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CorEnergy: Effect Of Ultra Petroleum's Bankruptcy


Yet another one of CorEnergy's main tenants may be declaring bankruptcy very soon, as the grace period on UPL's $26mil senior note payment comes to an end on April 30th.

It's likely that UPL will voluntarily file for Chapter 11 bankruptcy protection, potentially as early as April 29th.

A bankruptcy filing means that CorEnergy's $20mil annual lease payments may be at risk.

However, the assets representing these payments are a critical part of UPL's operations, so it is unlikely for the lease to be impaired unless UPL liquidates.

That said, CorEnergy shares are likely to trade materially lower upon a UPL bankruptcy announcement. As such, I've sold my shares in anticipation of a better entry point.

Fellow contributor Dallas Salazar released an article today noting that Ultra Petroleum (NYSE:UPL) is likely to file for bankruptcy any day now. Dallas clearly describes why, with the grace period for UPL's $26mil senior note payment ending on April 30th, the company is running out of options to avoid bankruptcy.

Later in his piece, Dallas also speculated that UPL is planned to attempt to renegotiate their agreement with CorEnergy Infrastructure Trust (NYSE:CORR). While I am by no means a bankruptcy expert, I believe that these speculations are incorrect, and will explain why below.