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Genesis Energy cuts distribution, details plans to boost financial flexibility

Genesis Energy LP announced a 31% cut in its quarterly distribution as it detailed plans to reallocate capital and set new targets for distribution coverage and leverage ratios.

The partnership declared a quarterly distribution of 50 cents per common unit for the quarter ended Sept. 30. The distribution will be paid Nov. 14 to unit holders of record as of the close of business Oct. 31. The previous distribution was 72.3 cents.

The partnership then intends to increase quarterly distributions by at least 1 cent per common unit every quarter starting Dec. 31. With the new distribution profile, Genesis is now targeting a distribution coverage of 1.4x to 1.6x on a cash basis, starting with the quarter ended Sept. 30. Genesis also aims to obtain leverage ratios of 4.75x for year-end 2018, 4.25x for year-end 2019, and 3.75x for year-end 2020.

With these changes, Genesis expects to improve its financial flexibility so that it can pursue organic projects and strategic acquisitions, according to an Oct. 12 news release. The partnership also noted that its businesses are still performing in line with expectations. Genesis may evaluate a potential unit repurchase program in the future.

"Absent material, unexpected changes to the underlying fundamentals of our aggregate businesses, or other potential higher valued uses of capital, we would target to continue the minimum quarterly growth referenced above for at least each of the next twenty quarters," said Grant Sims, CEO of Genesis.