GREY:PRBEQ - Post by User
Post by
westcoast1000on Mar 15, 2016 1:39pm
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Post# 24660592
The news
The newsAs I read it, they have renegotiated the credit facility. They have issued new notes due in June 2018. These notes involve a strengthened hold over the company's assets, and also at a higher interest rate than previously, but likely have reduced requirements for asset coverage. They pay a lower interest rate (or maybe an additional one, of 8 %) from March 2016 to June 30, 2016, payable in kind (oil or gas?). They have sold their hedges, and taken $4 million to pay down debt.
The lender's potential hold over the company has gone up, the interest rate has gone up, but the restrictiveness and tight control of the requirement for cash flow had gone down.
The final paragraph is required to indicate there is uncertainty regarding the consequences of this move. This statement is likely required in the same way that a statement regarding the nature of "forward looking statemens" is required in prospectuses or M and A statements. Similarly it is like a statement, regarding "going concern" status annual reports.
In general I see this as positive news, given the state of the oil and gas sector. They have work on the well services side over 2016 and 2017. It could be there debt covenants all covered the production side and ignored the cash flow from the well services side. Being proactive in addressing their debt makes sense. Now the cash flow from well services (as well as unhedged production) will have to be able to make the payments needed. I'm not selling.