After not being able to file its second annual report as a public company on time FTAI Infrastructure (FIP), an operator of infrastructure in the transportation and energy industries, revealed management is not capable of competently projecting cash flows for a key asset with debt coming due shortly.

Two weeks after informing the SEC it needed more time to complete its financial statements, FTAI filed its annual report and revealed certain projections may still not be accurate despite the additional time. In discussing the process used in testing the Goodwill in its Jefferson Terminal reporting unit, FTAI acknowledged:

“The Company did not maintain effective controls to review on a timely basis and in sufficient detail the cash flow projections and certain key assumptions…”

FTAI plans to hire valuation consultants to fix its troubled cash flow projections.

The projection in question is important as $79.1 million in Jefferson Terminal debt comes due in less than a year (January 1, 2025) and FTAI isn’t currently able to repay the debt and fund its other obligations:

“...management concluded that the Company’s current liquidity and forecasted cash flows from operations are not sufficient to support, in full, the repayment of Jefferson Terminal’s Taxable Series 2020B Bonds totaling $79.1 million that mature on January 1, 2025, the Company’s operating and capital expenditure commitments and dividend payments on Series A Preferred Stock.”

In response, FTAI says it’s considering several potential transactions and related financings, including, but not limited to, asset sales, debt refinancing, equity refinancing, and taking on more debt.

Though revenue increased in 2023, Adjusted EBITDA decreased $1.5 million despite a change in methodology that excluded additional expenses from the measure.

Even with the new calculation method, FTAI still couldn’t add back enough expense to turn a profit and posted a third consecutive year of losses, ($24.3), ($24.7), and ($26.1) in 2021,2022, and 2023, respectively.

FTAI was spun off from Fortress Transportation less than two years ago but still pays Fortress a management fee of $1.5% of the company’s total equity every month.

FTAI’s equity, per the balance sheet in its latest annual report, is $484 million. The company carries $1.34 billion in debt not counting operational leases.