RE:Today's article on ATH from Financial Postnorthwestcoast wrote:
I really like ATH, and support it. However, there are reasons why it is priced as it is and now I understand the shorts' perspective. Artilce about ATH and lenders: https://business.financialpost.com/2015/02/11/athabascas-bankers-tighten-noose-as-oil-plummets/?__lsa=fed9-3a4b
The article seems to be concerned with this 225m loan:
From Q3
Senior Secured Term Loans On May 7, 2014, Athabasca entered into a credit agreement providing for US$225 million term loan which was fully funded at closing and an additional US$50 million committed delayed draw term loan which the Company may draw at its option at any time up until May 7, 2016, subject to compliance with certain conditions precedent and covenants (the “Term Loans”). Borrowings under the Term Loans generally bear interest at a floating rate based on LIBOR plus 7.25%, subject to a LIBOR floor of 1.00%. The Company incurs standby fees on the undrawn portion of the US$50 million delayed draw term loans equal to 1.00% per annum. The Term Loans will amortize in equal quarterly installments in an aggregate annual amount equal to 1.00% of the original principal amount with the balance payable on May 7, 2019 or on May 7, 2017 if the Company has not redeemed or refinanced the Notes prior to that date. Athabasca has the option to redeem the Term Loans at any time prior to May 7, 2015 at the present value of 102% of the principal amount plus the present value of interest from the date of redemption to May 7, 2015. Beyond that date, Athabasca will have the option to redeem the Term Loans at a price of 102% for the 12‐month period beginning May 7, 2015, 101% for the 12‐month period beginning May 7, 2016 and at par thereafter. The Term Loans are subject to substantially the same restrictive covenants as the Notes and certain additional restrictive covenants that are contained in the applicable credit agreement including: hedging restrictions; certain business operating restrictive covenants; a requirement to maintain a minimum ratio of adjusted consolidated net tangible assets (including the present value of total proved and probable reserves) to total debt of 3.5 times; and, beginning with the March 31, 2015 quarter‐ end, if the amount of unrestricted cash, cash equivalents and short term investments do not exceed the amount of outstanding total debt, the Company must maintain a minimum ratio of the present value of proved reserves to net first lien debt of 1.5 times. As at September 30, 2014, Athabasca is in compliance with all of the covenants related to the Term Loans.
The article says:
Based on its third-quarter earnings, the producer would have found itself about $57-millionshort of the cash and liquid asset threshold.
And the ATH Q3 report says
"As at September 30, 2014, Athabasca is in compliance with all of the covenants related to the Term Loans. "
That would seem to mean that for Q3, they had to fall back on the "minimum ratio of the present value of proved reserves to net first lien debt of 1.5 times." in order to be compliant.
Does anyone have an opinion about present value of proved reserves to net first lien debt here forward? Is early redemption if out of compliance not an option? With perspective in those two questions.... does it look like ATH is really not at risk of any significant problems... just some shuffling. Opinions?