KGIC Inc LGLTF

RE:RE:RE:RE:RE:Any material change to credit agreement besides extension ?

[BlueHorseshoe13]

Great points Audit.  You're bang on.

On security, BMO gets a first call on all LRN's assets, and all of LRN's subsidiaries have guaranteed the loan, meaning BMO can go after any and all of them as well.  But that's ok because youre absolutely right that this business has little in the way of fixed assets that would have a liquidation value.  I also agree that there's probably no market for the subsidiaries and having to dump them all in a fire sale would further depress the price.  You might get 25 cents on the dollar for the receivables.

The other thing BMO will  think is that under Canadian law the court appointed receiver and his/her army of consultants gets paid from the proceeds of the fire sale before the bank.  So there will likely be $2M of fees ahead of the bank in the soup line if they do decide to call the loan and force LRN to seek creditor protection.

BMO wanted to see the cash injection to cure the working capital problem, but realistically, if the company can continue as a going concern (absent the loan default), I think they'll let it because as you say, the alternative isn't great.

If I were BMO i would be buying heavily right now because the only way I get my 9M loan prin back in 3 years is if the SP gets up to 20-30 cents range I'd guess. If you have to hold the debt at par value might as well suck up some cheap equity to improve the upside.

 In for a penny, in for a pound.