In Hindsight, Today Will Be Important For HCLP

HCLP and their bank reached a fast agreement on the compliance ratios. This is a big deal and I am very grateful for it. I almost turned tail and ran earlier this month when the threat of a breach surfaced in their earnings report. Sticking around has already proven fruitful (see the relief rally).

Hi-Crush Partners LP Announces Revolving Credit Facility Amendment

Houston, Texas, November 6, 2015 – Hi-Crush Partners LP (HCLP), “Hi-Crush” or the “Partnership”, today reported the completion of an amendment to its Revolving Credit Facility Agreement. The amendment, among other things, provides for a reduction in the commitment level from $150 million to $100 million, waives the compliance ratios through June 30, 2017 (the “Effective Period”), establishes certain minimum quarterly EBITDA covenants, allows distributions to unitholders up to 50% of quarterly distributable cash flow after quarterly debt payments on the term loan, and increases the pricing to LIBOR plus 4.50% during the Effective Period.

Accordingly, when HCLP has to take write offs early next year (they hinted at this) and they breach the old ratio limits, they will have a full two years to get back into compliance. And, as they have just suspended distribution, they should have plenty of cash to make that happen. Any recovery in oil prices over that time will obviously expedite the process, but I don’t have to count on such a hypothetical occurring in any timely manner now.

More importantly, their bank is labeling them a victor and communicating a commitment to making them work. Someone else will be getting the sharp end of the spear of destiny.

I am now all but completely confident that both of my remaining oil investments – HCLP and BAS – will experience full recoveries over the next few years.