Niska Gas Storage Partners LLC (NYSE:NKA) tanked heavily in the previous day’s trading session after analysts at Citigroup assigned a ‘Sell’ rating on the stock. The analyst at the research firm, Faisel Khan raised the probability of a credit event as he revised the price target on the stock to zero. Khan wrote in his report that the present capital structure does not support the business, and he sees the possibility of a credit event to happen very likely.
Citi Is Negative
Khan, however, said that Niska Gas Storage Partners LLC (NYSE:NKA)’s gas storage assets still appear valuable over the long run. In addition to this, Khan sees higher risk attached going forward as he foresees a substantial dilution of public equity in the process of restructuring. Khan mentioned that it would become extremely challenging for the company to refinance the debt as its cash flow will be insufficient to bear the financing costs.
Distribution Of Common Units Suspended
Earlier this month, Niska Gas Storage Partners LLC (NYSE:NKA) has announced suspension of its common unit distribution. The company announced this step in order to conserve cash and preserve liquidity in the challenging market environment. The company missed meeting the market consensus on earnings per share by a wide margin, posting -$6.85 earnings per share in the third-quarter against the estimates of -$0.30. The company blamed higher supplies and relatively warm weather as factors leading to dismal results.
It said that the excess supply across North America supplemented by a warm weather took a toll on its earnings. Further, the company anticipates a rough quarter ahead now, which pushed it to review cost reduction strategies leading to the suspension of distribution of its common units.
Ever since the company announced its cost reduction strategy, its shares continue to tumble on the market. Last Friday was no different as the shares of the company further extended loss, plummeting by more than 27% to close at $1.57.