20% Dilution at $1.27, New Debt at 10% rate & Raymond James20% dlilution at $1.27 per share. And also DEE replaces the existing bank debt of $30 million whose interest rate currently is from 3% to 5% with $30 million in senior notes whose interest rate is 10%. This is clearly a very expensive debt and proforma the deal all DEE's debt will have 10% interest rate.
This means that the existing high interest expenses will be even higher in the next quarters eroding further the bottom line.
A prudent value investor can't be happy with such deals but such deals are expected due to DEE's overly weak balance sheet and high leverage. You don't have negotiating power when your leverage is almost 3 times and you have the most expensive Montney wells in the Montney space at $8 million each.
Not to forget that now you know why Raymond James has been pumping DEE by setting irrationally high price targets. DEE and Raymond James have been making business together and they continue to make business together once again:
A syndicate of agents, led by Raymond James Ltd. and co-led by AltaCorp Capital Inc., has sold the securities on a private placement basis. The Company has agreed to sell, on a private placement basis, 27,559,055 common shares at an issue price of $1.27 per common share, a discount of 3.8% to the closing price of Delphi common shares on the TSX on May 19, 2017, for aggregate gross proceeds of approximately $35 million (the "Equity Offering").
Furthermore, the Company has agreed to issue an additional $30 million principal amount of the currently outstanding 10% senior secured Collateralized Exchange ListedTM ("CELTM") Notes (the "Notes Offering"). The re-opening of the CELTM Notes was priced at 100% of par (plus accrued and unpaid interest) to yield 10% (the "Additional Notes") and will not be issued with any warrants. The Additional Notes are being offered as further notes to Delphi's existing $60 million aggregate principal amount of 10% senior secured CELTM Notes due 2021, issued on June 15, 2016 (the "Existing Notes"). See also the existing interest rate of 3% to 5% for the existing bank debt:
" Interest payable on amounts drawn under the facility is at the prevailing bankers’ acceptance or LIBOR rates plus stamping fees, lenders’ prime rate or U.S. base rate plus the applicable margins, depending on the form of borrowing by the Company.
The applicable margins and stamping fees are based on a sliding scale pricing grid tied to the Company’s trailing debt to earnings before interest, taxes, depreciation and amortization ratio: from a minimum of the bank’s prime rate or U.S. base rate plus 1.00 percent to a maximum of the bank’s prime rate or U.S. base rate plus 3.00 percent or from a minimum of bankers’ acceptances or LIBOR rate plus a stamping fee of 2.00 percent to a maximum of bankers’ acceptances rate plus a stamping fee of 4.00 percent. "