Blog Coverage Global Partners Ends Railcar Sublease Agreement Before Maturity to Save Costs

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LONDON, UK / ACCESSWIRE / December 23, 2016 / Active Wall St. blog coverage looks at the headline from Global Partners L.P. (NYSE: GLP) as the Company announced on December 22, 2016, that its wholly owned subsidiary Global Companies LLC signed an agreement terminating sublease for 1,610 railcars that were leased from a third party before the maturity date. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

One of Global Partners’ competitors within the Basic Materials Wholesale space, Empire Resources, Inc. (NASDAQ: ERS), reported on November 14, 2016, its results for the third quarter of 2016. AWS will be initiating a research report on Empire Resources in the coming days.

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Global Partners L.P. is a midstream logistics and marketing Company that is engaged in the purchasing, selling, and logistics of transporting petroleum and related products, including domestic and Canadian crude oil, gasoline and gasoline blendstocks, distillates, residual oil, renewable fuels, natural gas and propane. Global Partners also owns, controls, or has access to one of the largest terminal networks of refined petroleum products in the Northeast. Global is one of the largest independent owners, suppliers and operators of gasoline stations and convenience stores.

Commenting on the termination Eric Slifka, President and CEO of Global Partners, said:

“Terminating the lease for these railcars – three years ahead of its scheduled expiration in 2019 – saves the Partnership more than $10 million in cash and puts some of the expenses associated with underutilized railcars behind us.”

The details of the agreement and its financial implications

As a result of the agreement, Global Companies will have to make a one-time discounted lease termination payment in Q4 2016. The discounted payment would be approximately $10.2 million. This is against the actual lease payment of $72 million that Global Companies would have had to pay over the next three years. The agreement helps save all future lease payments for the railcars. The scheduled lease payments were about $30 million, $29 million, and $13 million to be paid in 2017, 2018, and 2019, respectively

As a condition of the agreement terminating the Sublease of Railcars, Global Partners will incur a one-time expense of $81 million in Q4 2016. Additionally, Global Partners will also have to make a one-time payment towards costs for future railcar storage, freight, cleaning, and inspection services including certain non-cash accounting adjustments. Global Partners has made an amendment to its credit agreement so that it can raise funds via borrowings, to finance the payment and costs towards early termination. The amendment to the credit agreement will result in bringing down the combined total leverage ratio from 5.50 times to 5.00 times effective with the fiscal quarter ending December 31, 2016.

Recent development in the Company

In November 2016, Global Partners declared their results for Q3 2016 ending on September 30, 2016. It reported a net loss of $119.6 million, or $3.54 per limited partner unit. Sales for the reported quarter were $2.0 billion with a negative EBITDA of $67.8 million.

In October 2016, Global Partners announced a quarterly cash distribution of $0.4625 per unit, or $1.85 per unit on an annualized basis, for the period July 01, 2016 – September 30, 2016.

In August 2016, Global Partners completed the sale of 30 non-strategic gasoline stations and convenience stores located in New York and Pennsylvania to Mirabito Holdings, Inc. for approximately $40.0 million.

Stock Performance

Global Partner’s share price finished yesterday’s trading session at $17.80, surging 13.74%. A total volume of 341.54 thousand shares exchanged hands, which was higher than the 3 months average volume of 75.19 thousand shares. The stock has advanced 38.13% and 17.43% in the last six months and twelve past months, respectively. The stock has an impressive dividend yield of 10.39% and currently has a market cap of $589.89 million.

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