CQP - Cheniere Energy Partners: Time To Sell With Risky Distributions And A Near Record High Unit Price

• Cheniere Energy Partners have seen their unit price recover back towards its record highs and whilst they still offer a high 6% distribution yield, it sadly has a risky outlook.
• Their large distribution payments are difficult to cover with free cash flow but the growth prospects once the sixth LNG train at Sabine Pass comes online should resolve this issue.
• The real problem is their over $16b of net debt and the resulting very high leverage that has a very restricted ability to deleverage whilst also sustaining their distributions.
• Thankfully, their liquidity is strong but it does not mitigate the risks since their equity-focused unitholders are still buried under the pile of debt further up the capital structure.
• Whilst their high distribution yield is appealing, it still appears to be time to sell given its risky outlook and a near-record high unit price and thus I believe that a bearish rating to be appropriate.

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