Subordinate debt & cash sweeps Just a short meminder that all of MMB's senior long-term debt facilities contain covenants pertaining to "cash sweeps". It is possible that servicing future additional subordinate debt (post production of course) might impinge upon the existing cash sweeps. In such an event, I suggest that the senior debt holders will be agreeable to modify the "cash sweeps" clauses.
As defined in the Baja Mining Corp. Consolidated Financial Statements December 31, 2011, page 22:
"Under the terms of the facilities, 35% of excess free cash flows available after debt servicing are required to be used to reduce the amout outstanding under the facilities ("cash sweeps"), while the amounts needed for up to six months of debt servicing are required to be maintained in a separate Debt Service Reserve Account. Furthermore, the Company is permitted to make voluntary prepayments on the facilities."
It ain't over until the fat lady sings.
I cannot tell you if " ... free cash flows available after debt servicing ..." debt servicing referrs to all MMB debt (senior and subordinate) or just senior debt. In addition, if MMB and/or Baja issues convertible debentures, I do not know if the interest payable upon these securities would be included as part of the above "debt servicing".
Regards,
Doug.