Overland Park-based propane supplier Ferrellgas, known by consumers for its Blue Rhino brand of propane tanks, is warning investors that it has doubts about whether it can remain in operation as it shoulders a major debt load that’s coming due next year.
Share prices for Ferrellgas tumbled precipitously on Wednesday, dropping by more than 30% by the close of trading before stablizing on Thursday. The drop in stock prices came one day after it released its fourth quarter and year-end financial report. The report disclosed that Ferrellgas has doubts about its ability to continue as a “going concern.”
In particular, Ferrellgas is holding $357 million in unsecured notes that are due June 15, 2020. Ferrellgas hired Moelis & Co., an investment bank, and law firm Squire Patton Boggs to help the company manage its debt problems.
“The successful outcome of Ferrellgas’ debt reduction strategy continues to remain uncertain,” Ferrellgas’ latest filing with the Securities and Exchange Commission says.
Those strategies are uncertain enough that Ferrellgas also disclosed that its lenders and creditors could force the company into bankruptcy.
Ferrellgas, which supplies propane for outdoor grills, water heaters and gas-powered forklifts, among other uses, employs 4,200 workers. That number includes 380 centralized corporate positions.
A request for comment or an interview with company officials was not returned on Thursday. The company is unlikely to say anything; earlier this year, the company suspended its calls with investors and analysts.
The New York Stock Exchange in July notified Ferrellgas that it is out of compliance with requirements to list the company on the country’s largest exchange, mostly because its shares had traded for less than $1 for more than 30 days. Ferrellgas started the trading day on Thursday with shares going for 67 cents.
Ferrellgas got its start in propane supply. In 2014, it sought to expand its business into midstream operations, or the transportation and storage of natural gas and oil. The company went into debt to acquire midstream operators. For example, the company paid $837.5 million to buy crude oil midstream operator Bridger Logistics in 2015. In August 2018, the Bridger businesses were among those sold for a total of $92 million.
By 2018, Ferrellgas abandoned the midstream strategy and sold most, if not all, of those segments of the business and returned its focus to propane.
But the debt largely remained. Moody’s late last year downgraded Ferrellgas to non-investment grade, or junk, status.
Ferrellgas is structured as a master limited partnership, a corporation where profits are taxed on distributions to investors. Ferrellgas suspended distributions in 2018 as it grappled with debt.