RE:RE:RE:RE:RE:The Absolute Lack of Fundamental LegsPUNJABI wrote: As earning comes down so will the liine of credit. They have lot of cashflow to pay interest.
Under convertible debt the company has to issue shares at the conversion rate of $7.40 per share. They do not have to pay cash. The debt holder are under water big time. As the share price tanks LRE.DB tank too. They are trading at $75.
FROM MD & A of LRE
Credit Facilities
At December 31, 2013, the Company had credit facilities of $475 million. During the second quarter, the Company’s credit facilities increased from $475 million to $575 million in connection with the Deep Basin Acquisition, and the termination date was extended to May 31, 2017.
On August 6, 2014, the credit facilities borrowing base increased by $120 million to $695 million upon closing of the Crocotta acquisition. The credit facilities consist of a $655 million revolving syndicated facility and a $40 million operating facility. Total borrowings permitted under these facilities cannot exceed the borrowing base, which is determined by the lenders on a semi-annual basis or upon the occurrence of a material event.
Security for the credit facilities at September 30, 2014 included a demand debenture for $1.5 billion which provides for a first ranking security interest and floating charge over all of the assets and property of the Company.
The credit facilities are subject to semi-annual review with the next review scheduled for November 2014. The bank debt has been classified as long term on the statement of financial position as the Company does not intend to repay the facility within the next 12 months. While the Company does not anticipate a reduction to the borrowing base below the level of bank debt currently outstanding, there is no assurance that the borrowing base will be maintained at current levels until May 31, 2017.
At September 30, 2014, the Company was in compliance with all covenants, obligations, and conditions of its credit agreement. The covenant requirements under the credit facilities have not changed since December 31, 2013. These covenants relate to bank debt and total debt to trailing 12 month EBITDA, interest coverage, permitted dispositions and permitted hedging. EBITDA is defined in the credit facilities as earnings before interest, exploration expenses, taxes, depletion and depreciation, and other non-cash items. The bank covenants require a senior debt to EBITDA ratio of less than 3:1 (September 30, 2014 – 2.09:1) and a total debt to EBITDA ratio of less than 3.5:1 (September 30, 2014 – 2.09:1). The interest coverage ratio, defined as EBITDA to interest expense, must be at least 3.5:1 (September 30, 2014 – 13.6:1). The convertible debentures issued in January 2014 are not considered debt for the debt to EBITDA ratio calculations under the credit agreement. Dispositions are permitted up to 10% of the borrowing base without formal approval of the lending syndicate. Commodity hedges are permitted on up to Third Quarter 2014 Management’s Discussion & Analysis 17
Long Run Exploration
75% of 2014 forecasted oil and NGLs and natural gas production net of royalties (2015 - 75%; 2016 - 50%). Interest rate hedges are permitted up to 75% of the 2014 total debt balance (2015 - 75%; 2016 - 50%). Further details on the calculations of the covenants can be found in the Company’s credit facility agreement filed on SEDAR at
www.sedar.com on May 5, 2014, June 6, 2014 and August 25, 2014 under the Company’s profile.
Convertible Debentures
On January 28, 2014, the Company issued convertible unsecured subordinated debentures (the “convertible debentures”) in the principal amount of $75 million at par. The convertible debentures bear interest at an annual rate of 6.40%, payable semi-annually in arrears. Prior to maturity on January 31, 2019, the convertible debentures are convertible into Common Shares at a conversion price of $7.40 per Common Share, subject to adjustments in certain events. The increase in the Company’s dividend rate associated with the closing of the Deep Basin Acquisition is not expected to adjust the convertible debentures conversion price in 2014.
punjabi - I'm glad you read the MDA and understand its contents, few people here even know what it is or even know what all that info is.
The issue no matter how you word is sentiment.