- Whilst I have previously warned that the very high 11% distribution yield from CrossAmerica Partners was risky, these risks have now been kicked into overdrive.
- They saw a bad start to 2021 with their first quarter seeing both their operating cash flow and adjusted EBITDA down around 20% year-on-year.
- This was already less than ideal given their very weak distribution coverage but the more longer-lasting issue relates to their very high leverage and their now very weak liquidity.
- Their covenant leverage ratio has soared and if they have another weak or bad quarter, it would breach its limit, which is concerning with tough year-on-year comparisons laying ahead.
- Their distributions are now very risky with a significant reduction or complete suspension a very real possibility, and thus, I believe that downgrading my rating to bearish from neutral is appropriate.
For further details see:
CrossAmerica Partners: One More Bad Quarter And Say Goodbye To Your Distributions