Natural Resource Partners LP (NYSE: NRP), which lately has been diversifying its based beyond the coal landholding business, announced on April 22 a long-term plan to strengthen its balance sheet, reduce debt and enhance liquidity in order to reposition the partnership for future growth.
The plan consists of the following strategic goals and initiatives:
- Improve consolidated Debt/Adjusted EBITDA from 4.9x at December 31, 2014 to 3.5x by the end of 2017;
- Reduce NRP’s quarterly distribution to $0.09/unit, a 75% decrease from the distribution paid with respect to the prior quarter that will: increase NRP’s estimated distribution coverage ratio for 2015 to over 4.0x based on NRP’s current guidance; and result in additional cash available for debt reduction of approximately $130 million annually;
- Utilize excess cash to pay off approximately $500 million of debt by the end of 2017, including $41 million paid in the first quarter 2015;
- Enhance and extend the partnership’s liquidity profile with the establishment of a new NRP Operating $300 million revolving bank credit facility that will mature in October 2017 and replace NRP Operating’s existing $300 million revolver that matures in August 2016; and
- Increase focus on capital efficiency and pursue NRP’s diversification strategy through organic growth of its aggregates, industrial minerals and oil and natural gas assets.
“After several years of accelerated growth and diversification through acquisitions, we need to focus our attention on reducing our debt and improving our balance sheet,” said Corbin J. Robertson, Jr., Chairman and Chief Executive Officer. “The Board’s decision to decrease quarterly distributions to our unitholders was made after extensive consideration of NRP’s liquidity and financial position, as well as the current market environment. Ultimately, the Board concluded that it is in the best interest of NRP to use a substantial portion of its distributable cash flow to pay down debt, implement a plan to improve its credit metrics and liquidity, and position NRP for long-term growth.”
Natural Resource Partners is a master limited partnership headquartered in Houston, Texas. NRP is a diversified natural resource company that owns interests in oil and gas, coal, aggregates and industrial minerals across the United States. A large percentage of NRP’s revenues are generated from royalties and other passive income. In addition, NRP owns an equity investment in OCI Wyoming, a trona/soda ash operation, owns non-operated working interests in oil and gas properties and owns VantaCore, making NRP one of the top 25 aggregates producers in the United States. NRP began life in the coal landholding business, and lately has added other business lines as the coal industry sustains a protracted downturn.