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I’ve Bought This Pink Sheets ‘Gem’–Extreme Caution–Maybe More Dangerous than Original Thought

Gem is a relative description for me – what is the risk/reward? A deep dig to find out the background and the reason for the extremely high current yield of this preferred stock. You all know the security and many of you likely own some shares–but even as conservative as I am I have now taken a 1/2 position–with more potential buys to come.

Of course I am talking about the Golar LNG 8.75% cumulative redeemable preferred stock (GLMPF) which trades on the pink sheets.

Golar LNG Partners was bought by New Fortress Energy (NFE) back in 4/2021 and the preferred shares were announced to be ‘delisted’–but subsequentially began trading on the OTC Pink Sheets. As you can see below the shares have essentially collapsed since 2021—now trading in the $11-$11.50 area. Why? There is no logical answer to be trading at this price with a 19% current yield. Now who said that every preferred stock or baby bond trades at a logical price–of course they generally trade where one would expect them to trade–BUT on some occasions they trade at pricing that really don’t make sense based on fundamentals and logic.

So they trade on the pink sheets and there have been a couple preferreds that have had their dividends suspended after being acquired. Also these acquisitions tend to confuse folks—sometimes it is laziness—don’t want to deal with the complexities of the parent company (New Fortress). But NFE is a reporting company and all the details of all parts of their operation are in their financial reports–nothing hidden for those wanting to know the details of their operations.

So let’s look a bit closer at New Fortress Energy. NFE is a LNG (liquified natural gas) company which as we all know is in a damned good demand position–and is likely to be in great demand for decades to come. More specifically they are a gas to power company. The initial public offering came in 2019 at a price of $14—they had been controlled by asset manager Fortress Investment. Since that time their common shares have traded as high as $60/share, but more recently fell into the $25 area before bouncing to the current $33/share area–market cap is $7 billion.

When the IPO occurred the company had little revenue–typical for a LNG company–think Cheniere or Tellurian. Revenue

48 thoughts on “I’ve Bought This Pink Sheets ‘Gem’–Extreme Caution–Maybe More Dangerous than Original Thought”

  1. Golar LNG Partners LP Series A Preferred Cash Distribution

    April 24, 2024 at 8:00 AM EDT
    NEW YORK–(BUSINESS WIRE)–Apr. 24, 2024– Golar LNG Partners LP, an indirect subsidiary of New Fortress Energy Inc. (NASDAQ: NFE), has declared a cash distribution of $0.546875 per unit of 8.75% Series A Cumulative Redeemable Preferred Units for the period from February 15, 2024, through May 14, 2024. This will be payable on May 15, 2024, to all Series A preferred unitholders of record as of May 8, 2024.

  2. Apologies in advance for the length of this post, but I saw @TNTowanda’s comment earlier today about NFE providing an “irrevocable letter of support” for the continued funding of its indirect subsidiary GMLP in the Reader Initiated Alerts section of III (see https://innovativeincomeinvestor.com/reader-initiated-alerts/comment-page-14/#comment-116866 ). I’d thought I’d reply here, where we’ve discussed GMLPF in some detail in the past.

    As @TNTowanda notes, late in the day on April 29, 2024 NFE filed the annual audited financials that are required by GMLPF’s prospectus. See https://ir.newfortressenergy.com/static-files/271be839-6cb0-413e-aed2-79bb47f83ba1 . The “going concern” section of this report (which TNT quoted) has one very unusual sentence:

    “NFE also provided an irrevocable letter of support whereby NFE has committed to fund such commitments. ” (Emphasis added; the “commitment” in this sentence is to continue funding the GMLPF dividends and other GMLP expenses.)

    On April 30, 2024, I wrote to NFE’s head of IR, a fellow named Chance Pipitone, and requested a copy of NFE’s “irrevocable letter of support” for GMLPF. He responded the same day, stating: “We have not made public the letter except for the statement in our filing.”

    I then spent some time this week researching how Delaware courts would interpret the word “irrevocable”. I found that there is a Delaware Supreme Court case called Myers v. Myers, 508 A.2d 279 (1979) that states:

    Black’s Law Dictionary defines “irrevocable” as that “which cannot be revoked or recalled.” Black’s Law Dictionary 963 (4th ed. 1968).

    Earlier this afternoon, I wrote to NFE’s IR department again and asked this question:

    “Can you tell me whether the terms of NFE’s “irrevocable” commitment to fund GMLP are indefinite, without any time limitation in duration, as opposed to possibly having a set expiration?”

    I have not yet heard back from NFE IR, but will report back when and if I do.
    I have been a preferred share and income investor for nearly two decades and I have never seen another situation where a company has provided an “irrevocable letter of support” to fund an indirect subsidiary’s preferred shares. @TNTowanda may be correct in assuming that CEO Wes Edens wants NFE to achieve investment grade status; defaulting on or defeasing GMLPF would hardly help that effort.

    At any rate, it’s an unusual situation. The plain English meaning of “irrevocable” would indicate that NFE is now guaranteeing the GMLPF dividend, which is something they’ve previously been unwilling to to do in writing. (NFE CEO Chris Guinta wrote to me on January 18th, 2024 to say “I understand your comments here, but we’re not interested in listing the pref shares at this time”. His response came after I offered to pay the $8K in OTC listing fees so that GMLPF could get back on the pink sheets.)

    Interestingly, for those who have a high risk tolerance, the GMLPF shares trade ex-dividend on May 7, 2024. The only US brokerage where one can buy them is at Fidelity. Bid and asks for these expert market issues can be found at IBKR.

    1. ESW3, Thanks for the follow up and contacting IR. Have you tried to contact the accounting firm? Or rating agency for NFE? I recall reading Wes’s comments about his surprise and disappointment NFE didn’t receive investment grading. NFE is capital intense and debt cost is paramount. Personally, I have no doubt Wes will stop paying as soon as there is no collateral damage. My worry as stated before is the duration of the guarantee. As I stated I own NFE bonds which had a tender offer but I declined.

  3. Golar LNG Partners LP Series A Preferred Cash Distribution
    January 24, 2024 at 9:26 AM EST

    NEW YORK–(BUSINESS WIRE)–Jan. 24, 2024– Golar LNG Partners LP, an indirect subsidiary of New Fortress Energy Inc. (NASDAQ: NFE), has declared a cash distribution of $0.546875 per unit of 8.75% Series A Cumulative Redeemable Preferred Units for the period from November 15, 2023, through February 14, 2024. This will be payable on February 15, 2024, to all Series A preferred unitholders of record as of February 8, 2024.


  4. GMLP’s 3rd Q., 2023 financials were released last night, a week earlier than the last two years:

    https://ir.newfortressenergy.com/gmlp (GMLP financial statements page)
    https://ir.newfortressenergy.com/static-files/7a6f6323-5ad8-4c00-9432-6742aa0f3761 (the 3rd Q. report)
    (Hat tip to Tigerbond, who posts here occasionally, and who posted this semi-optimistic take on the whole NFE / GMLPF situation on “the other site”: https://seekingalpha.com/instablog/30534115-joeri-van-der-sman/5598460-special-situation-indiscriminate-selling-in-gmlp-preferred#comment-96833642 ).

    1. ESW3 thanks for the link. I hadn’t been chasing yield so I haven’t bought into the Soap Opera of the GMLP preferred lost interest. Better LNG shippers out there.

  5. For some reason, Schwab is now allowing purchases of GMLPF preferred shares. I had an odd # of GMLPF shares in one Schwab account and by Jove, I was able to “round up” to an even share count number a few minutes ago. I then added another 100 shares just to see if I could – that trade went through as well.

    I’m wondering if this was some kind of system glitch or bug at Schwab, since I also tried to buy 100 $HMLPF shares at Schwab (using the IBKR bid / ask). Unfortunately, the $HMLPF trade was “outed” a few minutes after it was placed on Schwab.

    I was charged the standard “OTC fee” by Schwab on both GMLPF trades.

    Simply FYI …

  6. October 27, 2023 at 5:00 PM EDT
    NEW YORK–(BUSINESS WIRE)–Oct. 27, 2023– Golar LNG Partners LP, an indirect subsidiary of New Fortress Energy Inc. (NASDAQ: NFE), has declared a cash distribution of $0.546875 per unit of 8.75% Series A Cumulative Redeemable Preferred Units for the period from August 15, 2023, through November 14, 2023. This will be payable on November 15, 2023, to all Series A preferred unitholders of record as of November 8, 2023.

  7. LNG is a great place to be – one of XOM top investment target areas, but one does have to recognize certain risks. Last year a Liquefaction facility in Freeport TX exploded and was down for months. Liquefaction is done at scale and is the process of taking Methane gas and converting it to liquid using compression and heat exchangers. The LNG is then loaded onto customized ships that transport the LNG to regassification facilities at end market locations. I just think there are a lot of operational risks with these facilities, and I just wonder if investors in asset level debt instruments associated with these facilities are compensated for these risks. I came to this conclusion when looking at some BBB Sabine Pass notes earlier in the year – at that time there were very similar yields available on more diversified instruments.

    There are a couple of things that give me general pause with NFE (in no particular order)

    1)The firm is primarily exposed to emerging markets for both LNG production (Mexico) and end markets (Caribbean). To a large extent NFE is an emerging markets focused LNG play. They do appear to have a strategy to diversity into more developed markets with their CAPEX programs.

    2)They are certainly planning for aggressive CAPEX programs in a capital intensive industry they will have a higher cost of capital than many of their competitors.

    3)PEMEX does have a problematic saftey record and issues associated with their leverage and debt. While I realize that NFE is not PEMEX, I do tend to wonder if their are more systemic supply chain risks given NFEs liquification assets in Mexico.

    4)NFE shipping fleet does not appear to comply with Jones Act – this is one of the more minor points, but other midstream firms do have Jones Act compliant fleets. This limits ability to go from one US Port to another US Port.

    Looking at the partnership in question it is focused in on certain assets only, and does not appear to be a broad play on LNG per se. It looks like owns specific ships and specific Floating Storage and Regasification Units. These are floating platforms in the sea which perform specific functions to the LNG after it arrives at it’s destination. The FSRUs must be located in the Caribbean. They are clearly doing leaseback deals concerning the shipping assets.

    The single factor that gives me the most pause with NFE is their cost of debt capital. In this interest rate environment it is just not easy to compete in the midstream space with BB and BB- credit ratings on Sr Secured debt.

    1. August, you had the same thought as I did. These are basically floating an fixed point bombs. You pointed out the insurance aspect in case of a major event such as a terrorist attack. Like I said it crossed my mind, but I didn’t think of it from the insurance end. Just a few years ago there was that major chemical explosion in Beirut. Wonder which companies are covering the insurance?

      1. Hi Charles,
        Thanks for pointing out the insurance aspect. I was more focused on the operation risk (revenue loss due to down time and damage to core assets).

        I also just generally wonder about safety in oil and gas operations in Mexico generally pointing to PEMEX as an example.

        To me a *pure play* on LNG liquefaction, transportation and regasification deserves a higher spread then a more diversified midstream firm with an equivalent credit rating.

        I have no clue about the situation at the port in Beirut, but I would submit that if an industrial scale LNG liquefaction facility can explode in Texas it can happen anywhere. I would also say it is more likely to occur in emerging markets than Texas. Pure plays on LNG which derive a high degree of operational leverage from a small number of key assets (in this case a few liquification facilities) just make me nervous.


    2. AW – good comments, but in regards to #4, NFE’s fleet not Jones Act compliant, there are actually no Jones Act LNG tankers. “Jones Act” , in part, refers to a requirement that cargo being carried between two US ports must be carried on ships BUILT in the US. There are no LNG tankers operating that were built in the US. In fact, there are not even any LNG tankers in the US Flag. (A ship can be registered under the US Flag while having been built outside the US).

  8. Lots of activity around NFE yesterday – Tim’s article, the company update, and a new note from Fitch:
    Fitch Rates New Fortress Energy’s Term Facility ‘BB-‘/’RR4’
    Mon 16 Oct, 2023 – 2:14 PM ET

    Of particular interest (to me, anyway – the entire Fitch note is worth a read if you follow the company):


    As of June 30, 2023, NFE had approximately $104.3 million of unrestricted cash. The company has approximately $100.5 million of restricted cash on its balance sheet restricted to funding of a thermal plant project. The revolving credit facility is almost fully drawn with a maturity is April 2026. As of June 30, 2023, $741.6 million was drawn on the $741.7 million revolving credit facility.

    There are no near-term maturities for parent level debt. Proforma for the transaction, as the $TLB matures in 2028, $1.50 billion senior secured notes mature in 2026 and 2029. As of June 30, 2023, the company has asset level debt and the earliest maturity is February 2024.

    1. S&P was also out with an NFE note yesterday:
      New Fortress Energy Inc.’s Proposed $800 Million Senior Secured Term Loan B Due 2030 Rated ‘BB’


      Unfortunately the ratings agencies don’t separately cover Energos Infrastructure, as that entity (and specifically GMLP’s 20% proportional share of Energos’ earnings/losses) are presumably key to GMLPF’s ongoing dividend coverage.

      1. It seems Energos’ earnings is what NFE will pay based on its long term contract, and Energos doesn’t bear any oprational cost, just a sale and leaseback.

  9. Tim, I really hope this one works out for you.

    Personally, I try to stay away from anything Fortress manages.

    Over the years, I think their actions have shown very clearly that their overriding goal is to make money for Fortress (through management fees, or whatever), no matter the impact on the “managed” company. I would suggest you watch these guys carefully.

    That said, it may do well. heaven knows I have been wrong before (or most of the time, as my wife asserts).

    1. private
      Agree totally with your thoughts .These guys have a long and unfortunate record of not supporting investors. Of the spinouts, FTAI has been the exception. SC

  10. Coincidentally, NFE sent out a “Company Update” press release at 10:42 a.m. Pacific time – see https://ir.newfortressenergy.com/events-and-presentations (overview of Events & Presentations) and
    https://ir.newfortressenergy.com/static-files/86d4a089-8559-447e-b245-12f0974d58c3 (the actual company update). In the company update, the only thing I can see that would suggest that the GMLPF preferred shares are “safe” from any malignant actions from NFE’s management is Wes Edens’ continuing desire to target an “Investment Grade” rating. See presentation at page 10. (That may be naïve of me, however – do ratings agencies really care if a company screws over the preferred shareholders of its indirect subsidiary? – maybe not!)

    If I wanted to put new money to work on an Expert Market shipping company preferred share, it would probably be HMLPF. Like GMLPF, the HMLPF prospectus requires audited annual financials and unaudited quarterly reports (see https://www.sec.gov/Archives/edgar/data/1603016/000114420417050650/v476155_424b2.htm , page S-48), and the company is doing quite well financially (it resumed paying its common share dividend at the same rate it used to pay when it was a public company). See https://s202.q4cdn.com/811024256/files/doc_financials/2023/q2/2023-Q2-Report.pdf for the latest HMLPF financials. Interactive Brokers displays bids and asks for these expert market issues, by the way, so there’s a way to get a sense of the current pricing for any EM trades placed at Fidelity.

    1. ESW3—-thanks for the info—your thought mirror some others thoughts–but I think I am cured of any desire for expert market issues.

    2. Wes was disappointed NFE didn’t receive investment grade when NFE originally issued debt. I purchased on IBKR even though others had it as a 144a. I also bought a bit of NFE equity (but not enough). Fortress and Wes are smart and savvy. I don’t match them so stay with the bonds. If I remember the last earning call a MS analyst got on and asked about these preferreds and stated “do you know care about your preferred holders” Later I found out this guy was a MS broker not analyst that somehow got on the call. MS underwrites NFE debt. Tim, I always thought you a turtle but my, you are now a rabbit! Seriously, good luck.

  11. If NFE is using the proceeds from GMLPF asset sales to pay out distributions to NFE instead of keeping the cash on GMLPF books or doing partial calls of GMLPF wouldn’t that obligate NFE to have to keep paying the dividends on GMLPF?

    I would think blatantly stating what they have done with proceeds from selling GMLPF assets …….that NFE is not treating GMLPF as a separate subsidiary and NFE would be on the hook for paying the dividends on GMLPF, but I am no expert on this at all.

    1. Brett—I agree. When the acquisition occurred the documents said any dissolution, liquidation or other winding up would require redemption at $25. But Shix happens–not sure how they would get around that.

  12. I had a GTC bid on one of the preferred but I cancelled it. As Tim said I think there is a future for NG and LNG but this landlubber gets seasick too easy. I found the shipping sector to require you to pay attention to what is going on and things can change rapidly with swings in prices. Not saying I don’t follow that segment, I do but I think you need to place your bets by looking out 6 months to a year.
    Lot of investors are not aware and don’t understand there is a lot of new build ships going to hit the water in 2024 and 2025 shippers always are swinging from glut to high demand. With it taking several years to build, excess capacity always shows up all at once. With Korean and Chinese ship builder slowing down and steel prices coming down shippers are probably getting better prices than two years ago to order new ships but the financing is now a issue.
    Anyway TMI , for now I will stick with land based gas investments maybe less yield but safer.

  13. Tim,

    Without intending to point out competition to your terrific III site, there is a good discussion thread over at Yahoo Finance that might interest some here regarding GMLPF. The link is https://finance.yahoo.com/quote/GMLPF/community?p=GMLPF

    I am also one holding this at a higher cost and I think that anyone who wants put there toe in the water here should be fully aware of the sentiment surrounding this interesting preferred.

  14. GMLPF may be an option for the flippers and days traders. (My inner yield hog looked. ) Longer term investors may want to look closely at internal restructuring, ship sales, balance sheet changes and NFE management’s odd and disturbing response to an analysts complain about mistreating preferred shareholders (call us and we’ll talk privately. — You never return calls. — we are doing everything by the book. Next question.)

    As I remember it, GMLP has sold its ships to another company and is now the proud minority owner of a company controlled by PE , Apollo I think.

    Looking at their balance sheet, I am guessing that a good portion of the sales proceeds were paid out as a distribution to New Fortress. So there’s not much left by way of assets in the partnership shell for the preferred holders and dividend coverage may become an issue. (Read here managements comments to the effect of going by the book.)

    Maybe New Fortress itself will do okay, but investing in GMLPF strikes me as a risky proposition. If NFE has cashed out as I think they may have and NFE sees the preferred as debt, NFE could let GMLP slowly sink.

    In short I don’t see GMLPF as an Opportunity in Shipping as much as Trusting Your Money To The Kindness of Strangers, who happen to have delisted your shares and left you with minority share of a company controlled by PE.

    Of course I write this from memory and I could be – and probably am – entirely wrong, so DYODD and Just My Opinion.

    1. BearNJ—good data–good memory if that was from memory. I am still digging on it.

  15. The latest GMLP financial statements. I own the preferred at a much higher cost. It would not surprise me if they stopped paying the preferred dividend



    1. Good question Jane S. They are in a growth mode now and need most of their cash for expansion–but I agree that would be a possibility–and maybe we will see them buy on the open markets in quarters ahead when cash demands are not so great (assuming the price stays lows).

  16. It doesn’t trade on the pink sheets. It trades on the expert only market. Completely different.

    And NFE has been stripping the assets that supports GMLPF.

    1. FitInvesting–why don’t you expand on your claim of stripping assets supporting GMCPF.

      1. The financials for NFE are not relevant to analyzing GMLPF. You must analyze the financials only for GMLP which NFE posts separately on its website. They post these because they thought it would prevent GMLPF from going to the dark market but it has not. Thus, about the only place you can buy GMLPF is Fidelity. There are no active bid ask quotes. It’s purely a guessing game. And good luck if you ever want to sell it since other brokers won’t even let you buy it.

        Feel free to dig into the financials specific to GMLP:


        1. FitInvesting—thanks for the further data. Average daily volume in 7000 shares–plenty for my uses I think.

        2. I made several dollars a share flipping this after it went semi-dark. You have to get a feel for the range it is trading in and then wait because the orders do not seem to fill like they do on the open market. Shares will change hands at prices which indicate you should have had your order filled but you get overlooked somehow.

          But once it started trending mroe steadily down it was harder to make the flip, and since I did not understand its financials well enough for my liking I stopped haunting that particular casino. I had good timing for once.

    2. Agree that NFE is a very interesting concept firm. Moreover, it has actively built up buyers for their LNG. The core issue though is your comfort level with Fortress. Other than FTAI which has been well managed and overall shareholder friendly, Fortress has a lot of explaining to do. So far while interested in NFE, have found that they drop too many buz words and have so many moving parts that it is better to watch than participate. I may regret this but so be it. sc

      1. PS
        Tim, if NFE seems so interesting, why not look into a position in the core company ? One reason clearly is the yield. Not sure other than the common, not sure what issues NFE has available. Thanks for raising the opportunity.

        1. sc4—I am thinking about it–but really I hardly ever buy common stocks, but it looks very interesting–I will be most curious to see the earnings report and presentation.

          1. Tim
            Thanks the comment. My main concern is that they have so many moving parts that it is very hard to follow the company in detail. Thank you again. SC

      2. Nothing at all to regret sc4. Everyone has an opinion and a comfort level with various investments. We’ll see what coms out in a few weeks with earnings releases/presentations.

        1. Tim, You can check this very site on discussion regarding this security. Richard Lejeune has posted frequently with good information. FWIW, you and Rida both love this security. Sincerely hope this works for you.

          1. TNTowanda—oh no—if Rida likes it I shouldn’t. The more digging in I do the more stuff I find—plenty complicated.

            1. Tim, I started buying the common of this British large cap ship following the woman in FAST MONEY, who along with her husband over $100 million wealth management. She was born rich at Beverly Hills and got her MBA from the Wharton School of Biz (U of Pa). In one Barron’s mag, ‘Bond King’ Jeffrey Gundlach also chose this common. I asked Rida Morwa at that time. He actually had no opinion but believe that this large cap ship should be okay but seemed over priced. It kept on going down. Then I sold some common and replaced with the preferreds. To this day, I still have this illiquid high yield position in many of my portfoilo, IRA etc. So, this news to me is actually good news. I still prefer to stay with Safe Bulkers C or D, but do not have the guts to buy its common. The other day, I picked up just a few shares of CUBI-E, seems that it remains a winner until someday it could get called. Thank you Tim. For very old people like me, the PA of my new family doctor suggests Metamucil sugar free. It seems to be a good dietary supplement for diabetes and digestive system, actually works well when Broccoli alone may not work consistently. I own HMLPF following someone from SiliconInvestor.com. In hindsight, I would go easy with GMLPF. A few days, some SA writer suggests PAA, I took a position. It worked so far. With Saudi and Putin both cutting down production and Warren Buffett seem to bet on non renewables, MMP got merged with OKE. PAA seems to a good bet. I still hate to buy ET, but did pick up some ET preferreds.

              1. Good to hear from you John, anyone who has been playing in the oil and gas patch knows the term “Kindered” but those who entered after the great fall don’t have to worry about dealing with a MLP.
                Been seeing Tennessee gas bonds showing up at FIDO but not enough discount to get me interested in buying at less than 7% YTM Although I did pick up a few PAA bonds.

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