RE:RE:RE:RE:The Clock Is TickingJohnJBond wrote: Note the MIE default terms, the banks!
I have had a look at the revised Credit Facility terms that was posted on SEDAR on Dec.02.
I don’t have a financial background and honestly I have a very hard time properly understanding all the terms and conditions. What I get is;
- The revised TOTAL is $650m
- There is a $100m mandatory payment due Jan 31 which will effectively reduce the TOTAL to $550m
- There is a $125m mandatory payment due May 29 which will effectively reduce the TOTAL to $425m
- There is a $125m mandatory payment due Nov 30 which will effectively reduce the TOTAL to $300m
The Jan 31 payment is to be covered with the MIE transaction. What isn’t clear to me is the consequences if MIE defaults.
Can the Revolver be used to pay down the Non-revolver as long as the TOTAL is $550m or less on Jan 31?
If that’s the case LRE will have to come up with abt. $46m from other sources (the TOTAL bank debt at Sept 30 was reported at $595.6m)
They also have a $2.4m LRE.DB interest payment due on Jan 31.
When all the terms, conditions and reporting requirements to the Lenders are assessed it’s clear that the Lenders have Long Run on a very short leash.
I suspect that the Lenders would prefer to avoid CCAA but they will do whatever is required to protect the interests of their shareholders.
If the MIE transaction fails Long Run will be forced to Aggressively sell assets.
Regardless of what the theoretical value of their assets may be the reality is that in the current market assets are being sold at substantial discounts. The potential acquires (MIE included) are living is exactly the same low commodity price world as LRE.
The only thing that can change the game for Long Run and the other companies that are in similar situations is a Substantial Increase in the commodity prices very soon!!
I would be interested in hearing your assessment of the situation.
As Always; Do Your Own Due Diligence; It’s Your Money !!