CANEXUS CORP 6.5 PCT DEBS T.CUS.DB.D

RE:RE:RE:RE:disproportional reaction

[pm1231]

one more quick point on the dividend - CIBC is suggesting a "dividend cut is inevitable"...but for those that read the research report - it has to do with thier assumptions on future cashflow related to NATO...specifically - thier thesis is that the abundance of pipelines that will come on board by 2017 will reduce the WTI to WCS spread - diminishing the business case for crude to rail (which is more expensive than pipeline by a few dollars)...in other words - they have reduced cashflow expectations in 2015 for Canexus NATO...and with the new issuance of shares (bought deal) - payout is around 97% with capex....it appears to me they fanned the flames on this "inevitable" dividend cut...

I don't quite buy thier assessment of pipelines that will become available by 2017 - assumes Keystone, Northern Gateway, etc - all pass regulatory hurdles - and are built by 2017 and as most of you know - we are quite a ways from even a decision (5 years and counting for Keystone)....I would counter - the longer the delays in these pipeline projects - the longer companies like Canexus can extend the life of crude to rail beyond thier payback period - which makes future cashflow beyond 2015 sound (in my books) - and a total payout ratio of 78% if other estimates of EBITDA hold in 2015......more than sustainable - something the BOD needs to decide....if they do cut - i'll wait for this to bottom out - then buy it up....

Bottom line - this is a long term  hold.