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

RE:RE:Seeking Alpha Article - Canexus

[Calgaryrider]

Good posts (for once!).

Roxy, I think you're bang on.
First of all, North Van will never get $280M or thereabouts....your analysis is perfect.  Why pay a premium when you can expand capacity for cheaper?  If they'd had an offer anywhere near this value, they'd have signed and sealed it already.  If Superior is smart (and they are), they know they're one of 2 or 3 potential suitors and delaying any decent offer only enables the price to go down?  Why....see below.

Your statement on senior lenders disallowing Canexus paying off unsecured debt (debentures) with the $75M attained from the NATO sale is exactly what I was saying previously.  
When a company is over-leveraged like this, the senior lenders will ensure they protect their investment first and foremost. 

CUS will go three ways between now and December:b
1) They'll be forced to take a sub-standard offer for N. Van.e
2) They'll be forced to roll over that convertable debt (new agreement/new terms) and likely pay higher interest rates based on the super high risk involved here.  I wouldn't be surprised to see a 7% interest rate attached to that $60M.  Interest expenses are going to rise, folks, putting even more pressure on Profit Margins.
3) They'll be converting that $60M in debt to equity.  That would result in a ballpark 20% dilution in shares. 

Either case is NOT great for the shareholders....the least secure owner of this company. 
Expect more pain.  Selling NATO didn't solve anything other than short-term bleeding on the income statement.  It bought them a few months.  That's it.  They still have to deal with the debt legacy it created.  Doug really inherited a lemon, man.