RE:RE:RE:RE:RE:RE:RE:Reopened a position at 2.81nedstar71 wrote: JayBanks wrote:
nedstar71 wrote: Keep in mind in the Stratus example there were almost 14% more shares that needed to be distributed to due to the bought deal relating to the transaction, plus some debt that isn't free etc, the transaction imo was close to a wash. Which is what most of the transactions they do are at this point. And that's if we gloss over the idea that getting into a janitorial service franchise right at the time office space use is tanking made sense.
Say they had a deal to do tomorrow. How would they fund it? 8 or 9% debentures? $2.55 bought deal? Given where the share price is what would be the other options?
Don't get me wrong I own a bunch of shares, but this is one unloved stock, and for somewhat justified reasons.
They did not fund the Stratus deal through the proceeds of the share offering... here is directly what they stated:
The Purchase Price was funded with approximately C$47.0 million drawn from DIV’s existing undrawn acquisition facility, a C$15 million increase in the senior credit facilities of DIV’s subsidiary ML Royalties Limited Partnership, and a new US$15 million senior credit facility issued to Strat-B LP.
It seems that the subsequent share offering at that time likely had more to do with leveraging the facilities keeping them within certain ratios likely to keep reduced rates on the costs of borrowing if not for that transaction for the future.
Page 10 of the Consolidated Finacial Statements gives all the lending info:
Acqusition Facility = Prime +1 (8.2%)
Stratus term loan = SOFR + 2.11 (7.42%)
Other term loans = BA + 1.9-2 (6.9-7%)
Debentures = 6%
They have Lines of Credits similar to the Term Loans, but I believe they are all undrawn...
They also have interest rate swaps for each holding @ 6.09% and lower but I have no idea how those work so I don't know if that helps the above rates...
So to answer your question, I believe they have $39 million liquidity in the Acquisition Facility (50m avalible, 11m drawn), then new term loans that are drawn up at the time of the acquisition and of course current cash on the books which would likely be sub 10 million. Following an acquisition they may do anouther offering and they may offer debentures, but the current ones don't expire until 2027 and they used the current ones to pay off the older ones at a minor rate increase, doesn't seem like they care to have multiple rounds of them out there...
If the price Stratus was is considered high and likely more than most deals we would do, they currently have more than enough Dry Powder avalible to make a deal and sit on thier hands for a bit.
You really like to overcomplicate things. The bought deal was announced the same day of the Stratus acquisition, and was indeed used to repay the acquisition credit facility you quoted. It's right in the release about the closing of the increased bought deal, a week after the Status acquistion closed. The bought deal shares and debt funded the Status acquisition, the credit facility was just used temporarily until the bought deal closed.
And further to that, obviously the acquisition facility's interest rate is not favourable in this climate anyway so really can't be considered "dry powder" nor can other debt instruments. Paying 8 or 9% for a 10% return is pointless. Hence why the entire business model really doesn't work when the share price weak. And new deals inherently make the share price weak if they have to use shares to do it. It's a vicious circle.