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Calumet shares plummet on dropped dividend, higher debt

April 18, 2016

Shares in Calumet Specialty Products Partners went into a free fall beginning Friday evening, after the struggling Indianapolis-based company suspended its annual dividend and took on new debt.

Calumet stock fell 30 percent in after-hours trading Friday and dropped another 53 percent Monday morning, to as low as $4.75 per share.

The oil-refinery company announced late Friday afternoon that it was suspending its $2.74 annual dividend—a move that analysts had already been anticipating.

Calumet also said it priced a $400 million private placement offering of senior secured notes due in 2021 at a steep rate of 11.5 percent.

"The proceeds raised from the senior secured notes offering, in conjunction with a suspension in our quarterly cash distribution, position us to manage our capital structure with prudence and conservatism during a challenging period for our business, while repositioning the partnership for long-term strategic growth in our core specialty products markets," Calumet CEO Tim Go said in a written statement Friday.

In addition, Calumet said it expected to lose $59 million to $83 million in the first quarter. It is scheduled to officially announce earnings on May 5.

It also expects to have only $7.4 million cash on hand after the first quarter, down from $272.8 million a year ago.

Calumet, which owns refineries in 10 states across the country, has been hit hard by the collapse in oil prices. Its shares have fallen more than 75 percent since the beginning of the year.

Go, who became CEO Jan. 1, has been trying to win back investor confidence after prior management went on an acquisition and expansion spree that ratcheted up debt and heightened the company’s volatility.

The company recently took a big hit as part of a joint venture that built a $430 million North Dakota refinery—the first new refinery in the United States in seven years. The plan was to churn out expensive diesel fuel that nearby shale producers needed to power their equipment.

Trouble was, between construction in 2014 and opening in May 2015, the shale boom went bust.

The aggressive expansion left Calumet with a hefty $1.7 billion in debt. Meanwhile, it would have to allocate $210 million a year to make good on its dividend.

The latest offering raises the company’s total long-term debt load to more than $2 billion, the company said Monday in a public filing.

Calumet is one of just four central Indiana companies on the Fortune 500. It employs more than 2,200 and had revenue of $4.2 billion in 2014.

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