Despite an increase in the price of energy products in last few days, Vanguard Natural Resources, LLC (NASDAQ:VNR) hasn’t obtained much love from the investors. Also, it should be noted that that the company’s cash flow assignments look extremely appealing. The issue at hand, mainly a lender that is crushing the firm to death, seems right now to be lethal and shareholders should step carefully. There is a prospect that management can retrieve the business, but it’s not a factor considered by many analysts.
In October 2016, Vanguard Natural was being strained by its credit facility lenders and presented shareholders with significant risk. Despite seeing equity of the firm surge as much as 77.6% after the release of that piece, the company’s stock has since declined and is now trading 11.3% lower than the last trading price prior to that article was released. Given the gone time and the significant gains in energy prices, it would be better to go back and analyze once more to check if anything has improved.
The last meaningful thing that the market heard from Vanguard was it has finalized a deal with creditors wherein its credit facility – borrowing capacity was reduced to $1.1 billion from $1.325 billion, leaving the company with a notable capital shortfall. Things deteriorated as lenders agreed to permit Vanguard to free up minimum $50 million cash it was needed to keep in hand to pay interest owed against its Senior Notes.
As part of this deal, Vanguard was forced to accept to compensate $37.5 million monthly, starting in January, against its facility’s principal balance. It would take place in a period of 5 months into this year until the firm minimizes total borrowings. With cash in hand of almost $30 million in November, this may not appear so bad, however, the fact is that company’s financial condition needs some thought.