$90 million debt - Silver lining What's interesting with the new debt is it the timing of the redemption. I think that LSG believes they are pulling a fast one on the market. The bonds are not convertible until 9/30/15 (three whole years), but LSG also has the option to redeem the outstanding principal and interest on that same day. Given the duration of the bonds is through 9/30/17 (final maturity), a rough amortization schedule would have about $42 million remaining on the principal & interest at that time ($39.3 principal, $2.4 interest)
Essentially what they are doing with the debt is $50 million of $90 million is being used to pay off the existing credit line and extend the duration, customizing to their own cash flow needs and income stream from the ramped up production. Its an effective "matching" of revenues and expenses, creating a more linear relationship. The remaining $40 million is their "kitty", which will be used to retire the debt in three years at the conversion point. Does that make sense? LSG pre-financed the retirement of the own debt they are issuing by increasing the size to $90 million. Thus, it basically becomes a filing contest - first to file wins (perhaps, I'm not completely sure on this aspect?). LSG avoids dilution and gets an extension on their payment at a lower rate.
In all, this actually is a good (and neutral) financing, assuming they can pull the trick of retiring the debt before the holders convert to share. Probably why the share price is rebounding some quickly, as people are analyzing this debt issue and realizing what its' function is. The interesting trick to see happen will be the redemption - who gets their papers in first!!