Overland Park company employing 500 in KC area plans restructuring to keep going
Ferrellgas, the Overland Park-based propane distributor that’s been burdened by debt, announced a capital restructuring that it says allows the company to remain independent and will involve its holding company filing for bankruptcy soon.
Ferrellgas said the arrangement will give its operating company, known as Ferrellgas LP and which will not be part of the Chapter 11 bankruptcy proceedings, liquidity and will suffer no disruptions of its business.
Ferrellgas employs about 5,000 workers across the country, including about 500 in the Kansas City area. It is best known for its Blue Rhino brand of propane tanks used for gas grills and water heaters, among other things.
“This agreement is an important milestone to allow us to eliminate debt overhang, strengthen our financial position, and partner with our institutional noteholders that recognize the value and growth potential in our enterprise,” said Ferrellgas chief executive and board chairman James Ferrell in a statement.
Ferrellgas Partners LP, the holding company for the broader Ferrellgas enterprise and which technically has no employees, will file what’s known as a pre-packaged bankruptcy, which means it has negotiated a restructuring with its creditors ahead of entering bankruptcy.
Ferrellgas Partners expects to emerge from the bankruptcy by April 4.
The result, according to Ferrellgas, is a cleaner balance sheet. The holding company’s debt will go away while some $1.5 billion of debt owed by its operating company will be refinanced and more than $1 billion in new capital will be raised.
For much of its history, Ferrellgas focused on propane supply.
In 2014 it bought its way into the business of transporting and storing natural energy resources, which is known as midstream operations.
Those acquisitions included buying Sable Environmental in 2014 for $124.7 million and the following year acquiring Bridger Logistics, a crude oil midstream company in Dallas, for $837.5 million.
Ferrellgas took on substantial debt to make those acquisitions. By 2018, Ferrellgas sold Bridger Logistics for $92 million.
The debt load, coupled with residential propane prices peaking in 2014 and falling ever since, according to the U.S. Energy Information Administration, was a millstone on Ferrellgas’ balance sheet. The company responded by trying to trim its debt load and cutting distributions to investors before suspending them altogether.
Ferrellgas owed $357 million in debt that was due on June 15, and $500 million due on May 1, 2021. Another $475 million was due in 2022 and $700 million was due in 2023.
In its annual report, for the year ending July 31, the company said its accountant “expressed substantial doubt” about its ability to remain a going concern. Earlier this year, the company delisted from the New York Stock Exchange; its shares now trade on Over the Counter Markets.
