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What’s Happening To Master Limited Partnerships (MLPs) ?

Last update on: Mar 14 2020

Master limited partnerships (MLPs) have done poorly the last few years. The decline during the commodities bear market was somewhat understandable. Then, the industry began some restructuring. At the start of this year, the bad news seemed to be behind it. The restructuring and distribution reductions largely were over, and energy prices were recovering. At this article reports, more bad news hit the sector in the last week. The author argues that only a few MLPs should have been affected by the news. Since the sector continues to decline, he thinks that means investor sentiment is very bearish and it will take the sector a while to recover.

Hinds Howard, a midstream portfolio manager at CBRE Clarion Securities, estimated over the weekend that MLPs with a potential direct impact from the decision account for less than 10 percent of market capitalization overall. He relied partly on company press releases for that calculation; but even allowing for some corporate creativity on judging the fallout, the sell-off seems harsh. The index is back to the levels of early 2016, when existential angst was rife, and yields 8.7 percent, undercutting the rationale for using the MLP structure in the first place.

The most obvious companies with clear exposure, such as TC Pipelines LP and Enbridge Energy Partners LP, have been hit the hardest, indicating some method in the madness. And Monday started out as a bad day for the broader market.




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