Ferrellgas interim Chief Executive Officer (CEO) Jim Ferrell released the following letter this week concerning the company's plans for recapitalization and some of the actions taken by the executive team over the past few months. The United States-based propane supplier filed for Chapter 11 bankruptcy in January 2021.
The filing was part of a previously announced transaction support deal, and did not include Ferrellgas LP — only Ferrellgas Partners LP and Ferrellgas Partners Finance Corporation.
Read Ferrell's commentary, published verbatim, below.
"While it is impossible to describe all the events that led up to the new lease on life of Ferrellgas, I will have to give you a few so you understand our elation at having pieced together the successful recapitalization of the company.
The trouble for Ferrellgas began when the company tried to diversify into what is called 'Midstream,' the part of the oil business that is between production and, for instance, a gasoline station. In a way, Ferrellgas is part of midstream on the propane side, but what the company did in 2014 and 2015 was to acquire what are called disposal wells and, finally, a much larger entity called Bridger.
All of this diversification failed, and five years ago in late 2016, I decided to return from retirement and take over as interim CEO and replaced all of the senior executives. While I had not yet realized how flawed the diversification strategy and Bridger transaction actually was, I knew the propane business could and should be saved. We then sold or abandoned Bridger and every other non-propane asset.
Without going through everything that happened in the years that led up to the recent announcement of our successful refinancing, it is fair to say I weathered all sorts of attempts by debt-holders and some former employees to take over the business.
In June 2020, the parent company of Ferrellgas fell into default of a bond issued at that level, it's only such debt. We worked with the primary holder of that debt, the investment arm of Prudential Life, to craft a deal that led to the voluntary bankruptcy of the parent, commonly called a 'prepack.' The prepack bankruptcy was necessary to implement the deleveraging of the parent’s debt.
In the meantime, transformation of the Ferrellgas operating company was well underway. However, the COVID-19 crisis had also hit, so all corporate employees, including me, started working from home. We discovered Zoom conferencing and were undeterred in our quest to a sustainable future. Operating company debt was coming due in May 2021, so the pressure was on. The holding company was in default and looming ahead was an operating company default that would have doomed the company.
The solution we crafted in this high-pressure atmosphere is way too difficult to describe here, but it involved a complete restructuring of the balance sheets of both the holding company and the operating company that gives us a chance for a very long life.
It preserves the jobs in Kansas City and elsewhere, it extends debt maturities to the earliest of five years, and it gives us a solid credit rating. It also preserves our public equity and our employee stock ownership plan. The bankruptcy judge overseeing the parent bankruptcy case declared the equity preservation outcome to be “unheard of” as she rendered her final opinion.
All this was based on the renewed vigor of our traditional propane business (Ferrellgas) and the other part of the business called Blue Rhino. Our transformation took hold a year ago and has driven financial results higher than ever before. Top brand Blue Rhino is now is available at more than 62,000 selling locations. Ferrellgas, operating in all 50 states and Puerto Rico, has more than 700,000 customers. The story of becoming more efficient is amazing. For instance, we’re driving millions of fewer miles while delivering more. In effect, we have finally become a technology-driven logistics company.
None of what I just described happens accidentally. We drove a hard bargain for our employees because we believed the company was worth saving. Now we have gotten what we fought so hard for. We employ about 4,500 people with concentrations at Ferrellgas headquarters in Kansas City (350) and in Winston-Salem, the home of Blue Rhino (100), but we are also important employers in hundreds of communities across the nation. We will continue our transformation and become even more focused on growth. My hat is off to all of those who have helped us through these difficult times and who will be helping us in the future."
— Jim Ferrell