John Helmer's article loan covenantsCan anyone else confirm Severstal's debt/loan limitations? Seems that all Severstal could do is .68 Canadian according to John Helmer.
Comments???
CJ
Public information about Mordashov’s financial position has grown since then. Disclosure of loan covenants covering the entire Severstal group has established,to cite one, that:
“Severstal shall not and shall ensure that its Material Subsidiaries do not (in each case disregarding sales of stock in trade on an arm’s-length basis in the ordinary course of business and assignments of or other arrangements over the rights or revenues arising from any Steel or Ferrous Metal Contract) sell, lease, transfer or otherwise dispose of, to a person other than a Subsidiary or Severstal, as the case may be, by one or more transactions or series of transactions (whether related or not), the whole or any part of its revenues or its assets which have the aggregate value in excess of U.S.$150,000,000 or the equivalent thereof in any 12 month period, if such sale, lease, transfer or disposal has a Material Adverse Effect.”
If Mordashov were to consider a low target sell-price of 86 US cents, the cost to Severstal would be almost $220 million — more than Mordashov can afford. If the restrictive covenant of $150 million applies, the highest price Mordashov can go towards the HRG minorities appears to be 59 cents (68 Canadian).
If the current bid fails, Mordashov can raise it to his bankers’ limit. But most of the minority stakeholders are calculating that this will still fall short of a significant share sale. The spokesman for Mordashov and Severstal Resurs was asked by Minesite to explain what impact the loan covenants may be having; why they still want to take HRG private; and at what price they believe this can be effected. The spokesman responded that they have reviewed the questions, and decided “not to comment.”
The minority shareholder consensus now is that the best option for Mordashov, as well as for themselves, is to “let the bid lapse; do nothing; and make a fortune after keeping HRG public.”
by John Helmer - Wednesday, June 24th, 2009