Concordia Healthcare Corp. T.CXR.R

selling stocks to private firm is not god idea

[mingzhu]

minority equity, say 20%, only have 10 m *$6=60 m.  It make no meaningful reduction of 3.2 b debt,merely 5%. unless CXR is priced as bankcruptcy, private money infusion makes sense. $6 is not bk price. The market got it wrong today. This deal only make people believe that it can pay normal due payment of debt. i believe market will correct itself.

[visionaryfool]

mingzhu... you JUST beat me to posting the comment I was going to make. I don't think any equity raise is going to be meaningful. No PE firm will pay more than its current share price and normally pay a discount when getting share offerings. So I think IF (and its a BIG IF) there is a share sale... it'll be for call it $5 USD. At this level, ANYTHING they raise would be insignificant to

[Lumberfeverlong]

I know I sound like a broken record, but the capital transaction does not have to be for common shares. It could be for either preferred or convertible debentures with a lower yield or interest rate than the higher cost debt. There is no limit to what they can raise with that from a dilution perspective to common shares because there won't be any.  They then take the proceeds and redeem

[LaticelnExile]

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[visionaryfool]

Good point lumberfeverlong. Although from the general meeting, CXR is not allowed to raise prefs (was denied at the shareholder meeting). So that leaves them with convertible debentures. Look at what their debt is trading at... I don't think they'll get a deal better than 15% to 20% as anything better.. and the PE could just go and by the bonds. So I don't think it'll be anything

[Lumberfeverlong]

They will call a special shareholders meeting to approve a pref deal if they have to.  I'm sure that would get approved this time around.  PE would be investing for the upside in the equity and not the coupon rate on the instrument.

[Craigbad]

Honestly Lumber how would that work. PE would have to pay a huge premium to buyout the debt from where its currently trading to take a lower interest rate? So they would have to buyout secured bonds yielding over 16% in order to get 5% interest on them to save Cxr money? Man, this is baffling! This could be the final pump.

[LaticelnExile]

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[Lumberfeverlong]

Exactly why a capital raise will likely be for a convertible instrument.  The converitbe equity component will compensate investors for taking a lower yield on the instrument.  The portion of EV attributable to equity will natually increse as debt is retired.  With a stonger balance sheet, the value of common shares will naturally rise starting a nice virtous cycle upwards for

[LaticelnExile]

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[mingzhu]

correction : not good idea , 60 m only 2% of 3.2 b selling 20% equity has 2% debt reduction.

[Craigbad]

I would have to agree. I can't find a scenario where this option makes any sense to benefit common shareholders. It makes me think things are more desperate than they were letting on. 

[patenright11]

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[patenright11]

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[patenright11]

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[Shortingtozero2]

patenright11 wrote: OH REALLY. THEY DIDNT SAY MINOR EQUITY TAKE NOW DID THEY - LEARN TO READ - THEY SAID SIGNIFICANT - ISSUE 65M SHARES AT $6 = 400M. REDUCE DEBT BY 400M - JUST SAVED 36m/YR IN INTEREST. FREE CASHFLOW NOW UP TO $300M/YR NOW OR $2.6/SSHARE BASED ON 115M SHARES. USE A CONSERVATIVE 8X MULTIPLE ON EPS OF 2.6 = $21 STOCK IN US DOLLARS OR 4 BAGGER FROM HERE !!!