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

$5+ at the open.

[Nawaralsaadi]

This is a key paragraph from the press release:
 
“Canexus announced the start-up of the initial phase of the pipeline connected unit train expansion at the Corporation's North American Terminal Operations ("NATO" or "Bruderheim Terminal") at Bruderheim, Alberta in mid-December. Start-up and commissioning activities, complicated by severe winter weather, have continued through to the end of February, limiting unit train shipments to date. The Corporation anticipates loading approximately 12 to 15 unit trains per month for each of the next few months and then plans to take a 60- to 90-day period of downtime, currently targeted to commence in June, to complete remaining work, which will further increase unit train loading capacity at the Bruderheim Terminal and connect it to the Cold Lake pipeline system. The efficiencies of taking an uninterrupted period should allow Canexus to meet the revised total estimated cost of this project announced on January 14, 2014. The planned downtime will not affect truck-to-rail operations at NATO. Currently, 60% to 70% of planned unit train activity is contracted for multiple years. The Corporation expects to have unit train operations fully contracted in the near term. The financial contribution of the NATO unit train facility in 2014 will depend upon the timing of ramp-up of the expanded facility as it becomes fully operational.”
 
Based on the above, it looks like NATO will be fully operational by August or September at 100% capacity; this means we will be running at the expected annualized $50m+ in EBITDA from NATO by Q4/2014. I guess the only minor surprise is the 60 to 90 days downtime, but this is trivial in the big context and in relation to the massive decline in the share price since the revised capex numbers and the firing of the CEO.
 
The outlook for the chemical business seems to be in line with what the market has been expecting since late 2013, and most importantly the dividend has not been cut thus the Board is confident in the upcoming increase in cash flow as a result of the NATO revenue/cash contribution by year end.
 
I expect CUS to rally sharply tomorrow and into next week, my guess the stock will stabilize at $5.5 to $6 until the official announcement of the 100% contracting of the NATO facility and the hiring of a new permanent CEO at which point we could be back in the $7+ range.
 
Regards,
Nawar