RE:RE:RE:RE:RE:RE:RE:RE:news for natoCalgaryrider wrote: If covenants are broken - and they likely are AGAIN, or on the verge of being broken - the senior lenders (the banks) can call their loans immediately, as in, this afternoon. This would make CUS bankrupt. Remember, they already relaxed their older covenenants - either because they were being trashed or on the verge of it.
When it's the duty of the management to serve the shareholder, why have they let them get trashed? Ask youself this.
If they are shelling out $70M in dividends / year and $20M in interest / year and NATO is cash flow negative regardless of all this, that $100M EBITDA just got consumed.
Now if the options to sell NATO are all below constructed value, does CUS really have any viable options to manage their debt?
I do agree that management has had the option to cut dividends for more than a year, but, ask youself why that hasn't happened.
There is a reason this stock has been getting beat down like a cancerous dog.
It's because others can do math.
I'm not saying Canexus assets are worth nothing, but with the combination of debt, escalating operational issues, tighter capital markets, decreased NATO asset value and a management team that clearly has no regard for what the market wants, this situtation could (and has been) spiralling out of control.
Management has backed itself into a corner where all the work and capital they've expended in the last three years of business has actually gone towards lowering the combined value of their assets and the share price. Good management just simply doesn't do this. And remember this happened at $100 Oil!
3 years! The market has no trust in them, and I'd be surprised if NATO suitors do at their core either.
Do as you wish, everyone. I'm just saying, be careful.
I hope they get a $500M offer and at least break-even on this, but I doubt they will.
I've been waiting to jump in, but see no real sign/indication that now is the right time.
Covenants are on the verge of being broken again? (AGAIN? - Can you show me when in the PAST they were broken cuz i'm sure that would have made front page news).
If you are taking total debt to EBITDA to back up your claim they are on the verge of breaking thier covenant, then clearly you haven't read the definition of total debt. I'll help you out (pg. 72 of 2013 annual report)
Consolidated Senior Debt, Consolidated Total Debt and Consolidated EBITDA are defined within the credit facility agreement.Consolidated Senior Debt is defined as the aggregate of all long-term debt of the Corporation, including the Corporation’s shortterm
swing line loans, less subordinated long-term debt and intercompany subordinated long-term debt. Consolidated Total Debt is the sum of Consolidated Senior Debt plus subordinated long-term debt. The covenants specifically exclude the convertible debentures from the definitions of debt.
So total debt (say $591), less convertable debt of $312, equals $279 divided by say a conservative $120M EBITDA for 2015 - equals 2.32 - WELL below 4.5. Senior debt to EBITDA would obviously be lower.
Do you honestly think a bank would relax a debt covenent if Canexus was on the verge of breaking it? What, they figured they'd be nice, "throw good ol Douggy and the boys at Canexus a bone"...I mean seriously. If they were even close to breaking the covenent, they would force management to cut the dividend, sell assets, etc - but they are not. So why increase debt covenants? Merely as a precaution to give Canexus room to negotiate and if necessary, hold on to NATO until oil prices recover to calm a nervous market - plain and simple. Why haven't they cut the dividend? Why should they if they are midway through a negotation that will put a big dent in thier debt load with money to reinvest? Seriously, the arguments being made here are questionable at best.
Look. It's clear to me many are disgrunted at having gotten in at $5.00+ or even $7.00+ and lost more than 50-65%%. That's understandable, but past performance should not cloud your judgement on the fundamentals of the underlying, cash-producing, stable assets. That is the simple point i'm trying to make. If you (the reader) are in Canexus - stay in - (what have you got to lose)? Management seems determined to unload NATO and there is nothing to suggest they won't do so in a few months. Worst thing you can do is sell now, and kick yourself later when prices actually do recover. At this point, you are getting NATO for free and a discount on the chemicals business at these prices depending on the multiple you use. With the Canadian dollar falling, that increases EBITDA for Canexus in 2015 for thier chemicals segments. That's called a crazy irrational bargain to me.
I'm sure readers on this site will judge for themselves and weed out uninformed opinions (bordering on conspiracy theories on par with a belief that Area 51 still houses alien bodies) on the merits of Canexus going forward.
Sorry to be harsh but if you're going to say something, back it up. (I gave up on Kherson a long time ago but you I haven't come across yet so sharing with you what I shared with Kherson back in the day - if you claim they are on the verge of bankruptcy - at least show you've done the homework so people like me can be swayed).