Ferrellgas Partners sells tank railcars

February 21, 2018 By    

Ferrellgas Partners LP sold more than 1,000 tank railcars owned by Bridger Rail Shipping LLC, a subsidiary of Bridger Logistics LLC, which is a subsidiary of Ferrellgas, to an undisclosed buyer for cash consideration of about $47 million.

Ferrellgas says the proceeds will be used to reduce outstanding debt on the company’s secured credit facility.

According to Ferrellgas, the sale consists of 1,072 railcars, including 300 model DOT-117 and 772 model CPC-1232 railcars. Most of the CPC-1232 railcars are currently in storage and incurring storage fees, while all of the DOT-117s are currently leased to a third party under a multi-year contract.

“This transaction is another clear example of Ferrellgas’ commitment to debt reduction,” says James E. Ferrell, interim CEO and president of Ferrellgas. “The sale significantly reduces our interest expense, improves our credit metrics and lessens the company’s reliance on its credit facility as we move forward with growth efforts. We expect that the credit benefits from the sale of these assets will be achieved without impacting our forecasted earnings before interest, taxes, depreciation and amortization.”

With the sale, the company’s debt will be reduced, with the proceeds resulting in a proforma expected reduction in interest expense of about $2.8 million per year. Additionally, the company expects to report a non-cash loss on its model CPC-1232 railcars of about $35 million in the second quarter ending Jan. 31. The company expects no gain or loss from the sale of the model DOT-117 railcars.

“The market for our railcars has changed in recent years, so we have made the strategic decision to exit the railcar business,” says Ferrell. “With the sale, our streamlined company has further reduced its business risk profile, with the result being that our prospects for cash flow growth are strong. We have positive momentum and our employees are keenly focused on providing our customers with the world-class service we’ve always been known for.”

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Joe McCarthy was an associate editor at LP Gas Magazine.

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