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

RE:RE:Bullish Article on CUS

[ocean112]

I think the Market is can’t see the forest from the trees and are missing the big picture.  The biggest question glaring me in the face is “WHY would CUS anger their biggest customer and take them to court”?  Surely – this is a suicidal move with repercussions down the road.   And WHY – in a short period of time – has this relationship between MEG and CUS deteriorated?  What changed?  This was the excerpt from the Q2 2014 MEG conference call (July 30^th).
On the rail side, before the Canexus turn-around, we were able to move as much product on-rail as we wanted in Q2. Q1 we had moved about 17 unit trains for the first quarter and we moved an additional 33 unit trains in the second quarter. So we’re making good progress there. And we’ll continue to utilize the terminal once Canexus completes its ongoing work to increase throughput capacity. This work is scheduled for completion in September. On a related front engineering also continues on a diluent recovery facility. We expect this facility will be available to support our bitumen rail volume in 2016.
 
No bad blood here – looks like a nice symbiotic relationship.  Now all the sudden – just a few weeks later – MEG doesn’t want to play ball with CUS. 
All the big brokerages are focussing on the fact that MEG’s portion of revenue is discounted given this dispute, etc….they have revised estimates as if CUS was going to keep Bruderheim so they’ve slapped these ridiculous “at cost” NAV’s on the stock not taking into account that a sale of Bruderheim – with multiple parties interested would be sold at NAV + some material premium so that shareholders would approve the deal.
CUS would have no issue pissing off their biggest customer if selling the facility was a foregone conclusion.   They have actually completed the terminal!  This point seems to have been missed by the market!!! So execution risk is now next to zero – that was the biggest cloud overhanging this company.  The tie-in is the remaining piece at which point – Bruderheim goes to the highest bidder unless that has already been determined.
If there is a binding agreement between CUS and MEG – the courts will not let this drag on given the parties involved and domino effect (Cenovus misses volumes, Interpipeline doesn’t get its $3M quarterly from CUS, other customers can’t ship their volumes) – I doubt MEG would be allowed to hijack this process because they didn’t get terms…or on the flip side – MEG gets hit with punitive damages for materially manipulating the situation with no legal basis…..
This is a fear selloff – not a fundamental selloff ….the market will pick up on these details in short order IMHO.

Good luck!