;

  • Carney Hawks, the Class B units’ director and former partner of Brigade Capital Management;

  • Andrew Levison, managing partner of Southfield Capital Advisors;

  • Michael F. Morrissey, former partner of Ernst & Young;

  • Edward Newberry, global managing partner of the public policy practice, investigatory and regulatory solutions practice groups; and

  • Craig Snyder, the preferred units’ director and partner in the Ares Private Equity and co-portfolio manager of special opportunities.


The holdco and opco partnership agreements provide certain covenants for the benefit of Class B unitholders which can be waived upon consent by holders of the requisite Class B units. Requisite Class B unit consent under the limited partnership agreement means if PGIM and its affiliates hold in the aggregate at least 50% of the then-outstanding Class B units, the consent of at least 50% of the then-outstanding Class B units or if PGIM and its affiliates hold in the aggregate less than 50% of the then-outstanding Class B units, the consent of at least 33% of the then-outstanding Class B units.

Additionally, any person or group that owns 20% or more of Ferrellgas Partners’ Class A units cannot vote any of their Class A units in excess of the 20% threshold, but this limitation on voting expires on the later of five years after the effective date and the conversion of the Class B units to Class A units.

Financials

Propane prices have increased significantly this year, and management responded to questions on whether the sudden rise would lead to demand destruction during its winter season, stating that this was not an expectation of the company. The winter heating season in the months of November through March is when the company sells the most propane volumes. This period covers the company’s second quarter ending Jan. 31 and third quarter ending April 30.

The company’s retail propane sales volumes in the second and third quarters of fiscal 2021 contributed 66% to total sales volumes for the year. As can be seen in the table below, although the company’s retail gallons sold in the second quarter have decreased 7.2% over time to 218 million in fiscal 2021 from 235 million in fiscal 2018, along with the average sales price per retail gallon decreasing, the company has still been able to improve average gross margin per retail gallon from 77 cents in fiscal 2018 to 88 cents in fiscal 2021. Even though gallons sold declined over this period in the second quarter, the company managed to increase its retail customers 6.8% to 727,739 in fiscal 2021 from fiscal 2018. Similarly, in the third quarter, the company has also managed to significantly improve average gross margin per retail gallon through 2021 from fiscal 2018, although with rising average retail sales prices per gallon over time.

Overall, the company’s retail gallons sold sensitivity to changes in the average retail sales price per gallon does not seem to follow an exact trend as any significant swing in price is not always followed by a similar magnitude change in volumes sold between 2018 and 2021. However, the company has been able to manage and improve its average gross margin per retail gallon over time even through volume and price volatility over winter.

The company’s wholesale propane sales volumes in the second and third quarters of fiscal 2021 contributed 56% to total sales volumes for the year. In contrast to retail winter results, the average sales price per wholesale gallon and average gross margin per wholesale gallon during the winter have both increased significantly over time from fiscal 2018 to fiscal 2021. In contrast to the retail results, the company has aggressively increased tank exchange selling locations over time to 62,566 in the second quarter and 62,372 in the third quarter of fiscal 2021, which represent increases of 28.2% and 21.9%, respectively, from the second and third quarter in fiscal 2018. However, the addition of these locations were not enough to improve the ratio of average wholesale gallons sold per tank exchange selling location as this has declined each year from fiscal 2018 to fiscal 2021 during the winter season.

Similar to the retail results above, the changes in wholesale gallons sold and changes in sales price per gallon and gross margin per gallon do not have a perfect correlation. Second quarter fiscal 2021 average sales price per wholesale gallon was $2.07, up 35.7% year over year, however wholesale gallons sold only decreased 2.5% year-over-year to 67 million gallons. Third-quarter fiscal 2021 also witnessed a similar year-over-year increase in the average sales price per wholesale gallon but with an even smaller year-over-year change in wholesale gallons sold.

The company’s average gross margin per retail gallon of $0.86 in fiscal 2021 was higher than prior figures dating back to fiscal 2013. Fiscal 2021 gross margin was higher despite not having the highest average sales price per retail gallon over the fiscal period from 2013 to 2021. The highest average sales price per retail gallon over that period was $2.24 in fiscal 2014, up 19.5% from fiscal 2013. Although the company witnessed this large increase in pricing year over year, both retail propane gallons and average gross margin per retail gallon grew in fiscal 2014, albeit by much smaller amounts.

Between fiscal 2013 and fiscal 2021, the company’s average gross margin per wholesale gallon of $1.07 in fiscal 2021 was its highest over the period. Fiscal 2021 also had the highest average sales price per wholesale gallon of $2.27 over that same fiscal period. Wholesale gallons sold only decreased by 3.2% year over year in fiscal 2021 even with the large price increases in the average sales price and average gross margin per wholesale gallon.

As noted above, the company has managed to continue to improve its gross margin year over year. The company disclosed in cleansing materials prior to filing for bankruptcy that it had potential operational improvements to “achieve sustainable savings in excess of $40 million” across delivery efficiency, transportation efficiency, pricing performance, fleet management, staffing models, and shared services. Ferrell stated during the company’s third-quarter earnings call that the company continued to have strong performance due to “sound operating practices as we transform ourselves into a technology enabled logistics company.” The improvements the company has made and higher propane prices have flowed through to adjusted EBITDA resulting in consecutive year-over-year growth to $318.1 million in fiscal 2021. The company has also decreased its capex spend since updating its fleet in prior periods resulting in unlevered free cash flow, calculated as adjusted EBITDA less capex, of $258.7 million for fiscal 2021.

Despite the company’s propane sales volumes being lower in fiscal 2021 than either fiscal 2019 or fiscal 2020, the company still managed to generate substantially higher unlevered FCF in 2021 than the two prior years. While the company slowly grew retail customers by 1.5%, it aggressively expanded tank exchange selling locations by 11.7% in fiscal 2021 from fiscal 2019. However, average gallons per retail customer and average gallons per tank exchange selling locations fell by 7.4% and 12.2%, respectively, in fiscal 2021 from fiscal 2019 levels. Also, average gallons per transportation equipment unit was 195,030 in fiscal 2021, down 11.2% from 219,619 in fiscal 2019.

Additionally, over this three-year period, the company’s general partner reduced its full-time propane field operations employees by 10.4% to 3,415. Ferrellgas Partners has no employees and is managed by its general partner, Ferrellgas, Inc. The company also significantly decreased service centers and service units by 29.6% and 10.7%, respectively, in fiscal 2021 from fiscal 2019 levels. The service unit locations utilize hand-held computers and cellular or satellite technology to communicate with management typically located in the associated service center.

As shown in the table above, the company’s cash operating expense for fiscal 2021 was flat to fiscal 2020 at $0.54 per gallon sold while cash general and administrative expense increased to $0.06 per gallon sold. Both equipment lease expense and capex decreased on a per gallon basis year over year to $0.03 per gallon and $0.07 per gallon, respectively, in fiscal 2021.

Free Cash Flow Sensitivity & Distributions

Using the company’s average gross margin per retail and wholesale gallon and its other cash costs on a per gallon basis noted above, the company can generate an unlevered free cash flow range of $240.1 million assuming total gallons sold are 10% lower than fiscal 2021 and $277.2 million assuming total gallons sold are 10% higher than fiscal 2021. This analysis also assumes other gas gross margin remains the same as in fiscal 2021 and excludes any changes in working capital.

Taking the high end of the range of $277.2 million of unlevered FCF and subtracting out annual senior notes interest of $83.4 million and annual preferred units distributions of $62.7 million results in levered FCF of $133.5 million available to make further distributions to unitholders.

Americas Covenants by Reorg analyzed the company’s new senior notes used to refinance the opco’s capital structure in March. Although the company has the potential to generate significant FCF from reduced interest expense after emerging from bankruptcy, the amount of distributions opco can make in a given period is limited by its fixed charge coverage ratio. If its FCCR remains above 1.75x then the opco has the ability to distribute a higher amount of distributions than if it were equal to or below 1.75x. The definition of fixed charges includes interest expense and dividends and other distributions paid to unitholders and preferred stock during the period. If the opco FCCR is equal to or less than 1.75x after giving effect to the restricted payment on a pro forma basis, then its capacity is significantly reduced to $25 million less all restricted payments since the effective date plus certain incremental funds outlined in the indenture. The indentures initially permit the operating partnership to make restricted payments of $60 million plus the amount of the operating partnership’s available cash from operating surplus for the preceding fiscal quarter as long as opco’s FCCR is greater than 1.75x. Additionally, opco net leverage must be equal to or less than 5x on a pro forma basis giving effect to the restricted payment.

While the company reported having unrestricted cash of $270.2 million as of July 31, and has the potential to generate over $100 million in cash that could be available to make further distributions to unitholders, the FCCR would prevent the company from doing a large enough distribution to have the ratio fall below 1.75x. Using an estimated adjusted EBITDA of $342.6 million, which is the adjusted EBITDA resulting in the $277.2 million of unlevered FCF above, and assuming fixed charges of $146.1 million consisting of annual senior notes interest of $83.4 million and $62.7 million related to the required quarterly distributions on the preferred interest yields a FCCR of 2.35x. This would only provide available restricted payments of approximately $49.6 million to distribute to unitholders, otherwise the FCCR would decrease below 1.75x and restricted payment capacity would decrease significantly. Based on this restricted payment of $49.6 million available to unitholders and the remaining $307 million of distributions to be made to Class B unitholders, this would imply conversion of the Class B units to occur in year 8 when the conversion factor is 10x assuming 100% of these distributions go to Class B unitholders and the distribution amount stays constant.

Opco Preferred Units

Even if the company manages to pay off the distribution threshold of $357 million, the Class B unitholders still have the ability to convert into a significant amount of Class A units unless the Class B unit call price is paid. Similar to the Class B unit call price, the company’s preferred units also have a redemption price. The first amendment to the opco partnership agreement states the redemption price of a preferred unit is the greater of an amount that would result in an internal rate of return, or IRR, of 12.25% and an amount that would result in a multiple of invested capital, or MOIC, of 1.47x. Opco has the ability to execute partial redemptions on a pro rata basis of all preferred unitholders if the total amount of the redemption is equal to or greater than $25 million. The redemption price includes accumulated but unpaid quarterly distributions to the redemption date and the MOIC does not apply to any PIK unit redemptions. Opco paid a prorated quarterly cash distribution of $8 million for the period from the effective date to April 30. The preferred units redemption price table shown below illustrates the redemption prices calculated based on the MOIC and IRR including the prorated distribution. The calculation assumes all quarterly distributions are paid in cash and the redemption occurs at the end of each respective year.

As shown in the table, the MOIC price is significantly higher than the IRR price until the fourth anniversary of the effective date. At the end of the fourth anniversary, the IRR price starts to become higher than the MOIC price and continues to increase from that year onward. The year-end fourth anniversary illustrates the smallest difference between the MOIC and IRR prices. However, the company stated in its 10-K that if the preferred units “were redeemed at any time during the first three to four years after issuance, the 1.47x MOIC would require a large premium payment and that large premium payment would result in an internal rate of return far in excess of the minimum 12.25%.” Moreover, the company says that “it is unlikely that Ferrellgas would be able to achieve any savings in its cost of capital by redeeming the preferred units during the first three to four years after issuance.”

The opco agreement requires the opco to pay quarterly distributions on the preferred units for the first five years at a distribution rate of 8.956% which steps up by 0.75% on each of the fifth, sixth and seventh anniversaries of the effective date. Certain violations under the agreement can further increase the distribution rate. The quarterly distribution may be paid in cash or paid in kind through the issuance of additional preferred PIK units at the quarterly distribution rate plus an applicable premium that escalates each year from 0.75% to 3% so long as the preferred units remain outstanding. If at the time of any distribution in redemption the opco has issued PIK units in lieu of any cash distributions on more than four quarterly distribution dates, the IRR related to the redemption price would increase by 1.5%.

The preferred units also have the right to require opco to redeem all, but not less than all, of the outstanding preferred units beginning on the tenth anniversary of the effective date at the applicable redemption price if any Class B units are outstanding or if no Class B units are outstanding and no more than 233,300 preferred units (33.3%) are outstanding. Additionally, the preferred units have the right to require opco to initiate a sale of opco if no Class B units are outstanding and more than 233,300 preferred units are outstanding at any time beginning on the tenth anniversary of the effective date. If opco fails to consummate a sale that would pay the total redemption price and the PIK redemption price for each outstanding unit, respectively, in full in cash, then the required unitholders shall have the right to appoint a majority of the board of directors of the general partner, Ferrellgas Inc., and initiate a sale. Also, a change of control of opco would allow preferred unitholders the option to require redemption of all or a portion of the preferred units.

Additionally, the amendment to the opco agreement provides for distributions of available cash to holdco only if the opco has made all required quarterly distributions in cash or PIK units on the preferred units, the opco has redeemed all PIK units issued, the opco’s consolidated net leverage is below 7.25x through May 15, 2022 and 7x thereafter before and after giving effect to such distribution, the opco has at leaset $100 million of liquidity, consisting of unrestricted cash on hand and available capacity under the credit agreement, and that the opco is in compliance with other provisions in the amendment.

Holco Class B Units

Because of the annual increase in the Class B units’ conversion factor and its internal rate of return, Ferrellgas Partners is incentivized to make distributions to these unitholders sooner and allocate up to 100% of holdco distributions to them in order to lower the conversion rate or reduce the redemption price for the Class B units. As stated in the holdco partnership agreement, the company has the option to redeem the Class B units through March 30, 2026, the first five years after the effective date, or pay $357 million in distributions to the Class B unitholders and automatically have the Class B units convert to Class A units based on the respective conversion factor at the time of reaching the distribution threshold. If holdco chooses to exercise the Class B unit call option then it must “redeem all, but not less than all, of the Class B Units outstanding.”

The table below illustrates the Class B call price at varying years through March 30, 2026, and assumes that only the September distribution of $49.9 million is made to calculate the call price for each year. These call prices are estimated using an IRR of 15.85% as noted in the company’s 10-K and assumes preferred unit distributions are paid in cash.

The opportunity cost of Ferrellgas Partners choosing to redeem these Class B units over allowing them to convert illustrates what minimum holdco equity value would warrant the redemption. In either choice, the company must pay the $357 million of distributions, however it must pay a premium based on an IRR in the case of the redemption. Netting the company’s distributions against the beginning distribution threshold of $357 million, we calculate a current distribution threshold of $307 million, which once it is met then the Class B units can convert to Class A units based on their conversion factor. The difference between the illustrated call price and current distribution threshold is the premium holdco must pay in order to prevent the Class B units from converting into Class A units. Based on the conversion factor table shown previously, we assume the former Class B units could still own 32% to 57% of the holdco after conversion within the first five years.

As shown above, the implied equity value of the holdco assumed by using the call premium and the converted ownership stake shows valuations ranging from $111.9 million to $606.9 million. These valuations are significantly above the range given in the disclosure statement.

Valuation

Ferrellgas Partners reported in its disclosure statement that Moelis performed a valuation analysis of the holdco estimating an enterprise value range of $2 million to $488 million with a midpoint of $245 million. The company’s Class A units trade over-the-counter under the ticker FGPR while the Class B units do not. The market capitalization of the Class A units is approximately $90 million at a price of $18.5 per unit as of Dec. 6. Adding the current call price of the Class B units of $342.7 million to the Class A unit market capitalization yields a holdco equity value of $432.7 million, which is slightly below the high end of the valuation range. Taking into account the preferred unit redemption price of $974 million as of the end of the first year anniversary, and the opco’s $1.475 billion of debt net of cash of $220.3 million assuming July 31 cash of $270.2 million less the $49.9 million common distribution paid in October, resulting in an enterprise value of $2.661 billion.

The table below shows the low and midpoint of the enterprise value range using the low and midpoint value of the disclosure statement. Using Reorg’s estimated unlevered free cash flow of $277.2 million which is based off of an adjusted EBITDA figure that is 8% higher than LTM adjusted EBITDA, this would imply an unlevered FCF yield of 12.4% at the low end of the enterprise value range, 11.2% at the midpoint and 10.4% at the high end.

--Marc Gardner
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