Hard times, hot bargains

September 1, 2002 By    

For sale, cheap: Nation’s sixth largest propane retailer. Publicly owned partnership with plummeting sales, empty stock value and crushing debt load. Hoping to get offer before filing for bankruptcy protection. Call day or night.

The wolves are at the door of California-based CornerStone Propane Partners, the master limited partnership formed in 1996 to own and operate Synergy Gas, Empire Energy, Coast Gas and Coast Energy Group. Industry observers are wagering whether the company can stave off creditors long enough to make it to the heating season.

Publicly, CornerStone says it intends to make timely payment to all suppliers and continue servicing customers without disruption. Word on the street, however, is that the partnership’s marketing and sales departments have been shut down while regional offices have been merged or closed.

There’s also talk that the company is considering non-renewing its membership in the National Propane Gas Association in order to save membership dues.

The company has more than 440,000 retail propane customers in 34 states and 2,000 employees. It sold 275.4 million retail gallons and 205.2 million wholesale gallons in fiscal year 2001.

The foundering retail giant tried to right itself by selling or closing all of the midstream crude oil pipeline, gathering and marketing assets of its Coast Energy Group division earlier this year. It sold its Canadian crude oil business in 2001.

But recent weeks have been particularly telling for CornerStone, whose stock price has fallen from $18.38 to less than 25 cents in the last three years. Since July, the company has:

  • Appointed Robert Sundius Jr. as chief financial officer. Sundius specializes
    in company restructurings. Ronald Goedde, who spent 13 years at Coast Gas
    and Cornerstone, resigned as CFO in May 2001.
  • Dismissed President and Chief Executive Officer Keith Baxter and Chief
    Operating Officer Charles Kittrell. They have been replaced by Curtis G.
    Solsvig as CEO and Robert S.Everett as Chief Restructuring Officer. Both
    men are principals in a consulting firm specializing in management for
    companies evaluating restructuring options.
  • Decided not to make a $5.6 million loan interest payment on three classes
    of notes as it prepares to file for Chapter 11 bankruptcy protection.
  • Chose to withold its earnings for the fiscal year ending June 30. The New
    York Stock Exchange immediately suspended trading and removed CornerStone
    from the trading board.

What does it all mean? Look for a fire sale within the next year with another multi-stater scoring a major acquisition at bargain basement prices.

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