RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:50 cents today?Can I point you to the Waiver, and Consent and Amendment Agreement dated December 14, 2021 (which was posted to Sedar at the time Spark press released that they blew the bank covenant Dec 31st). This amendment anticipated the rights offering and permitted payments on the VTB loans despite them ranking behind the bank.
On page 5, note 8, BMO requires Spark to provide (i) a quality of earnings report, and (ii) a liquidity analysis, no later than March 15, 2022.
A Quality of Earnings Report is an engagement carried out by a CPA firm (usually a different one than the Company's auditor). The purpose of the report is to validate the accuracy of the reported numbers, look for anomolies positive or negative, with the ultimate goal of trying to determine if the numbers reflect the true state of affairs of the Company. These are done more often by purchasers acquiring a Company to see if they can rely on the numbers. Banks dont tend to require them unless that are making new loans to the purchaser to buy the Company.
A liquidity analysis - pretty self explanatory. If the company were to be liquidated on an orderly liquidation basis, how much can be available in cash - to be distributed to the liability holders (of which the bank ranks just behind certain government liabilities).
Remember this was requested at a time when more liquidity was coming into the business. After that time, Spark declared another covenant breach (and considering BMO allowed Spark to pay amounts on VTB loans, which ranked behind the bank, and then found out about the breach a few weeeks after - Im sure BMOs credit people were pissed).
BMO was either setting the table for Spark to sell, or had concerns about the accuracy of the numbers. And definitely had concerns that they couldnt get out without a significant loss.
There is no covenant waiver, cause BMO won't waive the breach. Every asset that can be sold at anything but a fire sale price will be. If BMO could get out tomorrow, they would (but no other lender would step into their shoes). They cant sell more shares.
Both BMO and Spark likely have the documents ready to pull the plug. BMO will do it if their collateral erodes by operating.